As filed with the Securities and Exchange Commission on February
25, 2000
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. 13
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)
[ X ] On February 28, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2) of rule
485
[ ] On (date) pursuant to paragraph (a)(2)
If appropriate, check the following box:
[ ] 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
- ---------------
February 28, 2000
[GRAPHIC]
<TABLE>
<S> <C>
Equity Funds Fixed Income Funds
------------ ------------------
Smith Barney Pacific Basin Portfolio INVESCO Global Strategic Income Portfolio
Smith Barney International Equity Portfolio Travelers Managed Income Portfolio
Smith Barney Large Cap Value Portfolio Putnam Diversified Income Portfolio
Smith Barney Large Capitalization Growth Portfolio Smith Barney High Income Portfolio
Smith Barney Aggressive Growth Portfolio MFS Total Return Portfolio
Smith Barney Mid Cap Portfolio Smith Barney Money Market Portfolio
Alliance Growth Portfolio
AIM Capital Appreciation Portfolio
Van Kampen Enterprise Portfolio
</TABLE>
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. consists of 15 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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investments, Risks and Performance Page
----------------------------------------------------------
<S> <C>
Smith Barney Pacific Basin Portfolio 2
Smith Barney International Equity Portfolio 4
Smith Barney Large Cap Value Portfolio 6
Smith Barney Large Capitalization Growth Portfolio 8
Smith Barney Aggressive Growth Portfolio 10
Smith Barney MidCap Portfolio 12
Alliance Growth Portfolio 14
AIM Capital Appreciation Portfolio 16
Van Kampen Enterprise Portfolio 18
MFS Total Return Portfolio 20
INVESCO Global Strategic Income Portfolio 22
Travelers Managed Income Portfolio 24
Putnam Diversified Income Portfolio 26
Smith Barney High Income Portfolio 28
Smith Barney Money Market Portfolio 30
More on the Funds' Investments and Related Risks 32
Management 36
Share Transactions 42
Share Price 42
Dividends, Distributions and Taxes 43
Financial Highlights 44
</TABLE>
- --------------------------------------------------------------------------------
You should know:
An investment in the fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other government agency.
<PAGE>
Investments, Risks and Performance
Smith Barney Pacific Basin Portfolio
Investment objective
Long-term capital appreciation.
Principal investment strategies
Key investments The fund invests primarily in equity securities of companies
in the Asia Pacific region. Equity securities include exchange traded and
over-the-counter common stocks, preferred shares, debt securities convertible
into equity securities, depository receipts and warrants and rights relating
to equity securities.
- --------------------------------------------------------------------------------
Selection process
The manager emphasizes individual security selection while
allocating the fund's investments among companies in the
Asia Pacific region. Companies in which the fund invests
may have large, mid or small size market capitalizations
and may operate in any market sector. Depending on the
manager's assessment of long-term growth potential, the
fund's emphasis among Asia Pacific region markets and
issuers may vary.
In selecting individual companies for investment, the
manager looks for:
. Above average earnings growth
. High relative return on invested capital
. Experienced and effective management
. Competitive advantages, such as high market share or
special licenses and patents
. Strong financial condition
The economic and political factors that the manager
evaluates include:
. Economic stability and favorable prospects for economic
growth
. Inflationary trends which create a favorable environment
for securities markets
. Government policies toward business affecting economic
growth and securities markets
. Currency stability
. Monetary and fiscal trends
Travelers Series Fund
2
<PAGE>
Principal risks of investing in the fund
While investing in Asia Pacific region securities can bring added benefits, it
may also involve risks. 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 of securities in the Asia Pacific region decline
. Economic, political or social instabilities significantly disrupt the
principal financial markets in the Asia Pacific region
. Factors creating volatility in one Asia Pacific region country negatively
impact values or trading in other countries in the region
. Currency fluctuations negatively impact the fund's portfolio
. The government of one or more countries in the region imposes restrictions on
currency conversion or trading
. The economies in the Asia Pacific region grow at a slow rate or experience a
downturn or recession
. In changing markets the fund may not be able to sell securities in desired
amounts at prices it considers reasonable
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular stock proves to be incorrect
Many Asia Pacific region countries in which the fund invests have markets that
are less liquid and more volatile than markets in the U.S. In some Asia Pacific
countries, there is also less information available about issuers and markets
because of less rigorous accounting and regulatory standards than in the U.S.
These risks are considered greater in the case of those Asia Pacific countries
that are emerging markets. To the extent the fund concentrates its investments
in one or more countries due to their large market capitalization in the Asia
Pacific region, such as Japan, the fund will be subject to greater risks than
if its assets were not so concentrated.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the return of
the MSCI All Country Asia Pacific Index ("MSCI Index"), a broad-based unmanaged
index of Asia-Pacific foreign stocks. Past performance does not necessarily
indicate how the fund will perform in the future. Performance figures do not
reflect expenses incurred from investing through a Separate Account. These
expenses will reduce performance. Please refer to the Separate Account
prospectus for more information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1995 2.40%
1996 9.34%
1997 -27.99%
1998 7.32%
1999 95.69%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Quarterly returns:
Highest:39.52% in 4th quarter 1999
Lowest:(25.00)% in 4th quarter 1997
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Since
year years inception
- -----------------------------------
<S> <C> <C> <C>
Fund 95.69% 11.11% 8.0%
MSCI Index 59.66% 1.99% 1.16%
- -----------------------------------
</TABLE>
* Index comparisons begin on June 30, 1994
Travelers Series Fund
3
<PAGE>
Investments, Risks and Performance
Smith Barney International Equity Portfolio
Investment objective
Total return on its assets from growth of capital and income.
Principal investment strategies
Key investments The fund invests primarily in equity securities of foreign
companies. Equity securities include exchange traded and over-the-counter
common stocks and preferred shares, debt securities convertible into equity
securities, and warrants and rights.
- --------------------------------------------------------------------------------
Selection process
The manager emphasizes individual security selection while
diversifying the fund's investments across regions and
countries which can help to reduce risk. While the manager
selects investments primarily for their capital
appreciation potential, some investments have an income
component as well. Companies in which the fund invests may
have large, mid or small size market capitalizations and
may operate in any market sector. Market conditions around
the world change constantly as does the location of
potential investment opportunities. Depending on the
manager's assessment of overseas potential for long-term
growth, the fund's emphasis among foreign markets and types
of issuers may vary.
In selecting individual companies for investment, the
manager looks for:
. Above average earnings growth
. High relative return on invested capital
. Experienced and effective management
. Competitive advantages
. Strong financial condition
. The range of individual investment opportunities
By spreading the fund's investments across many
international markets, the manager seeks to reduce
volatility compared to an investment in a single region.
Unlike global mutual funds which may allocate a substantial
portion of assets to the U.S. markets, the fund invests
substantially all of its assets in countries outside of the
U.S.
In allocating assets among countries and regions, the
economic and political factors that the manager evaluates
include:
. Low or decelerating inflation which creates a favorable
environment for securities markets
. Stable government with policies that encourage economic
growth, equity investment and development of securities
markets
. Currency stability
Travelers Series Fund
4
<PAGE>
Principal risks of investing in the fund
While investing in foreign securities can bring added benefits, it may also
involve additional risks. 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:
. Foreign stock prices decline
. Adverse governmental action or political, economic or market instability
occurs in a foreign country
. The currency in which a security is priced declines in value relative to the
U.S. dollar
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular stock proves to be incorrect
Many foreign countries in which the fund invests have markets that are less
liquid and more volatile than markets in the U.S. In some foreign countries,
there is also less information available about foreign issuers and markets
because of less rigorous accounting and regulatory standards than in the U.S.
Currency fluctuations could erase investment gains or add to investment losses.
The risk of investing in foreign securities is greater in the case of emerging
markets.
In Europe, Economic and Monetary Union (EMU) and the introduction 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 European
markets and present valuation problems for the fund.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the return of
the MSCI EAFE-GDP Weighted Index ("MSCI Index"), a broad-based unmanaged index
of foreign stocks. Past performance does not necessarily indicate how the fund
will perform in the future. Performance figures do not reflect expenses
incurred from investing through a Separate Account. These expenses will reduce
performance. Please refer to the Separate Account prospectus for more
information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1995 11.26%
1996 17.72%
1997 2.71%
1998 6.51%
1999 67.73%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Quarterly returns:
Highest:47.43% in 4th quarter 1999
Lowest:(19.72)% in 3rd quarter 1998
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Since
year years inception
- -----------------------------------
<S> <C> <C> <C>
Fund 67.73% 19.17% 16.29%
MSCI Index 31.00% 16.00% 14.36%
- -----------------------------------
</TABLE>
* Index comparisons begin on June 30, 1994
Travelers Series Fund
5
<PAGE>
Investments, Risks and Performance
Smith Barney Large Cap Value Portfolio
Investment objective
Current income and long-term growth of income and capital.
Principal investment strategies
Key investments The fund invests primarily in common stocks of U.S. companies
having market capitalizations of at least $5 billion at the time of
investment.
- --------------------------------------------------------------------------------
Selection process
The manager employs a two-step selection process. First,
the manager uses proprietary models and fundamental
research to try to find stocks that are underpriced in the
market relative to their fundamental value. The manager
looks for the following:
. Low market valuations measured by the manager's valuation
models
. Above average dividend yields and established dividend
records
. High return on invested capital and strong cash flow
. Liquidity
Next, the manager looks for a positive catalyst in the
company's near term outlook which the manager believes will
accelerate earnings.
These catalysts include positive changes in earnings
prospects because of:
. New management
. Effective research, product development and marketing
. A business strategy not yet recognized by the marketplace
. Regulatory changes favoring the company
Travelers Series Fund
6
<PAGE>
Principal risks of investing in the fund
While investing in large capitalization value securities can bring added
benefits, it may also involve additional risks. 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.
. Value stocks or larger capitalization stocks are temporarily out of favor.
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular stock proves to be incorrect.
. An adverse event, such as negative press reports about a company in the fund,
depresses the value of the company's stock.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the return of
the S&P 500 Index, a broad-based unmanaged index of U.S. stocks. Past
performance does not necessarily indicate how the fund will perform in the
future. Performance figures do not reflect expenses incurred from investing
through a Separate Account. These expenses will reduce performance. Please
refer to the Separate Account prospectus for more information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1995 33.08%
1996 19.79%
1997 26.63%
1998 9.82%
1999 0.06%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Quarterly returns:
Highest:13.92% in 4th quarter 1998
Lowest:(12.87)% in 3rd quarter 1998
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Since
year years inception
- --------------------------------------
<S> <C> <C> <C>
Fund 0.06% 17.27% 15.21%
S&P 500 Index 21.03% 28.54% 26.73%
- --------------------------------------
</TABLE>
* Index comparisons begin on June 30, 1994
Travelers Series Fund
7
<PAGE>
Investments, Risks and Performance
Smith Barney Large Capitalization Growth Portfolio
Investment objective
Long-term growth of capital.
Principal investment strategies
Key investments The fund invests primarily in equity
securities of U.S. companies having a market
capitalization of at least $5 billion at the time of
investment.
- --------------------------------------------------------------------------------
Selection process
The manager emphasizes individual security selection while
diversifying the fund's investments across industries which
may help to reduce risk. The manager attempts to identify
established large capitalization companies with the highest
growth potential. The manager then analyzes each company in
detail, ranking its management, strategy and competitive
market position. Finally, the manager attempts to identify
the best values available among the growth companies
identified.
In selecting individual companies for investment, the
manager looks for:
. Favorable earnings prospects
. Technological innovation
. Industry dominance
. Competitive products and services
. Global scope
. Long term history of performance
. Consistent and sustainable long-term growth in dividends
and earnings per share
. Strong cash flow
. High return on equity
. Strong financial condition
. Experienced and effective management
Travelers Series Fund
8
<PAGE>
Principal risks of investing in the fund
While investing in large capitalization growth securities can bring added
benefits, it may also involve additional risks. 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.
. Growth stocks or large capitalization stocks are temporarily out of favor.
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular stock proves to be incorrect.
. An adverse event, such as negative press reports about a company in the fund,
depresses the value of the company's stock.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the return of
the S&P 500 Index, a broad-based unmanaged index of U.S. stocks. Past
performance does not necessarily indicate how the fund will perform in the
future. Performance figures do not reflect expenses incurred from investing
through a Separate Account. These expenses will reduce performance. Please
refer to the Separate Account prospectus for more information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1999 30.83%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on May 1, 1998.
Quarterly returns:
Highest:23.64% in 4th quarter 1999
Lowest:(6.96)% in 3rd quarter 1999
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Since
year inception
- -------------------------------
<S> <C> <C>
Fund 30.83% 32.72%
S&P 500 Index 21.03% 22.22%
- -------------------------------
</TABLE>
* Index comparisons begin on May 31, 1998
Travelers Series Fund
9
<PAGE>
Investments, Risks and Performance
Smith Barney Aggressive Growth Portfolio
Investment objective
Long-term capital appreciation.
Principal investment strategies
Key investments 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.
- --------------------------------------------------------------------------------
Selection process
The manager emphasizes individual security selection while
diversifying the fund's investments across industries,
which may help to reduce risk. The manager focuses
primarily, but not exclusively, 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, products or services
. New cost reduction measures
. Changes in management, or
. Favorable changes in government regulations
Travelers Series Fund
10
<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
. Adverse governmental action or political, economic or market instability
occurs in a foreign country
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
- --------------------------------------------------------------------------------
Fund performance
Because this fund commenced operations on November 1, 1999, 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
11
<PAGE>
Investments, Risks and Performance
Smith Barney MidCap Portfolio
Investment objective
Long-term growth of capital.
Principal investment strategies
Key investments 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 January 31, 2000, the largest market
capitalization of a company in the Index was $37 billion
and the smallest market capitalization was $200 million.
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.
- --------------------------------------------------------------------------------
Selection process
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
12
<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
. Medium 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.
- --------------------------------------------------------------------------------
Fund performance
Because this fund commenced operations on November 1, 1999, 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
13
<PAGE>
Investments, Risks and Performance
Alliance Growth Portfolio
Investment objective
Long-term growth of capital.
Principal investment strategies
Key investments The fund invests primarily in equity
securities of U.S. companies. Equity securities include
exchange traded and over-the-counter common stocks and
preferred stock, debt securities convertible into equity
securities, and warrants and rights relating to equity
securities.
The fund may also invest in fixed income securities for
capital appreciation, including lower quality fixed
income securities.
- --------------------------------------------------------------------------------
Selection process
The subadviser emphasizes individual security selection
while spreading investments among many industries and
sectors. The subadviser identifies individual companies
that it believes offer exceptionally high prospects for
growth and uses qualitative analysis to control risk. The
subadviser also over- and underweights particular industry
sectors depending on the subadviser's outlook for each
sector.
In selecting individual companies and sectors for
investment the subadviser looks for the following:
. Favorable earnings outlook
. Above average growth rates at reasonable market
valuations
. Experienced and effective management
. High relative return on invested capital
. Strong financial condition
. Effective research, product development and marketing
Travelers Series Fund
14
<PAGE>
Principal risks of investing in the fund
While investing in growth securities can bring added benefits, it may also
involve additional risks. 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 markets decline.
. Growth stocks are temporarily out of favor.
. An adverse event, such as negative press reports about a company in the fund,
depresses the value of the company's stock.
. The subadviser's judgment about the attractiveness, value or potential
appreciation of a particular stock proves to be incorrect.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the return of
the Russell 1000 Index, a broad-based unmanaged index of smaller capitalization
stocks. Past performance does not necessarily indicate how the fund will
perform in the future. Performance figures do not reflect expenses incurred
from investing through a Separate Account. These expenses will reduce
performance. Please refer to the Separate Account prospectus for more
information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1995 34.87%
1996 29.41%
1997 29.02%
1998 29.05%
1999 32.25%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Quarterly returns:
Highest:31.22% in 4th quarter 1998
Lowest:(17.35)% in 3rd quarter 1998
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Since
year years inception
- -------------------------------------------
<S> <C> <C> <C>
Fund 32.25% 30.90% 28.41%
Russell 1000 Index 20.91% 28.04% 26.25%
- -------------------------------------------
</TABLE>
* Index comparisons begin on June 30, 1994
Travelers Series Fund
15
<PAGE>
Investments, Risks and Performance
AIM Capital Appreciation Portfolio
Investment objective
Capital appreciation.
Principal investment strategies
Key investments The fund invests primarily in common
stocks of companies the subadviser believes are likely
to benefit from new or innovative products, services or
processes, as well as those that have experienced above-
average, long-term growth in earnings and have excellent
prospects for future growth.
- --------------------------------------------------------------------------------
Selection process
The subadviser emphasizes individual security selection
while diversifying the fund's investments across
industries, which may help to reduce risk. The subadviser
seeks to identify companies having a consistent record of
long-term above average growth in earnings as well as
companies that are only beginning to experience significant
and sustainable earnings growth.
In selecting individual companies for investment, the
manager looks for the following:
. New or innovative products, services or processes that
should enhance future earnings
. Increasing market share
. Experienced and effective management
. Competitive advantages
The subadviser then considers whether to sell a particular
security when it no longer meets these criteria.
Travelers Series Fund
16
<PAGE>
Principal risks of investing in the fund
While investing in smaller growth securities can bring added benefits, it may
also involve risks. 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 declines.
. An adverse event, such as negative press reports about a company in the
fund's portfolio, depresses the value of the company's stock.
. The subadviser's judgment about the attractiveness, value or potential
appreciation of a particular stock proves to be incorrect.
The fund may invest in relatively new or unseasoned companies that are in their
early stages of development. Smaller, unseasoned companies present greater
risks than securities of larger, more established companies because:
. They may be dependent on a small number of products or services for their
revenues
. They may lack substantial capital reserves to make needed capital investments
or absorb losses
. They may have less experienced management
. Their securities may be less widely traded, less liquid and more volatile
. Recession or adverse economic trends are more likely to sharply and
negatively affect their earnings and financial condition
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the return of
the Lipper Midcap Index, a broad-based unmanaged index of mid-cap stocks. Past
performance does not necessarily indicate how the fund will perform in the
future. Performance figures do not reflect expenses incurred from investing
through a Separate Account. These expenses will reduce performance. Please
refer to the Separate Account prospectus for more information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1996 15.01%
1997 12.15%
1998 17.21%
1999 42.96%
Calendar years ended
December 31
This bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on October 10, 1995.
Quarterly returns:
Highest:35.92% in 4th quarter 1999
Lowest:(15.52)% in 3rd quarter 1998
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Since
year inception
- -------------------------------------
<S> <C> <C>
Fund 42.96% 18.87%
Lipper Midcap Index 44.05% 22.58%*
- -------------------------------------
</TABLE>
* Index comparisons begin on October 31, 1995
Travelers Series Fund
17
<PAGE>
Investments, Risks and Performance
Van Kampen Enterprise Portfolio
Investment objective
Capital appreciation.
Principal investment strategies
Key investments The fund invests primarily in common
stocks of U.S. growth companies.
- --------------------------------------------------------------------------------
Selection process
The subadviser emphasizes individual security selection
while diversifying the fund's investments across
industries, which can help reduce risk. The subadviser
seeks promising growth opportunities by investing primarily
in large and mid- capitalization companies. The subadviser
emphasizes growth companies but may also invest in
companies in cyclical industries during periods when their
securities appear attractive to the subadviser for capital
appreciation.
The subadviser frequently meets with company managements to
help assess individual companies for potential investment.
The subadviser looks for companies with an attractive
current valuation and a combination of positive future
fundamentals, such as one or more of the following:
. Accelerating earnings growth
. Consistent earnings growth
. Better than expected earnings, often related to new
products, processes or services or cost reductions
. Positive changes in a company or its industry or
regulatory environment
The subadviser also employs an active sell discipline and
will generally sell stock if it determines:
. The company's future fundamentals have deteriorated
. The company's stock has reached full or excessive
valuation levels
Travelers Series Fund
18
<PAGE>
Principal risks of investing in the fund
While investing in securities of large and medium capitalization companies can
bring added benefits, it may also involve risks. 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 declines.
. Large and medium capitalization stocks or growth stocks are temporarily out
of favor.
. An adverse event, such as negative press reports about a company in the
fund's portfolio, depresses the value of the company's stock or industry.
. The subadviser's judgment about the attractiveness, value or potential
appreciation of a particular stock or industry proves to be incorrect.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the returns of
the S&P 500 Index, a broad-based unmanaged index of U.S. stocks, and the Lipper
Growth Funds Index ("Lipper Index"), which shows average returns for funds
having an investment objective similar to that of the fund's. Past performance
does not necessarily indicate how the fund will perform in the future.
Performance figures do not reflect expenses incurred from investing through a
Separate Account. These expenses will reduce performance. Please refer to the
Separate Account prospectus for more information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1995 32.55%
1996 23.04%
1997 28.59%
1998 25.12%
1999 25.93%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Quarterly returns:
Highest:25.03% in 4th quarter 1998
Lowest:(14.75)% in 3rd quarter 1998
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Since
year years inception
- --------------------------------------
<S> <C> <C> <C>
Fund 25.93% 27.00% 24.29%
S&P 500 Index 21.03% 28.54% 26.73%
Lipper Index 27.96% 26.27% 24.45%
- --------------------------------------
</TABLE>
* Index comparisons begin on June 30, 1994
Travelers Series Fund
19
<PAGE>
Investments, Risks and Performance
MFS Total Return Portfolio
Investment objectives
Primary: Above average income (compared to a portfolio
invested entirely in equity securities) consistent with
the prudent employment of capital.
Secondary: Growth of capital and income.
Principal investment strategies
Key investments The fund invests in a broad range of
equity and fixed income securities of both U.S. and
foreign issuers.
The fund's equity securities include common and
preferred stock; bonds, warrants or rights convertible
into stock and depositary receipts for those securities.
The fund's fixed income securities include corporate
debt obligations of any maturity, Brady bonds, U.S.
Government securities, mortgage-backed securities, zero-
coupon bonds, deferred interest bonds and payment in
kind bonds.
Credit quality: The fund's assets may consist of both
investment grade and lower quality securities. The fund
may invest up to 20% of the fund's assets in
nonconvertible fixed income securities rated below
investment grade or unrated securities of equivalent
quality.
- --------------------------------------------------------------------------------
Selection process
Under normal market conditions and depending on the
subadviser's view of economic and money market conditions,
fiscal and monetary policy and security values, the fund's
assets will be allocated among fixed income and equity
investments within the following ranges:
. between 40% . at least 25% in
and 75% in non-convertible
equity fixed income
securities securities
Equity investments
The subadviser uses a "bottom up" investment approach in
selecting securities based on its fundamental analysis
(such as an analysis of earnings, cash flows, competitive
position and management's abilities) of an individual
security's value. In selecting individual equity securities
for investment, the subadviser seeks companies:
. that are undervalued in the market relative to their long
term potential because the market has overlooked them or
because they are temporarily out of favor in the market
due to market declines, poor economic conditions or
adverse regulatory or other changes
. that generally have low price to book, price to sales
and/or price to earnings ratios
. with relatively large market capitalizations (i.e.,
market capitalizations of $5 billion or more).
The subadviser also invests in convertible securities that
generally provide a fixed income stream and an opportunity
to participate in an increase in the market price of the
underlying common stock.
Fixed income investments
The subadviser periodically assesses the three month
outlook for inflation rate changes, economic growth and
other fiscal measures and their effect on U.S. Treasury
interest rates. Using that assessment, the subadviser
determines a probable difference between total Returns on
U.S. Treasury securities and on other types of fixed income
securities and selects those securities the subadviser
believes will deliver favorable returns.
Travelers Series Fund
20
<PAGE>
Principal risks of investing in the fund
While investing in a mix of equity and debt securities can bring added
benefits, it may also involve additional risks. Investors could lose money in
the fund or the fund's performance could fall below other possible investments
if any of the following occurs:
. The subadviser's allocation of investments between equity and fixed income
securities could cause the fund to miss attractive investment opportunities
by underweighting markets that generate significant returns or cause the fund
to incur losses by overweighting markets that experience significant
declines.
. The subadviser's judgment about the attractiveness, value or potential
appreciation of a particular security proves to be incorrect.
. Equity investments lose their value due to a decline in the U.S. stock
market.
. Value or large capitalization stocks are temporarily out of favor.
. An adverse event, such as negative press reports about a company in the
fund's portfolio, depresses the value of the company's stock.
. Fixed income investments lose their value due to an increase in interest
rates.
. The issuer of a debt security in the fund defaults on its obligation to pay
principal or interest, has its credit rating downgraded by a rating
organization or is perceived by the market to be less creditworthy.
. Mortgage and asset backed securities are subject to the same default risks of
other fixed income securities, but it may be more difficult to enforce rights
against the assets underlying these securities in case of default.
. As a result of declining interest rates, the issuer of a security exercises
its right to prepay principal earlier than scheduled, forcing the fund to
reinvest in lower yielding securities. This is known as call risk.
. As a result of rising interest rates, the issuer of a security exercises its
right to pay principal later than scheduled, which will lock in a below-
market interest rate and reduce the value of the security. This is known as
extension risk.
. Securities with longer maturities are more sensitive to interest rate changes
and may be more volatile.
The fund may invest in lower quality securities that are speculative and have
only an adequate capacity to pay principal and interest. These securities have
a higher risk of default, tend to be less liquid, and may be more difficult to
value. Changes in economic conditions or other circumstances are more likely to
lead issuers of these securities to have a weakened capacity to make principal
and interest payments.
Many foreign countries in which the fund invests have less liquid and more
volatile markets than in the U.S. In some of the foreign countries in which the
fund invests, there is also less information available about foreign issuers
and markets because of less rigorous accounting and regulatory standards than
in the U.S. Currency fluctuations could erase investment gains or add to
investment losses. The risk of investing in foreign securities is greater in
the case of less developed countries.
Impact of high portfolio turnover The fund may engage in active and frequent
trading to achieve its principal investment strategies. This may lead to the
realization and distribution to shareholders of higher capital gains, which
would increase their tax liability. Frequent trading also increases transaction
costs, which could detract from the fund's performance.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the return of
the S&P 500 Index, a broad-based unmanaged index of U.S. stocks, and the Lehman
Brothers Government/Corporate Bond Index ("Lehman Brothers Index"), a broad-
based unmanaged index of bonds issued by the U.S. government and its agencies
as well as certain corporate issuers. Past performance does not necessarily
indicate how the fund will perform in the future. Performance figures do not
reflect expenses incurred from investing through a Separate
Risk return bar chart
% Total Return
[BAR CHART]
1995 25.70%
1996 14.51%
1997 21.18%
1998 11.67%
1999 2.63%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Account. These expenses will reduce performance. Please refer to the Separate
Account prospectus for more information on expenses.
Quarterly returns:
Highest: 9.87% in 2nd quarter 1997
Lowest:(4.47)% in 3rd quarter 1999
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
<TABLE>
- -----------------------------------------------
<CAPTION>
One Five Since
year years inception
- -----------------------------------------------
<S> <C> <C> <C>
Fund 2.63% 14.86% 12.87%
S&P 500 Index 21.03% 28.54% 26.73%*
Lehman Brothers Index (2.15)% 7.61% 7.06%*
- -----------------------------------------------
</TABLE>
* Index comparisons begin on June 30, 1994
Travelers Series Fund
21
<PAGE>
Investments, Risks and Performance
INVESCO Global Strategic Income Portfolio
Investment objectives
Primary: High current income Secondary: Capital appreciation
Principal investment strategies
Key investments The fund invests primarily in debt
securities of U.S. and foreign companies, banks and
governments, including those in emerging markets.
Credit Quality: At least 50% of the fund's assets con-
sist of debt securities that are investment grade at the
time of purchase. The remainder may consist of lower-
quality bonds whose credit quality is considered the
equivalent of U.S. corporate debt securities commonly
known as "junk bonds."
Duration: The fund's average duration will generally
vary from 3 to 7 years depending on the subadviser's
outlook for interest rates. Individual securities may be
of any maturity.
- --------------------------------------------------------------------------------
Selection process
The subadviser uses a combination of a "top-down" approach
and quantitative models to create an optimal risk/return
allocation of the fund's assets among debt securities of
issuers in three separate investment areas: (1) the United
States, (2) developed foreign countries, and (3) emerging
markets. The subadviser then selects individual debt
securities within each area on the basis of its views as to
the values available in the marketplace.
In allocating investments among countries and asset
classes, the subadviser evaluates the following:
. Currency, inflation . Growth rate forecasts
and interest rate . Fiscal policies
trends . Political outlook
. Proprietary risk
measures
. Balance of payments
status
In selecting individual debt securities, the subadviser
evaluates the following:
. Yield . Issue classification
. Maturity . Credit quality
. Call or prepayment
risk
Travelers Series Fund
22
<PAGE>
Principal risks of investing in the fund
While investing in global debt securities can bring added benefits, it may also
involve risks. Investors could lose money in the fund or the fund's performance
could fall below other possible investments if any of the following occurs:
. Debt securities lose their value due to an increase in market interest rates
in one or more regions, a decline in an issuer's credit rating or financial
condition or a default by an issuer.
. As a result of declining interest rates, the issuer of a security exercises
its right to prepay principal earlier than scheduled, forcing the fund to
reinvest in lower yielding securities. This is known as call or prepayment
risk.
. As a result of rising interest rates, the issuer of a security exercises its
right to pay principal later than scheduled, which will lock in a below-
market interest rate and reduce the value of the security. This is known as
extension risk.
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular security proves to be incorrect.
. An unhedged currency in which a security is priced declines in value relative
to the U.S. dollar
. The subadviser's judgment about the attractiveness, relative yield, value or
potential appreciation of a particular security, or the stability of a
particular government proves to be incorrect.
The fund may invest in lower quality securities that are speculative and have
only an adequate capacity to pay principal and interest. These securities have
a higher risk of default, tend to be less liquid, and may be more difficult to
value. Changes in economic conditions or other circumstances are more likely to
lead issuers of these securities to have a weakened capacity to make principal
and interest payments.
Many foreign countries in which the fund invests have markets that are less
liquid and more volatile than markets in the U.S. In some of the foreign
countries in which the fund invests, there is also less information available
about foreign issuers and markets because of less rigorous accounting and
regulatory standards than in the U.S. Currency fluctuations could erase
investment gains or add to investment losses. The risk of investing in foreign
securities is greater in the case of less developed countries.
In Europe, Economic and Monetary Union (EMU) and the introduction 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 European
markets and present valuation problems for the fund.
The fund is NOT diversified, which means that it can invest a higher percentage
of its assets in any one issuer than a diversified fund. Being non-diversified
may magnify the fund's losses from adverse events affecting a particular
issuer.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the return of
the J.P. Morgan Global Bond Index ("Morgan Index"), a broad-based unmanaged
index of domestic and foreign bonds. Past performance does not necessarily
indicate how the fund will perform in the future. Performance figures do not
reflect expenses incurred from investing through a Separate Account. These
expenses will reduce performance. Please refer to the Separate Account
prospectus for more information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1995 20.09%
1996 18.70%
1997 7.41%
1998 -1.54%
1999 -1.79%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Quarterly returns:
Highest:7.64% in 3rd quarter 1996
Lowest:(5.35)% in 3rd quarter 1998
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Since
year Years inception
- --------------------------------------
<S> <C> <C> <C>
Fund (1.79)% 8.16% 6.36%
Morgan Index (5.08)% 6.69% 6.38%
- --------------------------------------
</TABLE>
* Index comparison begins on June 30, 1994.
Travelers Series Fund
23
<PAGE>
Investments, Risks and Performance
Travelers Managed Income Portfolio
Investment objective
High current income consistent with prudent risk of capital.
Principal investment strategies
Key investments The fund invests primarily in U.S.
corporate debt obligations and U.S. government
securities, including mortgage and asset backed
securities, but may also invest to a limited extent in
foreign issuers.
Credit Quality: The fund invests primarily in investment
grade obligations. Up to 35% of the fund's assets may be
invested in below investment grade obligations with no
minimum rating.
Duration: At least 65% of the fund's assets are invested
in securities having durations of 10 years or less. The
fund's average portfolio duration will vary between 2 to
5 years depending on the manager's outlook for interest
rates.
- --------------------------------------------------------------------------------
Selection process
The manager uses a three step "top down" investment
approach to selecting investments for the fund by
identifying undervalued sectors and individual securities.
Specifically, the manager:
. Determines appropriate sector and maturity weightings
based on the manager's intermediate and long-term
assessments of broad economic and interest rate trends
. Uses fundamental research methods to identify undervalued
sectors of the government and corporate debt markets and
adjusts portfolio positions to take advantage of new
information
. Analyzes yield maturity, issue classification and quality
characteristics to identify individual securities that
present what the manager considers the optimal balance of
potential return and manageable risk
Travelers Series Fund
24
<PAGE>
Principal risks of investing in the fund
While investing in debt securities can bring added benefits, it may also
involve risks. Investors could lose money in the fund or the fund's performance
could fall below other possible investments if any of the following occurs:
. The issuer of a debt security in the fund defaults on its obligation to pay
principal or interest, has its credit rating downgraded by a rating
organization or is perceived by the market to be less creditworthy.
. Interest rates go up, causing the prices of debt securities in the fund to
fall.
. As a result of declining interest rates, the issuer of a security exercises
its right to prepay principal earlier than scheduled, forcing the fund to
reinvest in lower yielding securities. This is known as call or prepayment
risk.
. As a result of rising interest rates, the issuer of a security exercises its
right to pay principal later than scheduled, which will lock in a below-
market interest rate and reduce the value of the security. This is known as
extension risk.
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular security proves to be incorrect.
The fund may invest in lower quality securities that are speculative and have
only an adequate capacity to pay principal and interest. These securities have
a higher risk of default, tend to be less liquid, and may be more difficult to
value. Changes in economic conditions or other circumstances are more likely to
lead issuers of these securities to have a weakened capacity to make principal
and interest payments.
Many foreign countries in which the fund invests have markets that are less
liquid and more volatile than markets in the U.S. In some of the foreign
countries in which the fund invests, there is also less information available
about foreign issuers and markets because of less rigorous accounting and
regulatory standards than in the U.S. Currency fluctuations could erase
investment gains or add to investment losses. The risk of investing in foreign
securities is greater in the case of less developed countries.
In Europe, Economic and Monetary Union (EMU) and the introduction of a single
currency began in 1999. There are significant political and economic risks
associated with EMU, which may increase the volatility of European markets and
present valuation problems for the fund.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the return of
the Lehman Brothers Intermediate Government/Corporate Index ("Lehman Brothers
Index"), a broad-based unmanaged index of bonds issued by the U.S. government
and its agencies as well as certain corporate issuers. Prior to 1998, the fund
compared its performance with the Lehman Aggregate Bond Index. The manager
believes that the Lehman Intermediate Government/Corporate Index is a more
appropriate benchmark because it more closely parallels the fund's holdings.
Past performance does not necessarily indicate how the fund will perform in the
future. Performance figures do not reflect expenses incurred from investing
through a Separate Account. These expenses will reduce performance. Please
refer to the Separate Account prospectus for more information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1995 16.02%
1996 2.93%
1997 9.72%
1998 5.07%
1999 0.89%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Quarterly returns:
Highest:5.75% in 2nd quarter 1995
Lowest:(2.39)% in 1st quarter 1996
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Since
year years inception
- --------------------------------------------
<S> <C> <C> <C>
Fund 0.89% 6.79% 6.15%
Lehman Brothers Index 0.39% 7.10% 6.57%
- --------------------------------------------
</TABLE>
* Index comparisons begin on June 30, 1994
Travelers Series Fund
25
<PAGE>
Investments, Risks and Performance
Putnam Diversified Income Portfolio
Investment objective
High current income consistent with preservation of capital.
Principal investment strategies
Key investments The fund invests primarily in debt
securities of U.S. and foreign governments and
corporations.
Credit Quality: The fund may invest in securities with a
wide range of credit qualities depending on the particu-
lar sector of the fixed income securities market in
which the manager invests.
Duration: The Fund's duration will generally vary from 3
to 7 years depending on market conditions and the
subadviser's outlook for interest rates. Individual se-
curities may be of any duration.
- --------------------------------------------------------------------------------
Selection process
The subadviser combines "top down" and "bottom up"
investment styles, with an emphasis on active sector
strategies. The subadviser believes that actively
allocating the fund's investments among sectors of the
fixed income securities markets, as opposed to investing in
any one sector, will better enable the fund to control risk
while pursuing its objective of high current income.
The subadviser allocates its investment among the following
three sectors of the fixed income securities market:
. A U.S. Government Sector, consisting primarily of
securities of the U.S. government, its agencies and
instrumentalities and related options, futures and
repurchase agreements. The subadviser allocates at least
20% of the fund to the U.S. Government Sector;
. A High Yield Sector, consisting primarily of high
yielding, lower-rated, high risk U.S. and foreign
corporate fixed-income securities commonly called "junk
bonds"; and
. An International Sector, consisting primarily of
obligations of foreign governments, their agencies and
instrumentalities, supranational entities, and foreign
corporations, including issuers in emerging markets, and
related options and futures.
The subadviser over- and underweights investments in each
sector depending on the subadviser's views on economic,
interest rate and political trends. The subadviser utilizes
proprietary techniques to organize and rank opportunities
presented by the various sectors.
In making sector allocations, the subadviser evaluates:
. Capital flows . Default trends
. Political trends . Interest rate forecasts
Specialists managing each sector then select individual
securities within each sector that represent risk/return
opportunities believed optimal. In selecting securities for
investment, the subadviser looks for favorable yield,
maturity, issue classification and quality characteristics.
Travelers Series Fund
26
<PAGE>
Principal risks of investing in the fund
While investing in fixed income securities can bring added benefits, it may
also involve additional risks. Investors could lose money in the fund or the
fund's performance could fall below other possible investments if any of the
following occurs:
. Fixed income securities lose their value due to an increase in market
interest rates in one or more regions, a decline in an issuer's credit rating
or financial condition or a default by an issuer.
. As a result of declining interest rates, the issuer of a security exercises
its right to prepay principal earlier than scheduled, forcing the fund to
reinvest in lower yielding securities. This is known as call or prepayment
risk.
. As a result of rising interest rates, the issuer of a security exercises its
right to pay principal later than scheduled, which will lock in a below-
market interest rate and reduce the value of the security. This is known as
extension risk.
. An unhedged currency in which a security is priced declines in value relative
to the U.S. dollar
. The subadviser's judgment about the attractiveness, relative yield, value or
potential appreciation of a particular security, or the stability of a
particular government proves to be incorrect.
The fund may invest in lower quality securities that are speculative and have
only an adequate capacity to pay principal and interest. These securities have
a higher risk of default, tend to be less liquid, and may be more difficult to
value. Changes in economic conditions or other circumstances are more likely to
lead issuers of these securities to have a weakened capacity to make principal
and interest payments.
Many foreign countries in which the fund invests have markets that are less
liquid and more volatile than markets in the U.S. In some of the foreign
countries in which the fund invests, there is also less information available
about foreign issuers and markets because of less rigorous accounting and
regulatory standards than in the U.S. Currency fluctuations could erase
investment gains or add to investment losses. The risk of investing in foreign
securities is greater in the case of less developed countries.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the returns of
the Lehman Brothers Aggregate Bond Index ("Lehman Brothers Index"), and the
Salomon Smith Barney Non-U.S. World Government Bond Index ("Salomon Index"),
both of which are broad-based unmanaged indices. (The Lehman index consists of
a variety of domestically issued bonds. The Salomon index consists of foreign
government bonds.) Past performance does not necessarily indicate how the fund
will perform in the future. Performance figures do not reflect expenses
incurred
from investing through a Separate Account. These expenses will reduce
performance. Please refer to the Separate Account prospectus for more
information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1995 17.49%
1996 8.14%
1997 7.69%
1998 0.67%
1999 1.11%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Quarterly returns:
Highest:4.97% in 1st quarter 1995
Lowest:(3.34)% in 3rd quarter 1998
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Since
year years inception
- ------------------------------------------------
<S> <C> <C> <C>
Fund 1.11% 6.85% 6.44%
Lehman Brothers Index (0.82)% 7.73% 7.20%
Salomon Index (5.07)% 5.90% 5.77%
- ------------------------------------------------
</TABLE>
* Index comparisons begin on June 30, 1994
Travelers Series Fund
27
<PAGE>
Investments, Risks and Performance
Smith Barney High Income Portfolio
Investment objectives
Primary: High current income Secondary: Capital appreciation
Principal investment strategies
Key investments The fund invests primarily in high
yielding, corporate debt obligations and preferred stock
of U.S. and foreign issuers, but may also invest in
foreign issuers.
Credit Quality: The fund invests primarily in below in-
vestment grade securities, but may not invest more than
10% in securities rated lower than B or unrated securi-
ties of comparable quality. Below investment grade secu-
rities are commonly known as "junk bonds."
Maturity: Although the fund may invest in securities of
any maturity, under current market conditions, the fund
intends to have an average remaining maturity of between
five and ten years.
- --------------------------------------------------------------------------------
Selection process
In selecting securities, the manager considers and compares
the relative yields of various types of obligations. The
manager seeks to maximize current income by generally
purchasing securities of lower credit quality, but offering
higher current yield. In selecting securities for the fund,
the manager employs a forward looking strategy seeking to
identify companies that exhibit favorable earnings
prospects or demonstrate a potential for higher ratings
over time.
The manager looks for:
. "Fallen angels" or companies that are repositioning in
the marketplace which the manager believes are
temporarily undervalued, and
. Younger companies with smaller capitalizations that have
exhibited improving financial strength or improving
credit ratings over time
The manager selects individual debt securities by comparing
yield, maturity, issue classification and quality
characteristics. Investments in these companies may
increase the fund's potential for capital appreciation and
reduce the fund's credit risk exposure.
The manager also employs an active sell strategy to dispose
of securities that no longer meet the manager's investment
criteria to harvest gains for reinvestment in new
securities exhibiting characteristics as described above.
Travelers Series Fund
28
<PAGE>
Principal risks of investing in the fund
While investing in high yield securities can bring added benefits, it may also
involve additional risks. Investors could lose money in the fund or the fund's
performance could fall below other possible investments if any of the following
occurs:
. The issuer of a debt security in the fund defaults on its obligation to pay
principal or interest, has its credit rating downgraded by a rating
organization or is perceived by the market to be less creditworthy.
. Interest rates go up, causing the prices of debt securities in the fund to
fall.
. As a result of declining interest rates, the issuer of a security exercises
its right to prepay principal earlier than scheduled, forcing the fund to
reinvest in lower yielding securities. This is known as call or prepayment
risk.
. As a result of rising interest rates, the issuer of a security exercises its
right to pay principal later than scheduled, which will lock in a below-
market interest rate and reduce the value of the security. This is known as
extension risk.
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular security proves to be incorrect.
The fund may invest in lower quality securities that are speculative and have
only an adequate capacity to pay principal and interest. These securities have
a higher risk of default, tend to be less liquid, and may be more difficult to
value. Changes in economic conditions or other circumstances are more likely to
lead issuers of these securities to have a weakened capacity to make principal
and interest payments.
Many foreign countries in which the fund invests have markets that are less
liquid and more volatile than markets in the U.S. In some of the foreign
countries in which the fund invests, there is also less information available
about foreign issuers and markets because of less rigorous accounting and
regulatory standards than in the U.S. Currency fluctuations could erase
investment gains or add to investment losses. The risk of investing in foreign
securities is greater in the case of less developed countries.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the returns of
the Salomon Smith Barney Intermediate High Yield Index ("Salomon Index") and
the Bear Stearns High Yield Index ("Bear Stearns Index"), both of which are
broad-based indices of high yield corporate bonds. Past performance does not
necessarily indicate how the fund will perform in the future. Performance
figures do not reflect expenses incurred from investing through a Separate
Account. These expenses will reduce performance. Please refer to the Separate
Account prospectus for more information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1995 19.18%
1996 13.13%
1997 13.85%
1998 0.44%
1999 2.60%
Calendar years ended
December 31
The bar chart shows the performance of the fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Quarterly returns:
Highest:5.35% in 2nd quarter 1997
Lowest:(5.79)% in 3rd quarter 1998
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Since
year years inception
- -----------------------------------------
<S> <C> <C> <C>
Fund 2.60% 9.61% 8.52%
Salomon Index 1.34% 9.76% 8.93%*
Bear Stearns Index 2.30% 9.72% 9.23%*
- -----------------------------------------
</TABLE>
*Index comparisons begin on June 30, 1994
Travelers Series Fund
29
<PAGE>
Investments, Risks and Performance
Smith Barney Money Market Portfolio
Investment objective
Maximize current income consistent with preservation of
capital. The fund seeks to maintain a stable $1 share
price.
Principal investment strategies
Key investments The fund invests exclusively in high
quality U.S. dollar denominated short term debt securi-
ties. These include commercial paper, corporate and mu-
nicipal obligations, obligations of U.S. and foreign
banks, securities of the U.S. Government, its agencies
or instrumentalities and related repurchase agreements.
Credit Quality: The fund invests exclusively in securi-
ties rated by a nationally recognized rating organiza-
tion in the two highest short term rating categories, or
if unrated, of equivalent quality.
Effective Maturity: The fund invests exclusively in se-
curities having remaining effective maturities of 397
days or less, and maintains a dollar-weighted portfolio
maturity of 90 days or less.
- --------------------------------------------------------------------------------
Selection process
In selecting investments for the fund, the manager looks
for:
. The best relative values based on an analysis of interest
rate sensitivity, yield and price.
. Issuers offering minimal credit risk.
. Maturities consistent with the manager's outlook for
interest rates.
Travelers Series Fund
30
<PAGE>
Principal risks of investing in the fund
Although the fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in the fund, or the fund could
underperform other short term debt instruments or money market funds if any of
the following occurs:
. Interest rates rise sharply.
. An issuer of the fund's securities defaults, or has its credit rating
downgraded.
. Sectors or issuers the fund has emphasized fail to perform as expected.
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular security proves to be incorrect.
The value of the fund's foreign securities may go down because of unfavorable
government actions, political instability or the more limited availability of
accurate information about foreign issuers.
You should know:
An investment in the fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other government agency. There is no assurance
that the fund will be able to maintain a stable net asset value of $1.00 per
share.
- --------------------------------------------------------------------------------
Fund performance
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. The table shows how the fund's
average annual returns for different calendar periods compare to the return of
the 90-day U.S. Treasury bill. Past performance does not necessarily indicate
how the fund will perform in the future. Performance figures do not reflect
expenses incurred from investing through a Separate Account. These expenses
will reduce performance. Please refer to the Separate Account prospectus for
more information on expenses.
Risk return bar chart
% Total Return
[BAR CHART]
1995 5.43%
1996 4.94%
1997 5.09%
1998 5.04%
1999 4.78%
Calendar years ended
December 31
The bar chart shows the performance of the Fund's shares for each of the full
calendar years since its inception on June 16, 1994.
Quarterly returns:
Highest:1.37% in 2nd quarter 1995
Lowest:1.10% in 2nd quarter 1999
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Since
year years inception
- ------------------------------------
<S> <C> <C> <C>
Fund 4.76% 5.05% 4.97%
Treasury bill 4.74% 5.11% 5.10%*
- ------------------------------------
</TABLE>
* Index comparison begins on June 30, 1994.
The fund's 7-day yield as of December 31, 1999 was 5.29%.
Travelers Series Fund
31
<PAGE>
More on the Funds' Investments and Related Risks
Additional investments and investment techniques
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Smith Barney Pacific Basin Portfolio
The section Although the fund intends to be fully invested in equity se-
entitled "In- curities, it may invest up to 20% of its assets in investment
vestments, grade debt securities.
Risks and Per-
formance" de- Smith Barney International Equity Portfolio
scribes the The fund may invest up to 20% of its assets in debt securi-
funds' invest- ties of any credit quality or maturity of foreign corporate
ment objec- and governmental issuers, as well as U.S. government securi-
tives and ties and money market obligations of U.S. and foreign corpo-
their princi- rate issuers.
pal investment
strategies and Smith Barney Large Capitalization Growth Portfolio
risks. This Although the fund intends to be fully invested in equity se-
section pro- curities of growth companies, it may invest up to 35% of its
vides some ad- total assets in money market instruments for cash management
ditional in- purposes.
formation
about the Alliance Growth Portfolio
funds' invest- Although the fund invests primarily in U.S. equity securi-
ments and cer- ties, it may also invest up to 25% of its assets in high
tain invest- yield securities with no minimum credit quality restriction,
ment manage- and may also invest up to 15% in foreign securities.
ment tech-
niques the MFS Total Return Portfolio
funds may use. The fund may invest without limit in ADRs and up to 20% of
More informa- its total assets in foreign securities.
tion about the
funds' invest- Travelers Managed Income Portfolio
ments and The fund may invest up to 35% of its total assets in non-in-
portfolio man- vestment grade debt obligations, commonly known as "junk
agement tech- bonds." The fund may also invest up to 35% of its total as-
niques, some sets in fixed-income obligations having durations longer than
of which en- 10 years. The fund may also invest up to 25% of its assets in
tail risk, is asset-backed and mortgage-backed securities, including CMOs.
included in
the Statement Smith Barney High Income Portfolio
of Additional Although the fund invests primarily in high yield securities,
Information the fund may also invest up to 35% of its assets in common
(SAI). To find stock and common stock equivalents, including convertible se-
out how to ob- curities, options, warrants and rights. The fund may invest
tain an SAI, up to 20% of its assets in foreign currency denominated secu-
please turn to rities and without limit in U.S. dollar denominated securi-
the back cover ties of foreign issuers.
of this pro-
spectus.
Smith Barney Mid Cap Portfolio
The fund may invest up to 35% of its assets in equity securi-
ties of companies with market capitalizations outside the
market capitalization range of companies in the Index (i.e.,
small or large capitalization companies).
While the fund intends to be substantially fully invested in
equity securities, the fund may maintain up to 35% of its as-
sets 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 interest rates go
up, the credit rating of the security is downgraded or the
issuer defaults on its obligation to pay principal or inter-
est.
- --------------------------------------------------------------------------------
Travelers Series Fund
32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Equity
investments Subject to its particular investment policies, each of these
Each equity funds may invest in all types of equity securities. Equity
fund, MFS To- securities include exchange-traded and over-the-counter (OTC)
tal Return common and preferred stocks, warrants, rights, investment
Portfolio and grade convertible securities, depositary receipts and shares,
Smith Barney trust certificates, limited partnership interests, shares of
High Income other investment companies, real estate investment trusts and
Portfolio equity participations.
- --------------------------------------------------------------------------------
Fixed income Subject to its particular investment policies, each fund may
investments invest in fixed income securities. Fixed income investments
Each fixed in- include bonds, notes (including structured notes), mortgage-
come fund and, related securities, asset-backed securities, convertible se-
to a limited curities, Eurodollar and Yankee dollar instruments, preferred
extent, each stocks and money market instruments. Fixed income securities
equity fund may be issued by U.S. and foreign corporations or entities;
U.S. and foreign banks; the U.S. government, its agencies,
authorities, instrumentalities or sponsored enterprises;
state and municipal governments; supranational organizations;
and foreign governments and their political subdivisions.
Fixed income securities may have all types of interest rate
payment and reset terms, including fixed rate, adjustable
rate, zero coupon, contingent, deferred, payment in kind and
auction rate features.
MFS Total Each of these funds may invest in mortgage-backed and asset-
Return, backed securities. Mortgage-related securities may be issued
Travelers Managedby private companies or by agencies of the U.S. government
Income, Putnam and represent direct or indirect participations in, or are
Diversified collateralized by and payable from, mortgage loans secured by
Income and real property. Asset-backed securities represent participa-
Smith Barney tions in, or are secured by and payable from, assets such as
High Income installment sales or loan contracts, leases, credit card re-
Portfolios ceivables and other categories of receivables.
- --------------------------------------------------------------------------------
Credit quality
If a security receives different ratings, a fund will treat
the securities as being rated in the highest rating category.
A fund may choose not to sell securities that are downgraded
after their purchase below the fund's minimum acceptable
credit rating. Each fund's credit standards also apply to
counterparties to OTC derivatives contracts.
Investment grade securities
Securities are investment grade if:
. They are rated, respectively, in one of the top four long-
term rating categories of a nationally recognized
statistical rating organization.
. They have received a comparable short-term or other rating.
. They are unrated securities that the manager believes are
of comparable quality to investment grade securities.
- --------------------------------------------------------------------------------
Travelers Series Fund
33
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
High yield, lower quality securities
Each of these funds may invest in fixed income securities
Alliance that are high yield, lower quality securities rated by a rat-
Growth, MFS ing organization below its top four long term rating catego-
Total ries or unrated securities determined by the manager or
Return, subadviser to be of equivalent quality. The issuers of lower
Travelers quality bonds may be highly leveraged and have difficulty
Managed servicing their debt, especially during prolonged economic
Income, Putnam recessions or periods of rising interest rates. The prices of
Diversified lower quality securities are volatile and may go down due to
market perceptions of deteriorating issuer credit-worthiness
Income, or economic conditions. Lower quality securities may become
INVESCO Global illiquid and hard to value in down markets.
Strategic
Income and
Smith Barney
High
Income
Portfolios
only
Alliance
Growth Portfo-
lio may invest
in these secu-
rities primar-
ily for their
capital growth
potential
- --------------------------------------------------------------------------------
Foreign and Each fund may invest in foreign securities, although the for-
emerging eign investments of Smith Barney Money Market Portfolio are
market limited to U.S. dollar denominated investments issued by for-
investments eign branches of U.S. banks and by U.S. and foreign branches
of foreign banks.
Investments in securities of foreign entities and securities
quoted or denominated in foreign currencies involve special
risks. These include possible political and economic insta-
bility and the possible imposition of exchange controls or
other restrictions on investments. If a fund invests in secu-
rities denominated or quoted in currencies other than the
U.S. dollar, changes in foreign currency rates relative to
the U.S. dollar will affect the U.S. dollar value of the
fund's assets.
Emerging market investments offer the potential of signifi-
Smith Barney cant gains but also involve greater risks than investing in
Pacific Basin, more developed countries. Political or economic instability,
Smith Barney lack of market liquidity and government actions such as cur-
International rency controls or seizure of private business or property may
Equity, MFS be more likely in emerging markets.
Total Return,
Putnam
Diversified
Income and
INVESCO Global
Strategic
Income
Portfolios
only
Economic and Monetary Union (EMU) and the introduction of a
single European currency (the Euro), which began on January 1,
1999, may increase uncertainties relating to investment in
European markets. Among other things, EMU entails sharing a
single currency and official interest rate and adhering to
limits on government borrowing by participating countries.
EMU is driven by the expectation of economic benefits,
however, there are significant risks associated with EMU.
Monetary and economic union on this scale has not been
attempted before, and there is uncertainty whether
participating countries will remain committed to EMU in the
face of changing economic conditions.
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 funds' European
investments and present valuation problems.
Sovereign government and supranational debt
These funds may invest in all types of fixed income securi-
MFS Total ties of governmental issuers in all countries, including
Return, emerging markets. These sovereign debt securities may in-
Travelers clude:
Managed
Income, Putnam . Fixed income securities issued or guaranteed by
Diversified governments, governmental agencies or instrumentalities and
Income and political subdivisions located in emerging market
INVESCO Global countries.
Strategic . Participations in loans between emerging market governments
Income Portfolios and financial institutions.
only . Fixed income securities issued by government owned,
controlled or sponsored entities located in emerging market
countries.
. Interests in entities organized and operated for the
purpose of restructuring the investment characteristics of
instruments issued by any of the above issuers.
- --------------------------------------------------------------------------------
Travelers Series Fund
34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
. Brady Bonds.
. Fixed income securities issued by corporate issuers, banks
and finance companies located in emerging market countries.
. Fixed income securities issued by supranational entities
such as the World Bank or the European Economic Community
(A supranational entity is a bank, commission or company
established or financially supported by the national
governments of one or more countries to promote
reconstruction or development.)
- --------------------------------------------------------------------------------
Derivatives Each fund may, but need not, use derivative contracts, such
and hedging as futures and options on securities, securities indices or
techniques currencies; options on these futures; forward currency con-
tracts; and interest rate or currency swaps for any of the
following purposes:
All funds ex-
cept Smith
Barney Money . To hedge against the economic impact of adverse changes in
Market Portfo- the market value of its securities, because of changes in
lio and Smith stock market prices, currency exchange rates or interest
Barney Aggres- rates
sive Growth . As a substitute for buying or selling securities
Portfolio . To enhance the fund's return
A derivative contract will obligate or entitle a fund to de-
liver or receive an asset or cash payment that is based on
the change in value of one or more securities, currencies or
indices. Even a small investment in derivative contracts can
have a big impact on a fund's stock market, currency and in-
terest rate exposure. Therefore, using derivatives can dis-
proportionately increase losses and reduce opportunities for
gains when stock prices, currency rates or interest rates are
changing. A 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 a fund less liquid and harder
to value, especially in declining markets.
- --------------------------------------------------------------------------------
Securities Each fund, except Van Kampen Enterprise Portfolio, may engage
lending in securities lending to increase its net investment income.
Each fund will only lend securities if the loans are callable
by the fund at any time and the loans are continuously se-
cured by cash or liquid securities equal to no less than the
market value, determined daily, of the securities loaned. The
risks in lending securities consist of possible delay in re-
ceiving additional collateral, delay in recovery of securi-
ties when the loan is called or possible loss of collateral
should the borrower fail financially.
- --------------------------------------------------------------------------------
Defensive
investing Each fund may depart from its principal investment strategies
in response to adverse market, economic or political condi-
tions by taking temporary defensive positions in all types of
money market and short-term debt securities. If a fund takes
a temporary defensive position, it may be unable to achieve
its investment goal.
- --------------------------------------------------------------------------------
Portfolio Each fund may engage in active and frequent trading to
turnover achieve its principal investment strategies. Frequent trading
also increases transaction costs, which could detract from a
fund's performance.
- --------------------------------------------------------------------------------
Travelers Series Fund
35
<PAGE>
Management
The managers
SSB Citi Fund Management LLC (SSB Citi), Travelers Investment Adviser Inc.
(TIA) or Travelers Asset Management International Corporation (TAMIC) is each
fund's manager. SSB Citi and TAMIC select investments for the funds for which
they serve as managers. TIA has engaged subadvisers to select investments for
funds for which TIA serves as manager.
SSB Citi Fund Management LLC
SSBC Citi is a wholly owned subsidiary 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. SSB Citi is located at 388
Greenwich Street, New York, New York 10013. SSB Citi acts as investment manager
to investment companies having aggregate assets of approximately $127 billion
as of January 31, 2000.
SSB Citi manages the investment operations of the following funds (Smith Barney
funds) and receives from each fund for these services the fee indicated:
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Actual management fee
paid for the fiscal year Contractual
ended October 31, 1999 management fee paid
(as a percentage (as a percentage
of the fund's of the fund's
Fund average daily net assets) average daily net assets)
------------------------------------------------------------------------------
<S> <C> <C>
Smith Barney Pacific
Basin Portfolio 0.90% 0.90%
Smith Barney
International Equity
Portfolio 0.90% 0.90%
Smith Barney Large Cap
Value Portfolio 0.65% 0.65%
Smith Barney Large
Capitalization Growth
Portfolio 0.75% 0.75%
Smith Barney Aggressive
Growth Portfolio N/A* 0.80%
Smith Barney Mid Cap
Portfolio N/A* 0.75%
Smith Barney High Income
Portfolio 0.60% 0.60%
Smith Barney Money
Market Portfolio 0.50% 0.50%
------------------------------------------------------------------------------
</TABLE>
* The Smith Barney Aggressive Growth Portfolio
and Smith Barney Mid Cap Portfolio commenced
operations on November 1, 1999, therefore no
management fees were paid during the fiscal
year ended October 31, 1999.
Travelers Series Fund
36
<PAGE>
Travelers Investment Adviser Inc.
Travelers Investment Adviser Inc. (TIA) is a wholly owned subsidiary of The
Plaza Corporation (Plaza), which is an indirect wholly owned subsidiary of
Citigroup. TIA is located at 388 Greenwich Street, New York, New York 10013.
TIA, an affiliate of SSB Citi, acts as investment manager to investment
companies having aggregate assets of approximately $3.3 billion as of January
31, 2000.
TIA manages the investment operations of the following funds (TIA funds) and
receives for these services from each fund the fee indicated:
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Actual management fee
paid for the fiscal year Contractual management
ended October 31, 1999 fee paid
(as a percentage (as a percentage
of the fund's of the fund's
Fund average daily net assets) average daily net assets)
------------------------------------------------------------------------------
<S> <C> <C>
Alliance Growth
Portfolio 0.80% 0.80%
AIM Capital Appreciation
Portfolio 0.80% 0.80%
Van Kampen Enterprise
Portfolio 0.70% 0.70%
MFS Total Return
Portfolio 0.80% 0.80%
INVESCO Global Strategic
Income Portfolio 0.80% 0.80%
Putnam Diversified
Income Portfolio 0.75% 0.75%
------------------------------------------------------------------------------
</TABLE>
Travelers Asset Management International Corporation
Travelers Asset Management International Corporation (TAMIC) is a wholly owned
subsidiary of Citigroup and an affiliate of SSB Citi. TAMIC is the outside
investment arm of Citigroup's insurance companies. It managed $8.3 billion in
assets as of December 31, 1999, including institutional, pension, corporate and
insurance company accounts. TAMIC is located at One Tower Square--10PB,
Hartford, Connecticut 06183-2030. TAMIC also acts as investment adviser or
subadviser for other investment companies used to fund variable products, as
well as for individual and pooled pension and profit-sharing accounts, and for
affiliated domestic insurance companies.
TAMIC manages the investment operations of the following funds (TAMIC funds)
and receives for these services from each fund the fee indicated:
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Actual management fee
paid for the fiscal year Contractual management
ended October 31, 1999 fee paid
(as a percentage (as a percentage
of the fund's of the fund's
Fund average daily net assets) average daily net assets)
------------------------------------------------------------------------------
<S> <C> <C>
Travelers Managed Income
Portfolio 0.65% 0.65%
------------------------------------------------------------------------------
</TABLE>
Travelers Series Fund
37
<PAGE>
The Subadvisers and Portfolio Managers
The Smith Barney funds are managed solely by SSB Citi. The TAMIC fund is
managed solely by TAMIC. Each of the TIA funds' investments are selected by a
subadviser which is supervised by TIA. The table below sets forth the name and
business experience of each fund's portfolio manager, including where
applicable, the portfolio manager employed by the subadviser.
<TABLE>
<CAPTION>
Fund Portfolio Manager and Subadviser Business Experience
<S> <C> <C>
Smith Barney Pacific David S. Ishibashi (since 1996) Investment Officer, SSB Citi;
Basin Portfolio SSB Citi Vice President, Salomon Smith
7 World Trade Center Barney.
New York, New York 10048
- --------------------------------------------------------------------------------------------------
Smith Barney James Conheady (since inception) Investment Officer, SSB Citi;
International Equity SSB Citi Managing Director, Salomon Smith
Portfolio 7 World Trade Center Barney.
New York, New York 10048
Jeffrey Russell (since inception) Investment Officer, SSB Citi;
SSB Citi Managing Director, Salomon Smith
Barney.
- --------------------------------------------------------------------------------------------------
Smith Barney Large Cap Ellen Cardozo Sonsino (since 1998) Investment Officer, SSB Citi;
Value Portfolio SSB Citi Managing Director and Senior
7 World Trade Center, Equity Portfolio Manager, Salomon
New York, New York 10048 Smith Barney.
- --------------------------------------------------------------------------------------------------
Smith Barney Large Alan Blake (since inception) Investment Officer, SSB Citi;
Capitalization Growth SSB Citi Managing Director, Salomon Smith
Portfolio 7 World Trade Center Barney.
New York, New York 10048
- --------------------------------------------------------------------------------------------------
Smith Barney Richard Freeman (since inception) Investment Officer, SSB Citi;
Aggressive Growth SSB Citi Managing Director of Salomon
Portfolio 7 World Trade Center Smith Barney.
New York, New York 10048
- --------------------------------------------------------------------------------------------------
Smith Barney Lawrence Weissman (since inception) Investment Officer, SSB Citi;
Mid Cap Portfolio SSB Citi Managing Director of Salomon
388 Greenwich Street Smith Barney.
New York, New York 10013
- --------------------------------------------------------------------------------------------------
Alliance Growth Tyler Smith (since inception) Senior Vice President, Alliance
Portfolio Alliance Capital Management L.P. Capital.
1345 Avenue of the Americas
New York, New York 10105
- --------------------------------------------------------------------------------------------------
</TABLE>
Travelers Series Fund
38
<PAGE>
<TABLE>
<CAPTION>
Fund Portfolio Manager and Subadviser Business Experience
<S> <C> <C>
AIM Capital Appreciation Kenneth A. Zschappel (since inception) Vice President, A I M Capital.
Portfolio A I M Capital Management, Inc.
11 Greenway Plaza,
Suite 100
Houston, TX 77046
Charles D. Scavone (since inception) Vice President, A I M Capital.
A I M Capital Management Associate Portfolio Manager, Van
Kampen Capital Asset Management,
Inc. from 1994 to 1996.
David P. Barnard (since inception) Vice President, A I M Capital.
A I M Capital Management
Robert M. Kippes (since inception) Vice President, A I M Capital.
A I M Capital Management
Christopher P. Perras (since August Portfolio Manager, A I M Capital.
1999) Equity Analyst at Van Wagoner
A I M Capital Management Capital Mangement from 1997 to
1999. Associate Portfolio Manager
at Van Kampen Asset Management
Inc. from 1995 to 1997.
Steven Brase (since 2000) Portfolio Manager,
A I M Capital.
Portfolio Manager at A I M
Capital since 1998. From 1995 to
1998, Associate Portfolio Manager
at Bricoleur Capital Management.
Brant H. De Muth (since 2000) Portfolio Manager,
A I M Capital.
Portfolio Manager at A I M
Capital since 1996. From 1992
to 1996, Portfolio Manger at
Colorado Public Employee's
Retirement Association.
- ----------------------------------------------------------------------------------------------------
Van Kampen Enterprise Jeff New (since July 1994) Senior Vice President, Van Kampen
Portfolio Van Kampen Asset Management Inc. Asset Management; Senior Vice
One Parkview Plaza President, Van Kampen Investment
Oakbrook Terrace, IL 60181 Advisory, Inc.
- ----------------------------------------------------------------------------------------------------
MFS Total Return David M. Calabro (since inception) Senior Vice President, MFS.
Portfolio Manager of investment team
Massachusetts Financial Services
Company
500 Boylston Street
Boston, MA 02116
- ----------------------------------------------------------------------------------------------------
</TABLE>
Travelers Series Fund
39
<PAGE>
<TABLE>
<CAPTION>
Fund Portfolio Manager and Subadviser Business Experience
<S> <C> <C>
INVESCO Global Strategic Cheng-Hock Lau (since 1996) Chief Investment Officer, Fixed
Income Portfolio INVESCO, Inc. Income, INVESCO since 1996.
1166 Avenue of the Americas Senior Portfolio Manager for
New York, NY 10036 Global/International Fixed
Income, Chancellor LGT from 1995
to 1996. Prior to that, Senior
Vice President and Senior
Portfolio Manager, Fiduciary
Trust Company International from
1993 to 1995. Prior to that, Vice
President, Bankers Trust Company
from 1991 to 1993.
- ----------------------------------------------------------------------------------------------------
Travelers Managed Income F. Denney Voss (since 1998) Senior Vice President, TAMIC
Portfolio TAMIC Smith Barney.
388 Greenwich Street
New York, New York 10013
- ----------------------------------------------------------------------------------------------------
Putnam Diversified Jennifer Evans Leichter (since 1998) Managing Director and Chief
Income Portfolio Putnam Investment Management, Inc. Investment Officer, Corporate
One Post Office Square Credit Group, Putnam Management.
Boston, MA 02109
- ----------------------------------------------------------------------------------------------------
Smith Barney High Income John C. Bianchi (since inception) Investment Officer, SSB Citi;
PortFolio SSB Citi Managing Director, Salomon Smith
388 Greenwich Street Barney.
New York, New York 10013
- ----------------------------------------------------------------------------------------------------
</TABLE>
Travelers Series Fund
40
<PAGE>
<TABLE>
<CAPTION>
Fund Portfolio Manager and Subadviser Business Experience
<S> <C> <C>
Money Market Portfolio Martin Hanley (since inception) Investment Officer, SSB Citi;
SSB Cii Director, Salomon Smith Barney.
388 Greenwich Street
New York, New York 10013
- ------------------------------------------------------------------------------------------------
</TABLE>
Distributor. The funds have entered into an agreement with CFBDS, Inc. to
distribute the funds' shares.
Year 2000 Issue. As the year 2000 began, there were few problems caused by the
inability of certain computer systems to tell the difference between the year
2000 and the year 1900 (commonly known as the "Year 2000" issue). It is still
possible that some computer systems could malfunction in the future because of
the Year 2000 issue or as a result of actions taken to address the Year 2000
issue. Fund management does not anticipate that its services or those of the
funds' other service providers will be adversely affected, but fund management
will continue to monitor the situation. If malfunctions related to the Year
2000 issue do arise, the funds and their investments could be negatively
affected.
Additional information about the subadvisors
Alliance Capital Management. Alliance manages over $368 billion in assets as
of December 31, 1999. The 52 U.S. registered investment companies comprising
more than 118 separate investment portfolios managed by Alliance Capital
currently have more than 4.5 million shareholders.
A I M Capital Management, Inc. AIM is a wholly owned subsidiary of A I M
Advisors, Inc., a registered investment adviser. AIM and A I M Advisors, Inc.
manage approximately $160 billion in assets as of December 31, 1999.
Van Kampen Asset Management Inc. Van Kampen is a diversified asset management
company. Van Kampen and its affiliates manage more than $90 billion in assets
as of December 31, 1999.
Massachusetts Financial Services Company. MFS and its predecessor organizations
have a history of money management dating from 1924. The MFS organization
manages approximately $136.7 billion on behalf of 4.2 million investor accounts
as of December 31, 1999.
INVESCO, Inc. INVESCO is a company formed on January 1, 2000 by the merger of
INVESCO (NY), Inc. and certain of its affiliates. INVESCO manages approximately
$92 billion in assets as of December 31, 1999.
Putnam Investment Management, Inc. Putnam has managed mutual funds since 1937.
Putnam and its affiliates manage approximately $390 billion in assets as of
December 31, 1999.
Travelers Series Fund
41
<PAGE>
Share Transactions
Availability of the funds
Shares of the funds are available only through the purchase of variable annuity
or variable life insurance contracts issued by insurance companies through
their separate accounts. The variable insurance products may or may not make
investments in all the funds described in this prospectus.
The interests of different variable insurance products investing in a fund
could conflict due to differences of tax treatment and other considerations.
The company currently does not foresee any disadvantages to investors arising
from the fact that each 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. Nevertheless, the Board of
Directors intends to monitor events to identify any material irreconcilable
conflicts which may arise, and to determine what action, if any, should be
taken in response to these conflicts. If a conflict were to occur, one or more
insurance companies' separate accounts might be required to withdraw their
investments in one or more funds and shares of another fund may be substituted.
In addition, the sale of shares may be suspended or terminated if required by
law or regulatory authority or is in the best interests of the funds'
shareholders.
Redemption of shares
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 order from a separate
account, which may be more or less than the price paid for the shares. The fund
will ordinarily make payment within one business day after receipt of a
redemption request in good order, though redemption proceeds must be remitted
to a separate account on or before the third day following receipt of the
request in good order, except on a day on which the New York Stock Exchange is
closed or as permitted by the SEC in extraordinary circumstances.
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. This calculation is done when regular trading closes on the Exchange
(normally 4:00 p.m., Eastern time). If the New York Stock Exchange closes
early, each fund accelerates the calculation of its net asset value to the
actual closing 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, or when the manager believes that they
are unreliable or that the value of a security has been materially affected by
events occurring after a foreign exchange closes, the funds 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 that
uses market quotations to price the same securities.
International markets may be open on days when U.S. markets are closed, and the
value of foreign securities owned by the fund could change on days when fund
shares may not be purchased or redeemed.
Unless there are extraordinary or unusual circumstances, Smith Barney Money
Market Portfolio uses the amortized cost method of valuing its money market
securities. Under the amortized cost method, assets are valued by constantly
amortizing over the remaining life of an instrument the difference between the
principal amount due at maturity and the cost of the instrument to the fund.
Travelers Series Fund
42
<PAGE>
Dividends, Distributions and 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.
Travelers Series Fund
43
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the
performance of each fund for the past five years (or since inception if less
than five years). The information in the following tables was audited by KPMG
LLP, independent accountants, whose report, along with each fund's financial
statements, is included in the annual report (available upon request). Certain
information reflects financial results for a single share. Total returns
represent the rate that a shareholder would have earned (or lost) on a share of
a fund assuming reinvestment of all dividends and distributions. There is no
information for Smith Barney Aggressive Growth Portfolio and
Smith Barney Mid Cap Portfolio since no shares were outstanding during the
periods shown.
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
Smith Barney Pacific Basin
1999 1998(1) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $6.81 $8.04 $9.75 $8.95 $10.10
- --------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss)
(2) (0.14) -- (0.01) 0.08 (0.04)(3)
Net realized and unrealized
gain (loss) 5.10 (1.14) (1.64) 0.75 (1.11)
- --------------------------------------------------------------------------------
Total income (loss) from
operations 4.96 (1.14) (1.65) 0.83 (1.15)
- --------------------------------------------------------------------------------
Less distributions from:
Net investment income -- (0.09) (0.06) (0.03) --
- --------------------------------------------------------------------------------
Total distributions -- (0.09) (0.06) (0.03) --
- --------------------------------------------------------------------------------
Net asset value, end of year $11.77 $6.81 $8.04 $9.75 $8.95
- --------------------------------------------------------------------------------
Total return 72.83% (14.09)% (17.02)% 9.26% (11.39)%
- --------------------------------------------------------------------------------
Net assets, end of year
(000's) $25,429 $12,728 $18,225 $16,657 $7,122
- --------------------------------------------------------------------------------
Ratios to average net assets:
Expenses (2) 1.30% 1.56% 1.38% 1.34% 1.83%
Net investment income (loss) (0.29) (0.03) (0.08) 0.47 (0.51)
- --------------------------------------------------------------------------------
Portfolio turnover rate 99% 136% 156% 59% 28%
- --------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the average shares method.
(2) The manager waived all or part of its fees for the years ended October 31,
1996 and October 31, 1995. If such fees were not waived and expenses not
reimbursed, the per share increase in net investment loss and the ratios of
expenses to average net assets for the fund would have been as follows:
------------------------------------------------------------------------------
<CAPTION>
1996 1995
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share (Increases) Decreases to Net Investment
Income (Loss) $0.02 $(0.03)
------------------------------------------------------------------------------
Expense Ratios Without Fee Waivers and Custody
Credits 1.58% 2.23%
------------------------------------------------------------------------------
</TABLE>
In addition, during the years ended October 31, 1996 and 1995, the fund
earned credits from the custodian, which reduces service fees incurred. If
the credits are taken into consideration the expense ratios for these periods
were 1.17% and 1.30%, respectively.
(3) Includes realized gains and losses from foreign currency transactions.
Travelers Series Fund
44
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
Smith Barney International Equity
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $12.60 $13.23 $12.18 $10.48 $10.55
- --------------------------------------------------------------------------------
Income (loss) from
operations:
Net investment income 0.02 0.05 0.01 0.02 0.03(1)
Net realized and unrealized
gain (loss) 4.35 (0.68) 1.05 1.69 (0.10)
- --------------------------------------------------------------------------------
Total income (loss) from
operations 4.37 (0.63) 1.06 1.71 (0.07)
- --------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.05) -- (0.01) (0.01) --
- --------------------------------------------------------------------------------
Total distributions (0.05) -- (0.01) (0.01) --
- --------------------------------------------------------------------------------
Net asset value, end of year $16.92 $12.60 $13.23 $12.18 $10.48
- --------------------------------------------------------------------------------
Total return 34.73% (4.76)% 8.73% 16.36% (0.66)%
- --------------------------------------------------------------------------------
Net assets, end of year
(000's) 308,875 $224,207 $219,037 $143,323 $53,538
- --------------------------------------------------------------------------------
Ratios to average net
assets:
Expenses (2) 1.00% 1.00% 1.01% 1.10% 1.44%
Net investment income 0.16 0.37 0.09 0.23 0.25
- --------------------------------------------------------------------------------
Portfolio turnover rate 36% 34% 38% 41% 29%
- --------------------------------------------------------------------------------
</TABLE>
(1) Includes realized gains and losses from foreign currency transactions.
(2) During the years ended October 31, 1995 and 1996, the fund earned credits
from the custodian, which reduces service fees incurred. If the credits are
taken into consideration the expense ratios for these periods were 1.21%
and 1.05%, respectively.
Travelers Series Fund
45
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
Smith Barney Large Cap Value
1999(1) 1998(1) 1997 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $18.94 $17.90 $14.84 $12.12 $10.14
- -----------------------------------------------------------------------------
Income from operations:
Net investment income (2) 0.27 0.31 0.25 0.32 0.28
Net realized and unrealized gain 1.38 1.47 3.16 2.62 1.76
- -----------------------------------------------------------------------------
Total income from operations 1.65 1.78 3.41 2.94 2.04
- -----------------------------------------------------------------------------
Less distributions from:
Net investment income (0.24) (0.21) (0.18) (0.17) (0.06)
Net realized gains (0.52) (0.53) (0.17) (0.05) --
- -----------------------------------------------------------------------------
Total distributions (0.76) (0.74) (0.35) (0.22) (0.06)
- -----------------------------------------------------------------------------
Net asset value, end of year $19.83 $18.94 $17.90 $14.84 $12.12
- -----------------------------------------------------------------------------
Total return 8.52% 9.65% 23.38% 24.55% 20.21%
- -----------------------------------------------------------------------------
Net assets, end of year (millions) $544 $424 $287 $139 $39
- -----------------------------------------------------------------------------
Ratios to average net assets:
Expenses (2) 0.67% 0.68% 0.69% 0.73% 0.73%
Net investment income 1.35 1.59 2.01 2.35 2.70
- -----------------------------------------------------------------------------
Portfolio turnover rate 43% 36% 46% 32% 38%
- -----------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The manager waived all or part of its fees for the year ended October 31,
1995. If such fees were not waived and expenses not reimbursed, the per
share decreases in net investment income and the ratios of expenses to
average net assets for the fund would have been as follows:
<TABLE>
-------------------------------------------------------------
<CAPTION>
1995
-------------------------------------------------------------
<S> <C>
Per Share Decreases in Net Investment Income $0.02
-------------------------------------------------------------
Expense Ratios Without Fee Waivers and Reimbursement 0.94%
-------------------------------------------------------------
</TABLE>
Travelers Series Fund
46
<PAGE>
For a share of capital stock outstanding throughout the period ended October
31.
<TABLE>
<CAPTION>
Smith Barney Large Cap Growth
1999 1998(1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year $9.90 $10.00
- -------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (2) 0.00(3) 0.01
Net realized and unrealized gain (loss) 4.64 (0.11)(4)
- -------------------------------------------------------------------------------
Total income (loss) from operations 4.64 (0.10)
- -------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.01) --
- -------------------------------------------------------------------------------
Total distributions (0.01) --
- -------------------------------------------------------------------------------
Net asset value, end of year $14.53 $9.90
- -------------------------------------------------------------------------------
Total return 46.88% (1.00)%(5)
- -------------------------------------------------------------------------------
Net assets, end of year (000's) $168,280 $20,787
- -------------------------------------------------------------------------------
Ratios to average net assets:
Expenses (2) 0.86% 1.00%(6)
Net investment income 0.07 0.52(6)
- -------------------------------------------------------------------------------
Portfolio turnover rate 14% 1%
- -------------------------------------------------------------------------------
</TABLE>
(1) For the period from May 1, 1998 (commencement of operations) to October 31,
1998.
(2) The manager waived part of its fees for the period ended October 31, 1998.
If such fees were not waived and expenses not reimbursed, the per share
decreases to net investment income and the ratios of expenses to average
net assets for the fund would have been $0.02 and 1.77%(6) respectively.
(3) Amount represents less than $0.01.
(4) The amount shown may not be consistent with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of fund shares throughout the year.
(5) Not annualized.
(6) Annualized.
Travelers Series Fund
47
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
Alliance Growth
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $22.14 $20.82 $16.30 $13.28 $10.65
- ---------------------------------------------------------------------------
Income from operations:
Net investment income (1) 0.02 0.11 0.05 0.04 0.14
Net realized and unrealized gain 7.79 2.69 5.11 3.39 2.61
- ---------------------------------------------------------------------------
Total income from operations 7.81 2.80 5.16 3.43 2.75
- ---------------------------------------------------------------------------
Less distributions from:
Net investment income (0.15) (0.04) (0.02) (0.09) (0.02)
Net realized gains (1.45) (1.44) (0.62) (0.32) (0.10)
- ---------------------------------------------------------------------------
Total distributions (1.60) (1.48) (0.64) (0.41) (0.12)
- ---------------------------------------------------------------------------
Net asset value, end of year $28.35 $22.14 $20.82 $16.30 $13.28
- ---------------------------------------------------------------------------
Total return 35.51% 12.92% 32.59% 26.55% 26.18%
- ---------------------------------------------------------------------------
Net assets, end of year (millions) $1,166 $ 775 $ 545 $ 295 $ 112
- ---------------------------------------------------------------------------
Ratios to average net assets:
Expenses (1) 0.82% 0.82% 0.82% 0.87% 0.90%
Net investment income 0.14 0.59 0.32 0.39 1.24
- ---------------------------------------------------------------------------
Portfolio turnover rate 54% 40% 66% 88% 78%
- ---------------------------------------------------------------------------
</TABLE>
(1) The manager waived all or part of its fees for the year ended October 31,
1995. If such fees were not waived and expenses not reimbursed, the per
share decreases in net investment income and the ratios of expenses to
average net assets for the fund would have been as follows:
<TABLE>
-------------------------------------------------------------
<CAPTION>
1995
-------------------------------------------------------------
<S> <C>
Per Share Decreases in Net Investment Income $0.01
-------------------------------------------------------------
Expense Ratios Without Fee Waivers and Reimbursement 0.97%
-------------------------------------------------------------
</TABLE>
Travelers Series Fund
48
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
AIM Capital Appreciation
1999 1998 1997 1996(1) 1995(1)(2)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $12.31 $12.68 $10.76 $10.00 $10.00
- -----------------------------------------------------------------------------------
Income (loss) from
operations:
Net investment income
(loss) (3) (0.03) (0.01) 0.02 0.02 0.02
Net realized and
unrealized gain (loss) 4.02 (0.34) 1.91 0.75 (0.02)
- -----------------------------------------------------------------------------------
Total income (loss) from
operations 3.99 (0.35) 1.93 0.77 --
- -----------------------------------------------------------------------------------
Less distributions from:
Net investment income -- (0.02) (0.01) (0.01) --
- -----------------------------------------------------------------------------------
Total distributions -- (0.02) (0.01) (0.01) --
- -----------------------------------------------------------------------------------
Net asset value, end of
year $16.30 $12.31 $12.68 $10.76 $10.00
- -----------------------------------------------------------------------------------
Total return 32.41% (2.79)% 17.96% 7.71% 0.00%(4)
- -----------------------------------------------------------------------------------
Net assets, end of year
(000's) $299,520 $225,862 $202,846 $112,905 $8,083
- -----------------------------------------------------------------------------------
Ratios to average net
assets:
Expenses (3) 0.84% 0.85% 0.85% 0.96% 1.00%(5)
Net investment income
(loss) (0.18) (0.06) 0.20 0.22 4.07(5)
- -----------------------------------------------------------------------------------
Portfolio turnover rate 76% 75% 56% 44% 6%
- -----------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts calculated using the monthly average shares method.
(2) For the period from October 10, 1995 (commencement of operations) to
October 31, 1995.
(3) The manager waived all of its fees with respect to the fund for the period
ended October 31, 1995. In addition, the Manager reimbursed the fund for
$13,456 in expenses for the period ended October 31, 1995. If such fees
were not waived and expenses not reimbursed, the per share decreases in net
investment income and the ratios of expenses to average net assets for the
fund would have been:
<TABLE>
----------------------------------------------------------------
<CAPTION>
1995
----------------------------------------------------------------
<S> <C>
Per Share Decreases in Net Investment Income $0.03
----------------------------------------------------------------
Expense Ratios Without Fee Waivers and Reimbursement 5.95%(5)
----------------------------------------------------------------
</TABLE>
(4) Not Annualized.
(5) Annualized.
Travelers Series Fund
49
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
Van Kampen Enterprise
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $20.56 $19.89 $15.37 $12.89 $10.38
- --------------------------------------------------------------------------------
Income from operations:
Net investment income (1) 0.00(2) 0.06 0.06 0.05 0.03
Net realized and unrealized
gain 5.42 1.83 4.51 2.87 2.53
- --------------------------------------------------------------------------------
Total income from operations 5.42 1.89 4.57 2.92 2.56
- --------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.07) (0.05) (0.05) (0.04) (0.02)
Net realized gains (0.39) (1.17) -- (0.40) (0.03)
- --------------------------------------------------------------------------------
Total distributions (0.46) (1.22) (0.05) (0.44) (0.05)
- --------------------------------------------------------------------------------
Net asset value, end of year $25.52 $20.56 $19.89 $15.37 $12.89
- --------------------------------------------------------------------------------
Total return 26.48% 8.97% 29.81% 23.35% 24.74%
- --------------------------------------------------------------------------------
Net assets, end of year
(000's) $313,410 $249,051 $196,583 $103,691 $32,447
- --------------------------------------------------------------------------------
Ratios to average net
assets:
Expenses (1) 0.73% 0.73% 0.74% 0.83% 0.88%
Net investment income 0.01 0.35 0.41 0.53 0.65
- --------------------------------------------------------------------------------
Portfolio turnover rate 120% 68% 75% 112% 180%
- --------------------------------------------------------------------------------
</TABLE>
(1) The manager waived all or part of its fees for the year ended October 31,
1995. If such fees were not waived and expenses not reimbursed, the per
share decreases in net investment income and the ratios of expenses to
average net assets for the fund would have been as follows:
<TABLE>
-------------------------------------------------------------
<CAPTION>
1995
-------------------------------------------------------------
<S> <C>
Per Share Decreases in Net Investment Income $0.06
-------------------------------------------------------------
Expense Ratios Without Fee Waivers and Reimbursement 1.26%
-------------------------------------------------------------
</TABLE>
(2) Amount represents less than $0.01 per share
Travelers Series Fund
50
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
MFS Total Return
1999(1) 1998 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $16.23 $15.31 $13.13 $11.53 $9.98
- -------------------------------------------------------------------------------
Income from operations:
Net investment income (2) 0.52 0.32 0.38 0.33 0.45
Net realized and unrealized
gain 0.72 1.36 2.27 1.62 1.15
- -------------------------------------------------------------------------------
Total income from operations 1.24 1.68 2.65 1.95 1.60
- -------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.37) (0.28) (0.29) (0.27) (0.05)
Net realized gains (0.88) (0.48) (0.18) (0.08) --
- -------------------------------------------------------------------------------
Total distributions (1.25) (0.76) (0.47) (0.35) (0.05)
- -------------------------------------------------------------------------------
Net asset value, end of year $16.22 $16.23 $15.31 $13.13 $11.53
- -------------------------------------------------------------------------------
Total return 7.62% 10.94% 20.64% 17.16% 16.12%
- -------------------------------------------------------------------------------
Net assets, end of year
(000's) $621,828 $462,274 $263,585 $134,529 $49,363
- -------------------------------------------------------------------------------
Ratios to average net assets:
Expenses (2) 0.84% 0.84% 0.86% 0.91% 0.95%
Net investment income 3.11 3.32 3.54 3.82 4.40
- -------------------------------------------------------------------------------
Portfolio turnover rate 97% 118% 99% 139% 104%
- -------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The manager waived all or part of its fees for the year ended October 31,
1995. If such fees were not waived and expenses not reimbursed, the per
share decreases in net investment income and the ratios of expenses to
average net assets for the fund would have been as follows:
<TABLE>
-------------------------------------------------------------
<CAPTION>
1995
-------------------------------------------------------------
<S> <C>
Per Share Decreases in Net Investment Income $0.01
-------------------------------------------------------------
Expense Ratios Without Fee Waivers and Reimbursement 1.06%
-------------------------------------------------------------
</TABLE>
Travelers Series Fund
51
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
INVESCO Global Strategic Income
1999 1998 1997(1) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $10.97 $12.52 $12.45 $10.77 $9.95
- --------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (2) 0.75 0.84 0.75 0.74 0.64(3)
Net realized and unrealized
gain (loss) (0.85) (1.09) 0.36 1.36 0.28
- --------------------------------------------------------------------------------
Total income (loss) from
operations (0.10) (0.25) 1.11 2.10 0.92
- --------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.65) (0.66) (0.46) (0.42) (0.10)
Net realized gains -- (0.64) (0.58) -- --
- --------------------------------------------------------------------------------
Total distributions (0.65) (1.30) (1.04) (0.42) (0.10)
- --------------------------------------------------------------------------------
Net asset value, end of year $10.22 $10.97 $12.52 $12.45 $10.77
- --------------------------------------------------------------------------------
Total return (0.96)% (2.50)% 9.32% 20.07% 9.37%
- --------------------------------------------------------------------------------
Net assets, end of year (000's) $23,291 $28,131 $29,232 $19,152 $8,397
- --------------------------------------------------------------------------------
Ratios to average net assets:
Expenses (2) 1.13% 1.03% 1.07% 1.23% 1.47%
Net investment income 6.43 7.31 6.05 6.87 6.44
- --------------------------------------------------------------------------------
Portfolio turnover rate 135% 280% 161% 192% 295%
- --------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts calculated using the monthly average shares method.
(2) The manager waived all or part of its fees for the years ended October 31,
1996 and October 31, 1995. If such fees were not waived and expenses not
reimbursed, the per share decreases in net investment income and the ratios
of expenses to average net assets for the fund would have been as follows:
<TABLE>
--------------------------------------------------------------------
<CAPTION>
1996 1995
--------------------------------------------------------------------
<S> <C> <C>
Per Share Decreases in Net Investment Income $0.02 $0.04
--------------------------------------------------------------------
Expense Ratios Without Fee Waivers and Reimbursement 1.38% 1.93%
--------------------------------------------------------------------
</TABLE>
In addition, during the years ended October 31, 1996 and 1995, the fund
earned credits from the custodian which reduce service fees incurred. If the
credits are taken into consideration the expense ratios for these periods
were 1.11% and 1.11%, respectively.
(3) Includes realized gains and losses from foreign currency transactions.
Travelers Series Fund
52
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
Travelers Managed Income
1999(1) 1998(1) 1997(1) 1996(1) 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $11.65 $11.55 $11.06 $11.16 $10.04
- -------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (2) 0.65 0.72 0.63 0.65 0.61
Net realized and unrealized gain
(loss) (0.45) (0.06) 0.35 (0.14) 0.64
- -------------------------------------------------------------------------------
Total income (loss) from
operations 0.20 (0.66) 0.98 0.51 1.25
- -------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.29) (0.54) (0.49) (0.46) (0.13)
Net realized gains (0.07) (0.02) -- (0.15) --
- -------------------------------------------------------------------------------
Total distributions (0.36) (0.56) (0.49) (0.61) (0.13)
- -------------------------------------------------------------------------------
Net asset value, end of year $11.49 $11.65 $11.55 $11.06 $11.16
- -------------------------------------------------------------------------------
Total return 1.75% 5.71% 9.19% 4.61% 12.68%
- -------------------------------------------------------------------------------
Net assets, end of year (000's) $113,041 $57,556 $31,799 $23,532 $11,279
- -------------------------------------------------------------------------------
Ratios to average net assets:
Expenses (2) 0.76% 0.84% 0.87% 0.92% 0.92%
Net investment income 5.57 6.11 6.48 6.19 6.13
- -------------------------------------------------------------------------------
Portfolio turnover rate 411% 327% 259% 255% 170%
- -------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts calculated using the monthly average shares method.
(2) The manager waived all or part of its fees for the year ended October 31,
1995. If such fees were not waived and expenses not reimbursed, the per
share decreases in net investment income and the ratios of expenses to
average net assets for the fund would have been as follows:
<TABLE>
-------------------------------------------------------------
<CAPTION>
1995
-------------------------------------------------------------
<S> <C>
Per Share Decreases in Net Investment Income $0.04
-------------------------------------------------------------
Expense Ratios Without Fee Waivers and Reimbursement 1.29%
-------------------------------------------------------------
</TABLE>
Travelers Series Fund
53
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
Putnam Diversified Income
1999 1998 1997 1996(1) 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.70 $12.31 $11.99 $11.46 $10.18
- ------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (2) 0.91 0.57 0.67 0.78 0.79
Net realized and unrealized gain
(loss) (0.70) (0.62) 0.30 0.27 0.58
- ------------------------------------------------------------------------------
Total income (loss) from operations 0.21 (0.05) 0.97 1.05 1.37
- ------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.67) (0.42) (0.56) (0.39) (0.09)
Net realized gains -- (0.14) (0.09) (0.13) --
- ------------------------------------------------------------------------------
Total distributions (0.67) (0.56) (0.65) (0.52) (0.09)
- ------------------------------------------------------------------------------
Net asset value, end of year $11.24 $11.70 $12.31 $11.99 $11.46
- ------------------------------------------------------------------------------
Total return 1.80% (0.65)% 8.44% 9.43% 13.55%
- ------------------------------------------------------------------------------
Net assets, end of year (millions) $156 $157 $122 $81 $32
- ------------------------------------------------------------------------------
Ratios to average net assets:
Expenses (2) 0.83% 0.87% 0.88% 0.96% 0.97%
Net investment income 7.85 7.48 6.99 7.57 7.53
- ------------------------------------------------------------------------------
Portfolio turnover rate 118% 191% 253% 2.55% 276%
- ------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts calculated using the monthly average shares method.
(2) The manager waived all or part of its fees for the year ended October 31,
1995. If such fees were not waived and expenses not reimbursed, the per
share decreases in net investment income and the ratios of expenses to
average net assets of the fund would have been as follows:
<TABLE>
-------------------------------------------------------------
<CAPTION>
1995
-------------------------------------------------------------
<S> <C>
Per Share Decreases in Net Investment Income $0.04
-------------------------------------------------------------
Expense Ratios Without Fee Waivers and Reimbursement 1.31%
-------------------------------------------------------------
</TABLE>
Travelers Series Fund
54
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
Smith Barney High Income
1999 1998(1) 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.97 $13.25 $12.09 $11.26 $10.07
- ------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (2) 0.92 1.21 0.88 1.14 0.93
Net realized and unrealized gain
(loss) (0.28) (1.58) 1.00 0.19 0.48
- ------------------------------------------------------------------------------
Total income (loss) from operations 0.64 (0.37) 1.88 1.33 1.41
- ------------------------------------------------------------------------------
Less distributions from:
Net investment income 0.89 (0.74) (0.66) (0.50) (0.22)
Net realized gains -- (0.17) (0.06) -- --
- ------------------------------------------------------------------------------
Total distributions 0.89 (0.91) (0.72) (0.50) (0.22)
- ------------------------------------------------------------------------------
Net asset value, end of year $11.72 $11.97 $13.25 $12.09 $11.26
- ------------------------------------------------------------------------------
Total return 5.28% (3.38)% 16.24% 12.17% 14.30%
- ------------------------------------------------------------------------------
Net assets, end of year (millions) $199 $160 $124 $66 $20
- ------------------------------------------------------------------------------
Ratios to average net assets:
Expenses (2) 0.66% 0.67% 0.70% 0.84% 0.70%
Net investment income 9.44 9.12 9.36 9.79 9.54
- ------------------------------------------------------------------------------
Portfolio turnover rate 73% 82% 89% 104% 57%
- ------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The manager waived all or part of its fees for the year ended October 31,
1995. If such fees were not waived and expenses not reimbursed, the per
share decreases in net investment income and the ratios of expenses to
average net assets for the fund would have been as follows:
<TABLE>
-------------------------------------------------------------
<CAPTION>
1995
-------------------------------------------------------------
<S> <C>
Per Share Decreases in Net Investment Income $0.04
-------------------------------------------------------------
Expense Ratios Without Fee Waivers and Reimbursement 1.07%
-------------------------------------------------------------
</TABLE>
Travelers Series Fund
55
<PAGE>
For a share of capital stock outstanding throughout each year ended October 31.
<TABLE>
<CAPTION>
Smith Barney Money Market
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------
Income from operations:
Net investment income (1) 0.046 0.050 0.049 0.049 0.052
- ------------------------------------------------------------------------------
Total income from operations 0.046 0.050 0.049 0.049 0.052
- ------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.046) (0.050) (0.049) (0.049) (0.052)
- ------------------------------------------------------------------------------
Total distributions (0.046) (0.050) (0.049) (0.049) (0.052)
- ------------------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------
Total return 4.66% 5.11% 5.05% 5.05% 5.35%
- ------------------------------------------------------------------------------
Net assets, end of year
(000's) $276,699 $164,677 $111,168 $99,150 $37,487
- ------------------------------------------------------------------------------
Ratios to average net assets:
Expenses (1) 0.54% 0.64% 0.65% 0.65% 0.65%
Net investment income 4.58 4.99 4.94 4.86 5.26
- ------------------------------------------------------------------------------
</TABLE>
(1) The manager waived all or part of its fees with respect to the fund for the
years ended October 31, 1997, 1996 and 1995. If such fees were not waived
and expenses not reimbursed, the per share decreases in net investment
income and the ratios of expense to average net assets of the fund would
have been as follows:
<TABLE>
------------------------------------------------------------------------
<CAPTION>
1997 1996 1995
------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Decreases in Net Investment Income $0.000(2) $0.001 $0.003
------------------------------------------------------------------------
Expense Ratios Without Fee Waivers and
Reimbursement 0.67% 0.74% 0.94%
------------------------------------------------------------------------
</TABLE>
(2) Amount represents less than $0.001.
Travelers Series Fund
56
<PAGE>
[This page intentionally left blank]
<PAGE>
Travelers Series Fund Inc.
Additional Information
Shareholder reports. Annual and semiannual reports to shareholders provide
additional information about the fund's investments. These reports discuss the
market conditions and investment strategies that affected the fund's
performance.
The fund sends one report to a household if more than one account has the same
address. Contact an appropriate representative of a participating life
insurance company or your Salomon Smith Barney Financial Consultant if you do
not want this policy to apply to you.
Statement of additional information. The statement of additional (SAI)
information provides more detailed information about the fund. It is
incorporated by reference into 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 writing to Travelers Series Fund, 388 Greenwich Street, MF2, New York, NY
10013.
Information about the funds (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's (the "Commission") Public Reference
Room in Washington, D.C. In addition, information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-202-942-8090. Reports and other information about the funds are available
on the EDGAR Database on the Commission's Internet site at http://www.sec.gov.
Copies of this information may be obtained for a duplicating fee by electronic
request at the following E-mail address: [email protected], or by writing the
Commission's Public Reference Section, Washington, D.C. 20549-0102.
If someone makes a statement about the fund that is not in this prospectus, you
should not rely upon that information. The fund is not offering to sell its
shares to any person to whom the fund may not lawfully sell its shares.
Smith Barney Pacific Basin Portfolio
Smith Barney International Equity Portfolio
Smith Barney Large Cap Value Portfolio
Smith Barney Large Capitalization Growth Portfolio
Smith Barney Aggressive Growth Portfolio
Smith Barney Mid Cap Portfolio
Alliance Growth Portfolio
AIM Capital Appreciation Portfolio
Van Kampen Enterprise Portfolio
MFS Total Return Portfolio
INVESCO Global Strategic Income Portfolio
Travelers Managed Income Portfolio
Putnam Diversified Income Portfolio
Smith Barney High Income Portfolio
Smith Barney Money Market Portfolio
(Investment Company Act file no. 811-08372)
L-12410 2/00
PART B
Statement of Additional Information
February 28, 2000
STATEMENT OF ADDITIONAL INFORMATION
TRAVELERS SERIES FUND INC.
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 Travelers Series Fund Inc. (the "Company"),
dated February 28, 2000, and should be read in conjunction with
the Prospectus. The Company is a series investment company
consisting of fifteen portfolios (each, a "fund"). 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 SAI, 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 and certain qualified plans (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.
The Company, the investment underlying certain variable annuity
and variable life insurance contracts, offers a choice of fifteen
funds:
The Smith Barney Pacific Basin Portfolio seeks long-term capital
appreciation through investment primarily in equity securities of
countries in the Asian Pacific region.
The Smith Barney International Equity Portfolio seeks total
return on its assets from growth of capital and income and will
invest at least 65% of its assets in a diversified portfolio of
equity securities of established non-U.S. issuers.
The Smith Barney Large Cap Value Portfolio seeks current income
and long-term growth of income and capital. This fund invests
primarily, but not exclusively, in common stocks.
The Smith Barney Large Capitalization Growth Portfolio seeks
long-term growth of capital by investing in equity securities of
companies with market capitalization of at least $5 billion at
the time of investment.
The Alliance Growth Portfolio seeks long-term growth of capital.
Current income is only an incidental consideration.
The AIM Capital Appreciation Portfolio seeks to provide growth of
capital by investing principally in common stocks.
The Van Kampen Enterprise Portfolio seeks capital appreciation by
investing primarily in common stocks of companies which have
above average potential for capital appreciation.
The Smith Barney Aggressive Growth Portfolio seeks long-term
capital appreciation by investing primarily in common stocks of
companies the manager believes are experiencing or will
experience growth in earnings that exceed the average rate of
earnings growth of the companies comprising the S&P 500 Index.
The Smith Barney Mid Cap Portfolio seeks long-term growth of
capital by investing primarily in equity securities of medium
sized companies.
The MFS Total Return Portfolio seeks above-average income
(compared to a fund invested entirely in equity securities)
consistent with prudent employment of capital. While current
income is the primary objective, the fund believes that there
should be a reasonable opportunity for growth of capital and
income.
The INVESCO Global Strategic Income Portfolio primarily seeks
high current income and, secondarily, capital appreciation by
investing primarily in the debt securities of U.S. and foreign
companies, banks and governments, including those in emerging
markets.
The Travelers Managed Income Portfolio seeks high current income
consistent with what its investment adviser believes to be
prudent risk of capital. The fund invests primarily in U.S.
corporate debt obligations and U.S. government securities,
including mortgage and asset backed securities, but may also
invest to a limited extent in foreign issuers.
The Putnam Diversified Income Portfolio seeks high current income
consistent with preservation of capital.
The Smith Barney High Income Portfolio seeks high current income
by investing at least 65% of its assets in high-yielding
corporate debt obligations and preferred stock of U.S. and
foreign issuers, but may also invest in foreign issuers. Capital
appreciation is a secondary objective.
The Smith Barney Money Market Portfolio seeks maximum current
income consistent with preservation of capital.
Shares of Smith Barney Money Market Portfolio are not insured or
guaranteed by the U.S. Government. There is no assurance that the
fund will be able to maintain a stable net asset value of $1.00
per share.
In all cases, there can be no assurance that a fund will achieve
its investment objective.
CONTENTS
Directors and Executive Officers 3
Investment Objectives and Management Policies 4
Investment Practices 14
Risk Factors 33
Investment Restrictions 41
Portfolio Turnover 54
Taxation 54
Performance Information 55
Determination of Net Asset Value 56
Availability of the Funds 56
Redemption of Shares 57
Management 57
Other Information about the Company 62
Financial Statements 63
Appendix - Ratings of Debt Obligations A-1
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; 2111 Forge Road, Santa Barbara, California 93108. Former
President of Lips Propellers, Inc., a ship propeller repair
company. Director of two investment companies associated with
Citigroup Inc. ("Citigroup"); 78.
ABRAHAM E. COHEN, Director
Consultant to MeesPierson, Inc., a Dutch investment bank;
Consultant to and Board Member, Chugai Pharmaceutical Co. Ltd.,
444 Madison Avenue, New York, New York 10022; 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 Citigroup; 63.
ROBERT A. FRANKEL, Director
Managing Partner of Robert A. Frankel Managing Consultants, 102
Grand Street, Croton-on-Hudson, New York 10520. Director of nine
investment companies associated with Citigroup. Former Vice
President of The Readers Digest Association, Inc.; 72.
**MICHAEL E. GELLERT, Director
Partner of Windcrest Partners, 122 E. 42nd Street, New York, New
York 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 Citigroup; 68
RAINER GREEVEN, Director
Partner of the law firm of Greeven & Ercklentz; 630 Fifth Avenue,
New York, New York 10111. Director of two investment companies
associated with Citigroup; 63.
SUSAN M. HEILBRON, Director
Attorney; Lacey & Heilbron, 3 East 54th Street, New York, NY
10022. Director of two investment companies associated with
Citigroup; 55.
*HEATH B. McLENDON, Chairman of the Board, President and Chief
Executive Officer
Managing Director of Salomon Smith Barney Inc. ("Salomon Smith
Barney"), President of SSB Citi Fund Management LLC (''SSB
Citi'') and Travelers Investment Adviser, Inc. ("TIA"), Chairman,
Co-Chairman or Trustee of the Board of 71 investment companies
associated with Citigroup; 66.
*LEWIS E. DAIDONE, Senior Vice President and Treasurer
Managing Director of Salomon Smith Barney, Senior Vice President
or Executive Vice President and Treasurer (Chief Financial
Officer) of 61 investment companies associated with Citigroup;
Director and Senior Vice President of SSB Citi and TIA; 42
*JAMES B. CONHEADY, Vice President and Investment Officer
Managing Director of Salomon Smith Barney. Formerly First Vice
President of Drexel Burnham Lambert Incorporated; 64.
*JEFFREY RUSSELL, Vice President and Investment Officer
Managing Director of Salomon Smith Barney. Formerly Vice
President of Drexel Burnham Lambert Incorporated; 42.
*ALAN BLAKE, Vice President and Investment Officer
Managing Director of Salomon Smith Barney; Vice President and
Investment Officer of certain other investment companies
associated with Salomon Smith Barney;.
*ELLEN CARDOZO SONSINO, Vice President and Investment Officer
Managing Director of Salomon Smith Barney; Vice President and
Investment Officer of certain other investment companies
associated with Salomon Smith Barney;.
*JOHN C. BIANCHI, Vice President and Investment Officer
Managing Director of Salomon Smith Barney; Vice President and
Investment Officer of certain other investment companies
associated with Salomon Smith Barney; 44.
*MARTIN HANLEY, Vice President and Investment Officer
Director of Salomon Smith Barney. Vice President of certain other
investment companies associated with Salomon Smith Barney; 44.
*DAVID S. ISHIBASHI, Vice President and Investment Officer
Vice President of Salomon Smith Barney; formerly Head of Japanese
equities desk at SG Warburg; 44
*PHYLLIS M. ZAHORODNY, Vice President and Investment Officer
Managing Director of Salomon Smith Barney; Vice President and
Investment Officer of certain other investment companies
associated with Salomon Smith Barney; 42.
*RICHARD A. FREEMAN, Vice President and Investment Officer
Managing Director of Salomon Smith Barney, 7 World Trade Center,
New York, New York 10048; Portfolio manager of other mutual funds
managed by SSB Citi; 45
*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; 38.
*IRVING DAVID, Controller
Director of Salomon Smith Barney; Controller or Assistant
Treasurer of 43 investment companies associated with Citigroup;
Formerly Assistant Treasurer of First Investment Management
Company; 39.
*PAUL BROOK, Controller
Director of Salomon Smith Barney; Controller or Assistant
Treasurer of 43 investment companies associated with Citigroup
since 1998; Prior to 1998, Managing Director of AMT Capital
Services Inc.; Prior to 1997, Partner with Ernst & Young LLP; 46.
*CHRISTINA T. SYDOR, Secretary
Managing Director of Salomon Smith Barney and Secretary of 61
investment companies associated with Citigropup; Secretary and
General Counsel of SSB Citi and TIA; 49.
___________________
* 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 or 7 World trade Center, New York, New
York 10048 unless otherwise noted. Such persons are not
separately compensated for their services as Company officers
or directors.
** Director as of December 9, 1998
On February 3, 2000, 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, 1999. None of the officers
of the Company received any compensation from the Company for
such period. The Company does not pay retirement benefits to its
directors and officers. Officers and interested directors of the
Company are compensated by Salomon Smith Barney.
Director
Aggregate
Compensation
from the
Company
For Fiscal
Year Ended
10/31/99
Total
Compensation
from Company
and
Complex Paid
to
Director
For Calendar
Year Ended
12/31/99
Number of
Fund
Companies
for
Which
Director
Serves
Within Fund
Complex
Victor K. Atkins
$19,552
$27,600
2
Abraham E. Cohen
18,352
27,800
2
Robert A.
Frankel
20,952
79,450
9
Michael Gellert*
14,962
22,700
2
Rainer Greeven
18,352
25,800
2
Susan M.
Heilbron
20,952
29,600
2
Heath B.
McLendon
0
0
71
*Director as of December 9, 1998.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
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 the fund's fundamental investment
restrictions or applicable law, and any such change will first be
disclosed in the then current prospectus or SAI.
Set forth below is a discussion of certain nonfundamental
investment policies for each fund. Refer to the "Investment
Practices" and "Risk Factors" sections of this SAI for further
information.
Smith Barney Pacific Basin Portfolio
Pacific Basin Portfolio invests primarily in equity securities,
including American Depository Receipts ("ADRs"), of companies in
the Asia Pacific region. The Asia Pacific region currently
includes Australia, Hong Kong, India, Indonesia, Japan, Malaysia,
New Zealand, Pakistan, Papua New Guinea, the People's Republic of
China, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan
and Thailand. The manager may change this list at its
discretion. The fund's manager considers a company to be in the
Asia Pacific region if its securities trade on exchanges in the
Asia Pacific region, it generates at least half of its revenue
from the Asia Pacific region or it is organized under the laws of
an Asia Pacific region country.
The fund will normally invest at least 80% of its total assets in
equity securities of companies in the Asia Pacific region.
Equity securities include exchange traded and over-the-counter
common stocks, preferred shares, debt securities convertible into
equity securities, depository receipts and warrants and rights
relating to equity securities. The fund may also invest up to 20%
of its total assets in debt securities and other types of
investments. Concentration of the fund's assets in one or a few
of the countries in the Asia Pacific Region and Asia Pacific
currencies will subject the fund to greater risks than if the
fund's assets were not geographically concentrated.
It is expected that portfolio securities will ordinarily be
traded on a stock exchange or other market in the country in
which the issuer is principally based, but may also be traded on
markets in other countries including, in many cases, the United
States securities exchanges and over-the-counter markets. Debt
securities in which the fund may invest will generally be rated
at the time of purchase at least Baa by Moody's Investors Service
Inc. ("Moody's") or BBB by Standard and Poor's Ratings Group
("S&P"). Debt securities rated Baa or BBB may have speculative
characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of
their issuers to pay interest and repay principal than is the
case with higher rated securities.
The fund may enter into reverse repurchase agreements with
broker/dealers and other financial institutions up to 5% of its
net assets.
Smith Barney International Equity Portfolio
Under normal market conditions, International Equity Portfolio
invests at least 80% of its assets in a diversified portfolio of
equity securities and may invest up to 20% of its assets in
bonds, notes and debt securities (consisting of securities issued
in the Eurocurrency markets or obligations of the United States
or foreign governments and their political sub-divisions) or
established non-United States issuers.
In seeking to achieve its objective, the fund invests its assets
primarily in common stocks of foreign companies which in the
opinion of the Manager have potential for growth of capital.
However, there is no requirement that the fund invest exclusively
in common stocks or other equity securities and, if deemed
advisable, the fund may invest up to 20% of its assets in bonds,
notes and other debt securities (including securities issued in
the Eurocurrency markets or obligations of the United States or
foreign governments and their political subdivisions).
The fund will generally invest its assets broadly among countries
and will normally have represented in the portfolio business
activities in not less than three different countries. Except as
stated below, the fund will invest at least 80% of its assets in
companies organized or governments located in any area of the
world other than the United States, such as the Far East (e.g.,
Japan, Hong Kong, Singapore, Malaysia), Western Europe (e.g.,
United Kingdom, Germany, the Netherlands, France, Italy,
Switzerland), Eastern Europe (e.g., the Czech Republic, Hungary,
Poland, and the countries of the former Soviet Union), Central
and South America (e.g., Mexico, Chile, and Venezuela),
Australia, Canada and such other areas and countries as the
fund's manager may determine from time to time. Concentration of
the fund's assets in one or a few countries or currencies will
subject the fund to greater risks than if the fund's assets were
not geographically concentrated.
It is expected that fund securities will ordinarily be traded on
a stock exchange or other market in the country in which the
issuer is principally based, but may also be traded on markets in
other countries including, in many cases, the United States
securities exchanges and over-the-counter markets.
The fund may enter into reverse repurchase agreements with
broker/dealers and other financial institutions up to 5% of its
net assets.
Smith Barney Large Cap Value Portfolio
Under normal market conditions at least 65% of the fund's assets
will be invested in equity securities.
The fund may make investments in foreign securities, though
management currently intends to limit such investments to 5% of
the fund's assets, and an additional 10% of its assets may be
invested in sponsored American Depositary Receipts ("ADRs"),
which are certificates issued by U.S. banks representing the
right to receive securities of a foreign issuer deposited with
that bank or a correspondent bank. The fund will ordinarily
purchase foreign securities that are traded in the U.S. It may,
however, also purchase the securities of foreign issuers directly
in foreign markets. The fund may also lend up to 20% of the value
of its total assets and may purchase or sell securities on a
when-issued or delayed delivery basis.
The fund may buy or sell covered put and covered call options up
to 15% of its net assets, provided such options are listed on a
national securities exchange.
Smith Barney Large Capitalization Growth Portfolio
Under normal market conditions, the fund invests 65% of its
assets in equity securities of companies with market
capitalizations of at least $5 billion at the time of investment.
The core holdings of the fund will be large capitalization
companies that are dominant in their industries, global in scope
and have a long term history of performance. The fund has the
flexibility, however, to invest up to 35% of assets in companies
with other market capitalizations. Companies with large market
capitalizations typically have a large number of publicly held
shares and a high trading volume resulting in a high degree of
liquidity. Companies whose capitalization falls below this level
after purchase will continue to be considered large
capitalization companies for purposes of the 65% policy.
The fund may invest in securities of non-U.S. issuers in the form
of ADRs, European Depositary Receipts ("EDRs") or similar
securities representing interests in the common stock of foreign
issuers. Management intends to limit the fund's investment in
these types of securities, to 10% of the fund's net assets. ADRs
are receipts, typically issued by a U.S. bank or trust company,
which evidence ownership of underlying securities issued by a
foreign corporation. EDRs are receipts issued in Europe which
evidence a similar ownership arrangement. Generally, ADRs, in
registered form, are designed for use in the U.S. securities
markets and EDRs are designed for use in European securities
markets. The underlying securities are not always denominated in
the same currency as the ADRs or EDRs. Although investment in the
form of ADRs or EDRs facilitates in foreign securities, it does
not mitigate the risks associated with investing in foreign
securities.
Under normal market conditions, at least 65% of the fund's
portfolio will consist of common stocks, but it also may contain
money market instruments for cash management purposes, including
U.S. government securities; certificates of deposit, time
deposits and bankers' acceptances issued by domestic banks
(including their branches located outside the United States and
subsidiaries located in Canada), domestic branches of foreign
banks, savings and loan associations and similar institutions;
high grade commercial paper; and repurchase agreements with
respect to such instruments.
Alliance Growth Portfolio
The fund invests primarily in equity securities. The fund may
also invest a portion of its assets in developing countries or
countries with new or developing capital markets.
Because the values of fixed-income securities are expected to
vary inversely with changes in interest rates generally, when the
subadviser expects a general decline in interest rates, the fund
may also invest for capital growth in fixed-income securities.
The fund may invest up to 25% of total assets in high-yield,
high-risk, fixed-income and convertible securities rated at the
time of purchase Ba or lower by Moody's or BB or lower by S&P,
or, if unrated, judged by the subadviser to be of comparable
quality. The fund will generally invest in fixed income
securities with a minimum rating of Caa- by Moody's or CCC- by
S&P or in unrated securities judged by the subadviser to be of
comparable quality. However, from time to time, the fund may
invest in securities rated in the lowest grades of Moody's (C) or
S&P (D) or in unrated securities judged by the subadviser to be
of comparable quality, if the subadviser determines that there
are prospects for an upgrade or a favorable conversion into
equity securities (in the case of convertible securities).
Securities rated Ba or lower (and comparable unrated securities)
are commonly referred to as "junk bonds." Securities rated D by
S&P are in default.
Investment in non-publicly traded securities is restricted to 5%
of the fund's total assets (not including Rule 144A Securities).
The fund may also invest in zero-coupon bonds, payment-in-kind
bonds and real estate investment trusts. It may also buy and sell
stock index futures contracts ("index futures") and may buy
options on index futures and on stock indices for hedging
purposes. The fund may buy and sell call and put options on index
futures or on stock indices in addition to, or as an alternative
to, purchasing or selling index futures or, to the extent
permitted by applicable law, to earn additional income. The fund
may also, for hedging purposes, purchase and sell futures
contracts, options thereon and options with respect to U.S.
Treasury securities, including U.S. Treasury bills, notes and
bonds. The fund may also seek to increase its current return by
writing covered call and put options on securities it owns or in
which it may invest.
The fund may lend portfolio securities amounting to not more than
25% of its total assets and may enter into repurchase agreements
on up to 25% of its total assets. It may also purchase securities
for future delivery, which may increase its overall investment
exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. In addition,
the fund may invest in real estate investment trusts.
AIM Capital Appreciation Portfolio
The fund invests principally in common stocks of companies the
subadviser believes are likely to benefit from new or innovative
products, services or processes, as well as those that have
experienced above-average, long-term, growth in earnings and have
excellent prospects for future growth. As a result of this
policy, the market prices of many of the securities purchased and
held by the fund may fluctuate more widely than other equity
securities.
Special Situations. Although the fund does not currently intend
to do so, it may invest in "special situations." A special
situation arises when, in the opinion of management, the
securities of a particular company will, within a reasonably
estimable period of time, be accorded market recognition at an
appreciated value solely by reason of a development applicable to
that company, and regardless of general business conditions or
movements of the market as a whole. Developments creating special
situations might include, among others: liquidations,
reorganizations, recapitalizations, mergers, material litigation,
technical breakthroughs and new management or management
policies. Although large and well known companies may be
involved, special situations more often involve comparatively
small or unseasoned companies. Investments in unseasoned
companies and special situations often involve much greater risk
than is inherent in ordinary investments securities. The fund
will not, however, purchase securities of any company with a
record of less than three year's continuous operation (including
that of predecessors) if such purchase would cause the fund's
investment in all such companies, taken at cost, to exceed 5% of
the value of its total assets.
The fund may not invest more than 20% of its total assets in
foreign securities, including ADRs as well as EDRs and other
securities representing underlying securities of foreign issuers
as foreign securities for purposes of this limitation.
The fund may also invest up to 15% of its net assets in illiquid
securities, including repurchase agreements with maturities in
excess of seven days. In addition, the fund may purchase domestic
stock index futures contracts. It may also write (sell) covered
call options on no more than 25% of the value of its net assets.
Van Kampen Enterprise Portfolio
In addition to common stocks, the fund may invest in warrants and
preferred stocks, and in the securities of other investment
companies. The fund may also invest up to 15% of the value of
its total assets in securities of foreign issuers.
The fund generally holds a portion of its assets in investment
grade short-term debt securities in order to provide liquidity.
The fund may also hold investment grade corporate or government
bonds. The market prices of such bonds can be expected to vary
inversely with changes in prevailing interest rates.
The fund expects to utilize options, futures contracts and
options thereon in several different ways, depending upon the
status of its portfolio and the subadviser's expectations
concerning the securities markets. In times of stable or rising
stock prices, the fund generally seeks to obtain maximum exposure
to the stock market, i.e., to be "fully invested." Nevertheless,
even when the fund is fully invested, prudent management requires
that at least a small portion of assets be available as cash to
honor redemption requests and for other short term needs. The
fund may also have cash on hand that has not yet been invested.
The portion of the fund's assets that is invested in cash
equivalents does not fluctuate with stock market prices, so that,
in times of rising market prices, the fund may underperform the
market in proportion to the amount of cash equivalents in its
portfolio. By purchasing stock index futures contracts, however,
the fund can compensate for the cash portion of its assets and
obtain performance equivalent to investing 100% of its assets in
equity securities.
If the subadviser anticipates a market decline, the fund may seek
to reduce its exposure to the stock market by increasing its cash
position. By selling stock index futures contracts instead of
portfolio securities, a similar result may be achieved to the
extent that the performance of the stock index futures contracts
correlates to the performance of the fund's securities. Sales of
futures contracts could frequently be accomplished more rapidly
and at less cost than the actual sale of securities. Once the
desired hedged position has been effected, the fund could then
liquidate securities in a more deliberate manner, reducing its
futures position simultaneously to maintain the desired balance,
or it could maintain the hedged position.
As an alternative to selling futures contracts, the fund can
purchase puts (or futures puts) to hedge the fund's risk in a
declining market. Since the value of a put increases as the
underlying security declines below a specified level, the fund's
value is protected against a market decline to the degree the
performance of the put correlates with the performance of its
investment portfolio. If the market remains stable or advances,
the fund can refrain from exercising the put and its portfolio
will participate in the advance, having incurred only the premium
cost for the put.
Smith Barney Aggressive Growth Portfolio
The fund invests primarily in common stocks of companies the
manager believes are experiencing, or will experience growth in
earnings that exceed 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.
The manager emphasizes individual security selection while
diversifying the fund's investment across industries, which may
help to reduce risk. The manager focuses primarily, but not
exclusively, 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.
The fund may invest up to 10% of its assets in foreign
securities.
Smith Barney Mid Cap Portfolio
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.
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 fund.
The fund may invest up to 25% of its assets in foreign
securities.
MFS Total Return Portfolio
The fund's policy is to invest in a broad list of securities,
including short-term obligations. The list may be diversified not
only by companies and industries, but also by type of security.
Fixed income securities and equity securities may be held by the
fund. Some fixed income securities may also have a call on common
stock by means of a conversion privilege or attached warrants.
The fund may vary the percentage of assets invested in any one
type of security in accordance with the subadviser's
interpretation of economic and money market conditions, fiscal
and monetary policy and underlying security values. The fund's
debt investments may consist of both "investment grade"
securities (rated Baa or higher by Moody's or BBB or better by
S&P or Fitch IBCA, Inc. (formerly Fitch Investors Service, Inc.)
("Fitch")), securities that are unrated, and securities that are
rated in the lower ratings categories (rated Ba or lower by
Moody's or BB or lower by S&P or Fitch) (commonly known as "junk
bonds"), including up to 20% of its net assets in nonconvertible
fixed income securities that are in these lower ratings
categories or comparable unrated securities. See Appendix A for a
description of these ratings. Generally, most of the fund's long-
term debt investments will consist of "investment grade"
securities. It is not the fund's policy to rely exclusively on
ratings issued by established credit rating agencies but rather
to supplement such ratings with the subadviser's own independent
and ongoing review of credit quality.
As noted above, the fund invests in unrated and lower-rated
corporate debt securities, commonly known as "junk bonds." The
fund may also invest in emerging market securities. The fund may
also invest in emerging markets securities.
The fund will be managed actively with respect to the fund's
fixed income securities and the asset allocations modified as the
subadviser deems necessary. Although the fund does not intend to
seek short-term profits, fixed income securities will be sold
whenever the sub-adviser believes it is appropriate to do so
without regard to the length of time the particular asset may
have been held. With respect to its equity securities the fund
does not intend to trade in securities for short-term profits and
anticipates that portfolio securities ordinarily will be held for
one year or longer. However, the fund will effect trades whenever
it believes that changes in its portfolio securities are
appropriate.
INVESCO Global Strategic Income Portfolio
Debt securities in which the fund may invest include bonds,
notes, debentures, and other similar instruments. The fund
normally invests at least 50% of its net assets in U.S. and
foreign debt and other fixed income securities that, at the time
of purchase, are rated investment grade (i.e., within the four
highest categories for long-term debt) by Moody's or S&P or, if
unrated, determined by the subadviser to be of comparable
quality. No more than 50% of the fund's total assets may be
invested in securities rated below investment grade. Such lower-
rated securities involve a high degree of risk and are
predominantly speculative. The fund may also invest in securities
that are in default as to payment of principal and/or interest.
For purposes of the fund's operations, "emerging markets" will
consist of all countries determined by the subadviser to have
developing or emerging economies and markets. These countries
generally include every country in the world except the United
States, Canada, Japan, Australia, New Zealand and most countries
located in Western Europe. The fund will consider investment in,
but not be limited to, the following emerging markets: Algeria,
Argentina, Bolivia, Botswana, Brazil, Bulgaria, Chile, China,
Colombia, Costa Rica, Cyprus, Czech Republic, Dominican Republic,
Ecuador, Egypt, El Salvador, Finland, Greece, Ghana, Hong Kong,
Hungary, India, Indonesia, Israel, Ivory Coast, Jamaica, Jordan,
Kazakhstan, Kenya, Lebanon, Malaysia, Mauritius, Mexico, Morocco,
Nicaragua, Nigeria, Oman, Pakistan, Panama, Paraguay, Peru,
Philippines, Poland, Portugal, Republic of Slovakia, Russia,
Singapore, Slovenia, South Africa, South Korea, Sri Lanka,
Swaziland, Taiwan, Thailand, Turkey, Ukraine, Uruguay, Venezuela,
Zambia and Zimbabwe.
The fund will not be invested in all such markets at all times.
Moreover, investing in some of those markets currently may not be
desirable or feasible, due to the lack of adequate custody
arrangements, overly burdensome repatriation requirements and
similar restrictions, the lack of organized and liquid securities
markets, unacceptable political risks or for other reasons.
An issuer in an emerging market is an entity: (i) for which the
principal securities trading market is an emerging market, as
defined above; (ii) that (alone or on a consolidated basis)
derives 50% or more of its total revenue from either goods
produced, sales made or services performed in emerging markets;
or (iii) organized under the laws of, or with a principal office
in, an emerging market.
The fund's investments in emerging market securities may consist
substantially of Brady Bonds and other sovereign debt securities
issued by emerging market governments that are traded in the
markets of developed countries or groups of developed countries.
The subadviser may invest in debt securities of emerging market
issuers that it determines to be suitable investments for the
fund without regard to ratings. Currently, the substantial
majority of emerging market debt securities are considered to
have a credit quality below investment grade.
The fund also may consider making investments in below-investment
grade debt securities of corporate issuers in the United States
and in developed foreign countries, subject to the overall 50%
limitation.
Pending investment of proceeds from new sales of fund shares or
to meet ordinary daily cash needs, the fund may hold cash (U.S.
dollars, foreign currencies or multinational currency units) and
may invest its assets in high quality foreign or domestic money
market instruments.
Asset Allocation. The fund invests in debt obligations allocated
among diverse markets and denominated in various currencies,
including U.S. dollars, or in multinational currency units. The
fund may purchase securities that are issued by the government or
a company or financial institution of one country but denominated
in the currency of another country (or a multinational currency
unit). The fund is designed for investors who wish to accept the
risks entailed in such investments, which are different from
those associated with a portfolio consisting entirely of
securities of U.S. issuers denominated in U.S. dollars.
The subadviser selectively will allocate the assets of the fund
in securities of issuers in countries and in currency
denominations where the combination of fixed income market
returns, the price appreciation potential of fixed income
securities and currency exchange rate movements will present
opportunities primarily for high current income and secondarily
for capital appreciation. In doing so, the subadviser intends to
take full advantage of the different yield, risk and return
characteristics that investment in the fixed income markets of
different countries can provide for U.S. investors. Fundamental
economic strength, credit quality and currency and interest rate
trends will be the principal determinants of the emphasis given
to various country, geographic and industry sectors within the
fund. Securities held by the fund may be invested in without
limitation as to maturity.
The subadviser selects securities of particular issuers on the
basis of its views as to the best values then currently available
in the marketplace. Such values are a function of yield,
maturity, issue classification and quality characteristics,
coupled with expectations regarding the local and world
economies, movements in the general level and term of interest
rates, currency values, political developments and variations in
the supply of funds available for investment in the world bond
market relative to the demands placed upon it.
The subadviser generally evaluates currencies on the basis of
fundamental economic criteria (e.g., relative inflation and
interest rate levels and trends, growth rate forecasts, balance
of payments status and economic policies) as well as technical
and political data. If the currency in which a security is
denominated appreciates against the U.S. dollar, the dollar value
of the security will increase. Conversely, if the exchange rate
of the foreign currency declines, the dollar value of the
security will decrease. However, the fund may seek to protect
itself against such negative currency movements through the use
of sophisticated investment techniques that include currency,
options and futures transactions.
Selection of Debt Investments. In determining the appropriate
distribution of investments among various countries and
geographic regions for the fund, the subadviser ordinarily
considers the following factors: prospects for relative economic
growth among the different countries in which the fund may
invest; expected levels of inflation; government policies
influencing business conditions; the outlook for currency
relationships; and the range of the individual investment
opportunities available to international investors.
Although the fund values assets daily in terms of U.S. dollars,
the fund does not intend to convert holdings of foreign
currencies into U.S. dollars on a daily basis. The fund will do
so from time to time, and investors should be aware of the costs
of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on
the difference ("spread") between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to the fund at one rate, while
offering a lesser rate of exchange should the fund desire to sell
that currency to the dealer.
The fund may invest in the following types of money market
instruments (i.e., debt instruments with less than 12 months
remaining until maturity) denominated in U.S. dollars or other
currencies: (a) obligations issued or guaranteed by the U.S. or
foreign governments, their agencies, instrumentalities or
municipalities; (b) obligations of international organizations
designed or supported by multiple foreign governmental entities
to promote economic reconstruction or development; (c) finance
company obligations, corporate commercial paper and other short-
term commercial obligations; (d) bank obligations (including CDs,
TDs, demand deposits and bankers' acceptances) subject to the
restriction that the fund may not invest more than 25% of its
total assets in bank securities; (e) repurchase agreements with
respect to all the foregoing; and (f) other substantially similar
short-term debt securities with comparable characteristics.
According to the subadviser, more than 50% of the value of all
outstanding government debt obligations throughout the world is
represented by obligations denominated in currencies other than
the U.S. dollar. Moreover, from time to time, the debt securities
of issuers located outside the United States have substantially
outperformed the debt obligations of U.S. issuers. Accordingly,
the subadviser believes that the fund's policy of investing in
debt securities throughout the world may enable the achievement
of results superior to those produced by mutual funds with
similar objectives to those of the fund that invest solely in
debt securities of U.S. issuers. The fund may also purchase
securities on a "when-issued basis" and may purchase or sell
securities on a "forward commitment" basis in order to hedge
against anticipated changes in interest rates and prices.
The fund may borrow money from banks in an amount up to 33 1/3%
of its total assets (including the amount borrowed), less all
liabilities and indebtedness other than the borrowings and may
use the proceeds for investment purposes. The fund will borrow
for investment purposes only when the subadviser believes that
such borrowings will benefit the fund, after taking into account
considerations such as the cost of the borrowing and the likely
investment returns on the securities purchased with the borrowed
monies. In addition, the fund may borrow money for temporary or
emergency purposes or payments in an amount not exceeding 5% of
the value of its total assets (not including the amount borrowed)
provided that the total amount borrowed by the fund for any
purpose does not exceed 33 1/3% of its total assets.
Nondiversification. As a "non-diversified" fund under the 1940
Act, the fund will have the ability to invest more than 5% of its
assets in the securities of any issuer. However, the fund intends
to comply with Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"), which requires (among other things) that
at least 50% of the fund's assets consist of U.S. Government
securities, cash and cash items, securities of other regulated
investment companies, and other securities, with such other
securities limited in respect of any one issuer to not more than
5% of the value of the fund's total assets and not more than 10%
of the outstanding voting securities of such issuer. Also,
holdings of a single issuer (with the same exceptions) may not
exceed 25% of the fund's total assets. These limits are measured
at the end of each quarter of the fund's taxable year. Under the
Subchapter M limits, "non-diversification" allows up to 50% of a
fund's total assets to be invested in as few as two single
issuers. In the event of decline of creditworthiness or default
upon the obligations of one or more such issuers exceeding 5%, an
investment in the fund will entail greater risk than in a
portfolio having a policy of "diversification" because a high
percentage of the fund's assets may be invested in securities of
one or two issuers. Furthermore, a high percentage of investments
among few issuers may result in a greater degree of fluctuation
in the market value of the assets of the fund, and consequently a
greater degree of fluctuation of the fund's net asset value,
because the fund will be more susceptible to economic, political
or regulatory developments affecting these securities than would
be the case with a portfolio composed of varied obligations of
more issuers. The fund also intends to satisfy the
diversification requirements of Section 817(h) of the Code.
Travelers Managed Income Portfolio
Under normal market conditions, (1) at least 65% of the fund's
total assets will be invested in U.S. government securities and
in investment-grade corporate debt obligations (i.e., rated
within the four highest ratings categories of Moody's or S&P or
in unrated obligations of comparable quality); and (2) at least
65% of the fund's total assets will be invested in debt
obligations having durations of 10 years or less. The fund may
only invest in U.S. government securities that are issued or
guaranteed as to both principal and interest by the U.S.
government or backed by the full faith and credit of the U.S.
government or its agencies or instrumentalities.
The fund may invest up to 35% of its total assets in obligations
rated below the four highest ratings of Moody's or S&P, with no
minimum rating required. Such securities, which are considered to
have speculative characteristics, include securities rated in the
lowest rating categories of Moody's or S&P (commonly referred to
as "junk bonds"), which are extremely speculative and may be in
default with respect to payment of principal or interest.
The fund may also invest up to 35% of its total assets in fixed-
income obligations having durations longer than 10 years, up to
25% of its total assets in convertible debt obligations and
preferred stocks, and up to 20% of its total assets in securities
of foreign issuers, including foreign governments. The fund will
not invest in common stocks, and any common stocks received
through conversion of convertible debt obligations will be sold
in an orderly manner. Changes in interest rates will affect the
value of the fund's portfolio investments.
Bank certificates of deposit and bankers' acceptances in which
the fund may invest are limited to U.S. dollar-denominated
instruments of domestic banks, including their branches located
outside the United States, and of domestic branches of foreign
banks. In addition, the fund may invest in U.S. dollar-
denominated, non-negotiable time deposits issued by foreign
branches of domestic banks and London branches of foreign banks;
and negotiable certificates of deposit issued by London branches
of foreign banks. The foregoing investments may be made provided
that the bank has capital, surplus and undivided profits (as of
the date of its most recently published annual financial
statements) in excess of $100 million as of the date of
investment. Investments in obligations of foreign branches of
domestic banks, foreign banks, and domestic branches of foreign
banks involve risks that are different from investments in
securities of domestic banks, and are discussed in more detail
under "Risk Factors."
The fund may invest up to 25% of its total assets in securities
representing interests in pools of assets such as mortgage loans,
motor vehicle installment purchase obligations and credit card
receivables ("asset backed securities"), which include classes of
obligations collateralized by mortgage loans or mortgage-pass
through certificates ("CMOs"). The fund is authorized to borrow
money for temporary administrative purposes and to pledge its
assets in connection with such borrowings.
The fund may invest up to 20% of its assets in foreign
securities.
Putnam Diversified Income Portfolio
The subadviser believes that diversifying the fund's investments
among the U.S. government sector, the high yield sector and the
international sector, as opposed to investing in any one sector,
will better enable the fund to preserve capital while pursuing
its investment objective. Historically, the markets for U.S.
government securities, lower-rated, high yielding U.S. corporate
fixed-income securities, and debt securities of foreign issuers
have tended to behave independently and have at times moved in
opposite directions. The subadviser believes that when financial
markets exhibit such a lack of correlation, a pooling of
investments among these markets may produce greater preservation
of capital and lower volatility over the long term than would be
obtained by investing exclusively in any one of the markets.
The subadviser will continuously review the allocation of assets
and make such adjustments as it deems appropriate, although there
are no fixed limits on allocations among sectors, including
investment in the high yield sector. Because of the importance of
sector diversification to the fund's investment policies, the
subadviser expects that a portion of the fund's assets will
normally be invested in each of the three market sectors
described below. At times, the fund may hold a portion of its
assets in cash and money market instruments.
U.S. Government Sector. The fund will invest assets allocated to
the U.S. government sector and may engage in options, futures,
and repurchase transactions with respect to such securities. The
fund may also enter into forward commitments for the purchase of
U.S. government securities and make secured loans of its
portfolio securities with respect to U.S. government securities.
In purchasing securities for the U.S. government sector, the
subadviser may take full advantage of the entire range of
maturities of U.S. government securities and may adjust the
average maturity of the investments held in the portfolio from
time to time, depending on its assessment of relative yields of
securities of different maturities and its expectations of future
changes in interest rates. Under normal market conditions, the
fund will invest at least 20% of its net assets in U.S.
government securities. The fund may also invest assets allocated
to the U.S. government sector in a variety of other debt
securities, including asset-backed and mortgage-backed
securities, such as CMOs, that are issued by private U.S.
issuers. With respect to the U.S. government sector, the fund
will only invest in privately issued debt securities that are
investment grade at the time of purchase. The fund will not
necessarily dispose of a security if its rating is reduced below
these levels, although the subadviser will monitor the investment
to determine whether continued investment in the security will
assist in meeting the fund's investment objective.
High Yield Sector. The fund will invest assets allocated to the
high yield sector primarily in high yielding, lower-rated higher
risk U.S. and foreign corporate fixed-income securities,
including debt securities, convertible securities and preferred
stocks. Subject to the foregoing sentence, the fund may also
purchase equity securities. The fund will not necessarily invest
in the highest yielding securities available if in the
subadviser's opinion the differences in yield are not sufficient
to justify the higher risks involved. The fund may also invest in
zero-coupon bonds and payment-in-kind bonds.
At times, a substantial portion of the fund's assets may be
invested in securities as to which the fund, by itself or
together with other funds and accounts managed by the subadviser
and its affiliates, holds a major portion or all of such
securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the
issuer, the fund could find it more difficult to sell such
securities when the subadviser believes it advisable to do so or
may be able to sell such securities only at prices lower than if
such securities were more widely held. Under such circumstances,
it may also be more difficult to determine the fair value of such
securities for purposes of computing the fund's net asset value.
In order to enforce its rights in the event of a default under
such securities, the fund may be required to take possession of
and manage assets securing the issuer's obligations on such
securities, which may increase the fund's operating expenses and
adversely affect the fund's net asset value.
The high yield sector may invest in any security which is rated,
at the time of purchase, at least Caa as determined by Moody's or
CCC as determined by S&P's (or, the equivalent by another,
nationally recognized statistical rating agency) or in any
unrated security which the subadviser determines is at least of
comparable quality, although up to 5% of the net assets of the
fund (whether they are allocated to the high yield sector or the
international sector) may be invested in securities rated below
such quality, or in unrated securities that the subadviser
determines are of comparable quality.
International Sector. The fund will invest the assets allocated
to the international sector in debt obligations and other fixed-
income securities denominated in any currency including the U.S.
dollar. These securities include:
* debt obligations issued or guaranteed by foreign (including
emerging markets), national, provincial, state or other
governments with taxing authority, or by their agencies or
instrumentalities;
* debt obligations of supranational entities (described below);
and
* debt obligations and other fixed-income securities of foreign
and U.S. corporate issuers.
In the past, yields available from securities denominated in
foreign currencies have often been higher than those of
securities denominated in U.S. dollars. The subadviser will
consider expected changes in foreign currency exchange rates in
determining the anticipated returns of securities denominated in
foreign currencies.
Supranational entities include international organizations
designated or supported by governmental entities to promote
economic reconstruction or development and international banking
institutions and related government agencies. Examples include
the International Bank for Reconstruction and Development (the
World Bank), the European Steel and Coal Community, the Asian
Development Bank, and the Inter-American Development Bank. The
governmental members or "stockholders" usually make initial
capital contributions to the supranational entity and in many
cases are committed to make additional capital contributions if
the supranational entity is unable to repay its borrowing. Each
supranational entity's leading activities are limited to a
percentage of its total capital (including "callable capital"
contributed by members at the entity's call), reserves, and net
income.
Defensive Strategies. At times, the subadviser may judge that
conditions in the securities market make pursuing the fund's
basic investment strategy inconsistent with the best interests of
its shareholders. At such times, the subadviser may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the fund's assets. In implementing
these "defensive" strategies, depending on the circumstances, the
fund may temporarily reduce or suspend its option writing
activities, shift its portfolio emphasis to higher-rated
securities in the high yield sector, hedge currency risks in the
international sector, or generally reduce the average maturity of
its holdings in any or all of the sectors.
Smith Barney High Income Portfolio
The fund seeks to achieve its investment objectives by investing,
under normal circumstances, at least 65% of its assets in high-
yielding corporate debt obligations and preferred stock. The
fund's manager may adjust the fund's average maturity when, based
on interest rate trends and other market conditions, it deems it
appropriate to do so. Up to 35% of the fund's assets may be
invested in common stock or common stock equivalents, including
convertible securities, options, warrants and rights. The fund's
equity investments may be made in securities of companies of any
size depending on the relative attractiveness of the company and
the economic sector in which it operates. Fixed income securities
purchased by the fund will generally be lower-rated securities,
and may be rated as low as C by Moody's or D by S&P, or in non-
rated income securities that the manager determines to be of
comparable quality. The fund will not purchase securities rated
lower than B by both Moody's and S&P, if, immediately after such
purchase, more than 10% of the fund's total assets are invested
in such securities. The fund may invest in securities rated
higher than Ba by Moody's and BB by S&P without limitation when
the difference in yields between quality classifications is
relatively narrow.
The Portfolio may invest up to 20% of its assets in the
securities of foreign issuers that are denominated in currencies
other than the U.S. dollar and may invest without limitation in
securities of foreign issuers that are denominated in U.S.
dollars.
Smith Barney Money Market Portfolio
The fund operates as a money market fund, and utilizes certain
investment policies so that, to the extent reasonably possible,
its price per share will not change from $1.00, although no
assurance can be given that this goal will be achieved on a
continuous basis. For example, the fund will not purchase a
security which, after giving effect to any demand features, has a
remaining maturity of greater than 13 months, or maintain a
dollar-weighted average portfolio maturity in excess of 90 days
(securities used as collateral for repurchase agreements are not
subject to these restrictions).
The fund's investments are limited to dollar denominated
instruments the Board of Directors determines present minimal
credit risks and which are Eligible Securities at the time
acquired by the fund. The term Eligible Securities includes
securities rated by the "Requisite NRSROs" in one of the two
highest short-term rating categories, securities of issuers that
have received such ratings with respect to other short-term debt
securities and comparable unrated securities. "Requisite NRSROs"
means (a) any two nationally recognized statistical rating
organizations ("NRSROs") that have issued a rating with respect
to a security or class of debt obligations of an issuer, or (b)
one NRSRO, if only one NRSRO has issued such a rating at the time
that the fund acquires the security. The NRSROs currently
designated as such by the Securities and Exchange Commission (the
"SEC") are S&P, Moody's, Fitch IBCA, Inc., Duff and Phelps Inc.,
and Thomson BankWatch. See Appendix A for a discussion of the
ratings categories of the NRSROs.
The fund may enter into repurchase agreements collateralized by
U.S. government securities with any broker/dealer or other
financial institution that is deemed creditworthy by the manager,
under guidelines approved by the Company's Board of Directors.
The fund will not enter into a repurchase agreement on behalf of
the fund if, as a result thereof, more than 10% of the fund's net
assets (taken at current value) at that time would be subject to
repurchase agreements maturing in more than seven days.
The following are also permitted investments for the fund:
High Quality Commercial Paper. The fund's purchase of commercial
paper is restricted to direct obligations of issuers that at the
time of purchase are Eligible Securities that are rated by at
least one NRSRO in the highest category for short-term debt
securities or comparable unrated securities. The fund may invest
without limit in the dollar-denominated commercial paper of
foreign issuers.
High Quality Corporate Obligations. Obligations of corporations
that are: (1) rated AA or better by S&P or Aa or better by
Moody's or (2) issued by an issuer that has a class of short-term
debt obligations that are comparable in priority and security
with the obligation and that have been rated in one of the two
highest rating categories for short-term debt obligations. The
fund will only invest in corporate obligations with remaining
maturities of 13 months or less.
Bank Obligations. Obligations (including certificates of deposit,
bankers' acceptances and fixed time deposits) and securities
backed by letters of credit of U.S. banks or other U.S. financial
institutions that are members of the Federal Reserve System or
the Federal Deposit Insurance Corporation ("FDIC") (including
obligations of foreign branches of such members) if either: (a)
the principal amount of the obligation is insured in full by the
FDIC, or (b) the issuer of such obligation has capital, surplus
and undivided profits in excess of $100 million or total assets
of $1 billion (as reported in its most recently published
financial statements prior to the date of investment). Under
current FDIC regulations, the maximum insurance payable as to any
one certificate of deposit is $100,000; therefore, certificates
of deposit in denominations greater than $100,000 that are
purchased by the fund will not be fully insured. The fund
currently intends to limit its investment in fixed time deposits
with an ultimate maturity of from two business days to six months
and will invest in such time deposits only if, when combined with
other illiquid assets of the fund, not more than 10% of its
assets would be invested in all such instruments. The fund may
also invest in securities of foreign branches of U.S. banks. Such
investments involve considerations that are not ordinarily
associated with investing in domestic certificates of deposit.
The fund may invest in instruments issued by domestic banks,
including those issued by their branches outside the United
States and subsidiaries located in Canada, and instruments issued
by foreign banks through their branches located in the United
States and the United Kingdom. In addition, the fund may invest
in fixed time deposits of foreign banks issued through their
branches located in Grand Cayman Island, London, Nassau, Tokyo
and Toronto.
The purchase of obligations of foreign banks will involve similar
investment and risk considerations that are applicable to
investing in obligations of foreign branches of U.S. banks. These
factors will be carefully considered by the Manager in selecting
investments for the fund. See "Risk Factors."
High Quality Municipal Obligations. Debt obligations of states,
cities, counties, municipalities, municipal agencies and regional
districts rated SP-1+ or A-1 or AA or better by S&P or MIG 2,
VMIG 2, or Prime-1 or Aa or better by Moody's or, if not rated,
are determined by the Manager to be of comparable quality. At
certain times, supply/demand imbalances in the tax-exempt market
cause municipal obligations to yield more than taxable
obligations of equivalent credit quality and maturity length. The
purchase of these securities could enhance the fund's yield. The
fund will not invest more than 10% of its total assets in
municipal obligations.
The fund may, to a limited degree, engage in short-term trading
to attempt to take advantage of short-term market variations, or
may dispose of the portfolio security prior to its maturity if it
believes such disposition advisable or it needs to generate cash
to satisfy redemptions. In such cases, the fund may realize a
gain or loss.
As a matter of fundamental policy, the fund may borrow money from
banks for temporary purposes but only in an amount up to 10% of
the value of its total assets and may pledge its assets in an
amount up to 10% of the value of its total assets only to secure
such borrowings. The fund will borrow money only to accommodate
requests for the redemption of shares while effecting an orderly
liquidation of portfolio securities or to clear securities
transactions and not for leveraging purposes. The fund may also
lend its portfolio securities to brokers, dealers and other
financial organizations. Such loans, if and when made, may not
exceed 20% of the fund's total assets, taken at value.
Notwithstanding any of the foregoing investment policies, the
fund may invest up to 100% of its assets in U.S. government
securities.
INVESTMENT PRACTICES
Each of the following investment practices is subject to any
limitations set forth under "Investment Objectives and Management
Policies" or under "Investment Restrictions." See "Risk Factors"
for additional information about the risks of these investment
practices.
EQUITY SECURITIES
Common Stocks (each fund except Smith Barney Money Market
Portfolio). Each fund may purchase 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 (each fund except Smith Barney Money
Market Portfolio). Each fund may invest in convertible securities
which are fixed-income securities that may be converted at either
a stated price or stated rate into underlying shares of common
stock. Convertible securities have general characteristics
similar to both fixed-income and equity securities. Although to a
lesser extent than with fixed-income securities, the market value
of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stocks
and, therefore, also will react to variations in the general
market for equity securities.
Like fixed-income securities, convertible securities are
investments which provide for a stable stream of income with
generally higher yields than common stocks. Of course, like all
fixed-income securities, there can be no assurance of current
income because the issuers of the convertible securities may
default on their obligations. Convertible securities, however,
generally offer lower interest or dividend yields than non-
convertible securities of similar quality because of the
potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for
capital appreciation through the conversion feature, which
enables the holder to benefit from increases in the market price
of the underlying common stock. However, there can be no
assurance of capital appreciation because securities prices
fluctuate.
Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer,
although convertible bonds enjoy seniority in right of payment to
all equity securities, and convertible preferred stock is senior
to common stock of the same issuer. Because of the subordination
feature, however, convertible securities typically have lower
ratings than similar non-convertible securities.
Synthetic Convertible Securities (each fund except Smith Barney
Money Market Portfolio). Each fund may invest in synthetic
convertible securities. Synthetic convertible securities differ
from convertible securities in certain respects, including that
each component of a synthetic convertible security has a separate
market value and responds differently to market fluctuations.
Investing in synthetic convertible securities involves the risk
normally involved in holding the securities comprising the
synthetic convertible security.
Unlike a convertible security, which is a single security, a
synthetic convertible security is comprised of distinct
securities that together resemble convertible securities in
certain respects. Synthetic convertible securities are typically
created by combining non-convertible bonds or preferred stocks
with warrants or stock call options. The options that will form
elements of synthetic convertible securities may be listed on a
securities exchange or on the National Association of Securities
Dealers Automated Quotation System "NASDAQ" or may be privately
traded. The components of a synthetic convertible security
generally are not offered as a unit and may be purchased and sold
by the fund at different times. Synthetic convertible securities
differ from convertible securities in certain respects, including
that each component of a synthetic convertible security has a
separate market value and responds differently to market
fluctuations.
Warrants or Rights (AIM Capital Appreciation, Smith Barney Large
Capitalization Growth, Smith Barney Aggressive Growth, Smith
Barney Mid Cap, Putnam Diversified Income, MFS Total Return and
INVESCO Global Strategic Income Portfolios). Warrants or rights
may be acquired by each fund in connection with other securities
or separately and provide the fund with the right to purchase at
a later date other securities of the issuer. Each fund has
undertaken that its investment in warrants or rights, valued at
the lower of cost or market, will not exceed 5% of the value of
its net assets and not more than 2% of such assets will be
invested in warrants and rights which are not listed on the
American or New York Stock Exchange. Warrants or rights acquired
by a fund in units or attached to securities will be deemed to be
without value for purposes of this restriction.
Real Estate Investment Trusts ("REITs") (Alliance Growth Smith
Barney Aggressive Growth, Smith Barney Mid Cap and Smith Barney
High Income Portfolios). The funds may invest without limitations
in shares of REITs. REITs are pooled investment vehicles which
invest primarily in income producing real estate or real estate
related loans or interests. REITs are generally classified as
equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets
directly in real property and derive income primarily from the
collection or rents. Equity REITs may also include operating or
finance companies. Equity REITs can also realize capital gains by
selling properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. REITs are
not taxed on income distributed to shareholders provided they
comply with several requirements of the Internal Revenue Code of
1986, as amended (the "Code"). A mortgage trust can make
construction, development or long-term mortgage loans, which are
sensitive to the credit quality of the borrower. Mortgage trusts
derive their income from interest payments. Hybrid trusts combine
the characteristics of both equity and mortgage trusts, generally
by holding both ownership interests and mortgage interests in
real estate.
FIXED INCOME SECURITIES
Corporate Debt Obligations (each fund). Each fund may invest in
corporate debt obligations and zero coupon securities issued by
financial institutions and corporations. Corporate debt
obligations are subject to the risk of an issuer's inability to
meet principal and interest payments on the obligations and may
also be subject to price volatility due to such facts as market
interest rates, market perception of the creditworthiness of the
issuer and general market liquidity. Zero coupon securities are
securities sold at a discount to par value and on which interest
payments are not made during the life of the security.
U.S. Government Securities (each fund). Each fund may invest in
U.S. government securities, which are debt obligations issued or
guaranteed as to payment of principal and interest by the U.S.
Government (including Treasury bills, notes and bonds, certain
mortgage participation certificates and collateralized mortgage
obligations) or by its agencies and instrumentalities (such as
GNMA, the Student Loan Marketing Association, the Tennessee
Valley Authority, the Bank for Cooperatives, the Farmers Home
Administration, Federal Farm Credit Banks, Federal Home Loan
Banks, Federal Intermediate Credit Banks, Federal Land Banks, the
Export-Import Bank of the U.S., the Federal Housing
Administration, FHLMC, the U.S. Postal Service, the Federal
Financing Bank and FNMA). Some of these securities (such as
Treasury bills) are supported by the full faith and credit of the
U.S. Treasury; others (such as obligations of the Federal Home
Loan Bank) are supported by the right of the issuer to borrow
from the Treasury; while still others (such as obligations of
FNMA and the Student Loan Marketing Association) are supported
only by the credit of the instrumentality.
Zero Coupon, Pay-In-Kind and Delayed Interest Securities
(Alliance Growth, MFS Total Return, INVESCO Global Strategic
Income, Travelers Managed Income, Smith Barney High Income and
Putnam Diversified Income Portfolios). A fund may invest in zero
coupon, pay-in-kind and delayed interest securities as well as
custodial receipts or certificates underwritten by securities
dealers or banks that evidence ownership of future interest
payments, principal payments or both on certain U.S. government
securities. Zero coupon securities pay no cash income to their
holders until they mature and are issued at substantial discounts
from their value at maturity. When held to maturity, their entire
return comes from the difference between their purchase price and
their maturity value. Zero-coupon and delayed interest securities
are issued at a significant discount from their principal amount.
While zero-coupon bonds do not require the periodic payment of
interest, deferred interest bonds provide for a period of delay
before the regular payment of interest begins. Payment-in-kind
bonds allow the issuer, at its option, to make current interest
payments on the bonds either in cash or in additional bonds.
Because interest on zero coupon, pay-in-kind and delayed interest
securities is not paid on a current basis, the values of
securities of this type are subject to greater fluctuations than
are the values of securities that distribute income regularly and
may be more speculative than such securities.
Custodial receipts evidencing specific coupon or principal
payments have the same general attributes as zero coupon U.S.
government securities but are not considered to be U.S.
government securities. Although under the terms of a custodial
receipt a fund is typically authorized to assert its rights
directly against the issuer of the underlying obligation, the
fund may be required to assert through the custodian bank such
rights as may exist against the underlying issuer. Thus, in the
event the underlying issuer fails to pay principal and/or
interest when due, a fund may be subject to delays, expenses and
risks that are greater than those that would have been involved
if the fund had purchased a direct obligation of the issuer. In
addition, in the event that the trust or custodial account in
which the underlying security has been deposited is determined to
be an association taxable as a corporation, instead of a non-
taxable entity, the yield on the underlying security would be
reduced in respect of any taxes paid.
Synthetic Security Positions (INVESCO Global Strategic Income and
Putnam Diversified Income Portfolios). A fund may utilize
combinations of futures on bonds and forward currency contracts
to create investment positions that have substantially the same
characteristics as bonds of the same type on which the futures
contracts are written. Investment positions of this type are
generally referred to as "synthetic securities." For example, in
order to establish a synthetic security position for the fund
that is comparable to owning a Japanese government bond, the
relevant subadviser might purchase futures contracts on Japanese
government bonds in the desired principal amount and purchase
forward currency contracts for Japanese Yen in an amount equal to
the then current purchase price for such bonds in the Japanese
cash market, with each contract having approximately the same
delivery date.
The subadviser might roll over the futures and forward currency
contract positions before taking delivery in order to continue
the fund's investment position, or the subadviser might close out
those positions, thus effectively selling the synthetic security.
Further, the amount of each contract might be adjusted in
response to market conditions and the forward currency contract
might be changed in amount or eliminated in order to hedge
against currency fluctuations.
Further, while these futures and currency contracts remain open,
a fund will comply with applicable SEC guidelines to set aside
cash, debt securities of any grade or equity securities, in a
segregated account with its custodian in an amount sufficient to
cover its potential obligations under such contracts; provided
such securities have been determined by the subadviser to be
liquid and unencumbered pursuant to guidelines established by the
directors.
A subadviser would create synthetic security positions for a fund
when it believes that it can obtain a better yield or achieve
cost savings in comparison to purchasing actual bonds or when
comparable bonds are not readily available in the market.
Synthetic security positions are subject to the risk that changes
in the value of purchased futures contracts may differ from
changes in the value of the bonds that might otherwise have been
purchased in the cash market. Also, while a subadviser believes
that the cost of creating synthetic security positions generally
will be materially lower than the cost of acquiring comparable
bonds in the cash market, the subadviser will incur transaction
costs in connection with each purchase of a futures or a forward
currency contract. The use of futures contracts and forward
currency contracts to create synthetic security positions also is
subject to substantially the same risks as those that exist when
these instruments are used in connection with hedging strategies.
See "Investment Risks."
Mortgage-Backed Securities (MFS Total Return, Travelers Managed
Income, Putnam Diversified Income and Smith Barney High Income
Portfolios). A fund may invest in mortgage backed securities,
which are securities representing interests in "pools" of
mortgage loans. Monthly payments of interest and principal by the
individual borrowers on mortgages are "passed through" to the
holders of the securities (net of fees paid to the issuer or
guarantor of the securities) as the mortgages in the underlying
mortgage pools are paid off. The average lives of mortgage pass-
throughs are variable when issued because their average lives
depend on prepayment rates. The average life of these securities
is likely to be substantially shorter than their stated final
maturity as a result of unscheduled principal prepayment.
Prepayments on underlying mortgages result in a loss of
anticipated interest, and all or part of a premium if any has
been paid, and the actual yield (or total return) to a fund may
be different than the quoted yield on the securities. Mortgage
prepayments generally increase with falling interest rates and
decrease with rising interest rates. Additional payment may be
made out of unscheduled repayments of principal resulting from
the sale of the underlying residential property, refinancing or
foreclosure, net of fees or costs that may be incurred.
Prepayments of principal on mortgage-backed securities may tend
to increase due to refinancing of mortgages as interest rates
decline. Like other fixed income securities, when interest rates
rise the value of a mortgage pass-through security generally will
decline; however, when interest rates are declining, the value of
mortgage pass-through securities with prepayment features may not
increase as much as that of other fixed-income securities.
Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities
themselves) may be guaranteed by the full faith and credit of the
U.S. government (in the case of securities guaranteed by the
Government National Mortgage Association ("GNMA"); or guaranteed
by agencies or instrumentalities of the U.S. government (such as
the Federal National Mortgage Association ("FNMA") or the Federal
Home Loan Mortgage Corporation, ("FHLMC") which are supported
only by the discretionary authority of the U.S. government to
purchase the agency's obligations). Mortgage pass-through
securities may also be issued by non-governmental issuers (such
as commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other
secondary market issuers). Some of these mortgage pass-through
securities may be supported by various forms of insurance or
guarantees.
Interests in pools of mortgage-related securities differ from
other forms of debt securities, which normally provide for
periodic payment of interest in fixed amounts with principal
payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both
interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual
borrowers on their mortgage loans, net of any fees paid to the
issuer or guarantor of such securities. Additional payments are
caused by prepayments of principal resulting from the sale,
refinancing or foreclosure of the underlying property, net of
fees or costs which may be incurred. Some mortgage pass-through
securities (such as securities issued by the GNMA) are described
as "modified pass-through." These securities entitle the holder
to receive all interest and principal payments owed on the
mortgages in the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether the mortgagor
actually makes the payment.
The principal governmental guarantor of mortgage pass-through
securities is the GNMA. GNMA is a wholly owned U.S. government
corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith
and credit of the U.S. government, the timely payment of
principal and interest on securities issued by institutions
approved by GNMA (such as savings and loan institutions,
commercial banks and mortgage bankers) and backed by pools of
FHA-insured or VA-guaranteed mortgages. These guarantees,
however, do not apply to the market value or yield of mortgage
pass-through securities. GNMA securities are often purchased at a
premium over the maturity value of the underlying mortgages. This
premium is not guaranteed and will be lost if prepayment occurs.
Government-related guarantors (i.e., whose guarantees are not
backed by the full faith and credit of the U.S. government)
include the FNMA and the FHLMC. FNMA is a government-sponsored
corporation owned entirely by private stockholders. It is subject
to general regulation by the Secretary of Housing and Urban
Development. FNMA purchases conventional residential mortgages
(i.e., mortgages not insured or guaranteed by any governmental
agency) from a list of approved seller/servicers which include
state and federally-chartered savings and loan associations,
mutual savings banks, commercial banks, credit unions and
mortgage bankers. Pass-through securities issued by FNMA are
guaranteed as to timely payment by FNMA of principal and
interest.
FHLMC is also a government-sponsored corporation owned by private
stockholders. FHLMC issues Participation Certificates ("PCs")
which represent interests in conventional mortgages (i.e., not
federally insured or guaranteed) from FHLMC's national portfolio.
FHLMC guarantees timely payment of interest and ultimate
collection of principal regardless of the status of the
underlying mortgage loans. Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers also create pass-
through pools of mortgage loans. Such issuers may also be the
originators and/or servicers of the underlying mortgage-related
securities. Pools created by such non-governmental issuers
generally offer a higher rate of interest than government and
government-related pools because there are no direct or indirect
government or agency guarantees of payments in the former pools.
However, timely payment of interest and principal of mortgage
loans in these pools may be supported by various forms of
insurance or guarantees, including individual loan, title, pool
and hazard insurance and letters of credit. The insurance and
guarantees are issued by governmental entities, private insurers
and the mortgage poolers. There can be no assurance that the
private insurers or guarantors can meet their obligations under
the insurance policies or guarantee arrangements. A fund may also
buy mortgage-related securities without insurance or guarantees.
Collateralized mortgage obligations are a type of bond secured by
an underlying pool of mortgages or mortgage pass-through
certificates that are structured to direct payments on underlying
collateral to different series of classes of the obligations.
Asset-Backed Securities (MFS Total Return, Travelers Managed
Income, Putnam Diversified Income and Smith Barney High Income
Portfolios). A fund may invest in asset-backed securities. These
securities, issued by trusts and special purpose corporations,
are backed by a pool of assets, such as credit card and
automobile loan receivables, representing the obligations of a
number of different parties. Asset-backed securities arise
through the grouping by governmental, government-related and
private organizations of loans, receivables and other assets
originated by various lenders. Interests in pools of these assets
differ from other forms of debt securities, which normally
provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead,
asset-backed securities provide periodic payments which generally
consist of both interest and principal payments.
Corporate asset-backed securities present certain risks. For
instance, in the case of credit card receivables, these
securities may not have the benefit of any security interest in
the related collateral. Credit card receivables are generally
unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on
the credit cards, thereby reducing the balance due. Most issuers
of automobile receivables permit the servicers to retain
possession of the underlying obligations. If the servicer were to
sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the
holders of the related automobile receivables. In addition,
because of the large number of vehicles involved in a typical
issuance and technical requirements under state laws, the trustee
for the holders of the automobile receivables may not have a
proper security interest in all of the obligations backing such
receivables. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to
support payments on these securities.
Corporate asset-backed securities are often backed by a pool of
assets representing the obligations of a number of different
parties. To lessen the effect of failures by obligors to make
payments on underlying assets, the securities may contain
elements of credit support which fall into two categories: (i)
liquidity protection and (ii) protection against losses resulting
from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets, to
ensure that the receipt of payments on the underlying pool occurs
in a timely fashion. Protection against losses resulting from
ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third
parties. A fund will not pay any additional or separate fees for
credit support. The degree of credit support provided for each
issue is generally based on historical information respecting the
level of credit risk associated with the underlying assets.
Delinquency or loss in excess of that anticipated or failure of
the credit support could adversely affect the return on an
instrument in such a security.
Loan Participations, Assignments and Other Direct Indebtedness
(Putnam Diversified Income, INVESCO Global Strategic Income and
MFS Total Return Portfolios). A fund may invest a portion of its
assets in loan participations ("Participations") and other direct
claims against a borrower. By purchasing a Participation, a fund
acquires some or all of the interest of a bank or other lending
institution in a loan to a corporate or government borrower. The
Participations typically will result in the fund having a
contractual relationship only with the lender not the borrower. A
fund will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the
lender selling the Participation and only upon receipt by the
lender of the payments from the borrower. Many such loans are
secured, although some may be unsecured. Such loans may be in
default at the time of purchase. Loans that are fully secured
offer a fund more protection than an unsecured loan in the event
of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured
loan would satisfy the corporate borrower's obligation, or that
the collateral can be liquidated.
These loans are made generally to finance internal growth,
mergers, acquisitions, stock repurchases, leveraged buy-outs and
other corporate activities. Such loans are typically made by a
syndicate of lending institutions, represented by an agent
lending institution which has negotiated and structured the loan
and is responsible for collecting interest, principal and other
amounts due on its own behalf and on behalf of the others in the
syndicate, and for enforcing its and their other rights against
the borrower. Alternatively, such loans may be structured as a
novation, pursuant to which a fund would assume all of the rights
of the lending institution in a loan, or as an assignment,
pursuant to which the fund would purchase an assignment of a
portion of a lender's interest in a loan either directly from the
lender or through an intermediary. A fund may also purchase trade
or other claims against companies, which generally represent
money owed by the company to a supplier of goods or services.
These claims may also be purchased at a time when the company is
in default.
Each fund will acquire Participations only if the lender
interpositioned between the fund and the borrower is determined
by management to be creditworthy.
Putnam Diversified Income and INVESCO Global Strategic Income
Portfolios may also invest in assignments of portions of loans
from third parties ("Assignments"). When a fund purchases
Assignments from lenders, the fund will acquire direct rights
against the borrower on the loan. However, since Assignments are
arranged through private negotiations between potential assignees
and assignors, the rights and obligations acquired by the fund as
the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning lender.
FOREIGN INVESTMENTS
Depositary Receipts (each fund except Smith Barney Money Market
Portfolio). For many foreign securities, there are U.S. dollar-
denominated ADRs, which are traded in the United States on
exchanges or over the counter and are sponsored and issued by
domestic banks. ADRs represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent
bank. Because ADRs trade on United States securities exchanges,
they are not generally treated as foreign securities. Global
Depositary Receipts ("GDRs") are receipts issued by either a U.S.
or non-U.S. banking institution evidencing ownership of the
underlying foreign securities. Although investment in the form
of ADRs, EDRs or GDRs facilitates trading in foreign securities,
it does not mitigate the risks associated with investing in
foreign securities. By investing in depositary receipts rather
than directly in foreign issuers' stock, a fund can avoid
currency risks during the settlement period for either purchases
or sales. In general, there is a large, liquid market for many
depositary receipts. The information available for depositary
receipts is subject to the accounting, auditing and financial
reporting standards of the domestic market or exchange on which
they are traded, which standards are more uniform and more
exacting that those to which many foreign issuers may be subject.
EDRs, which sometimes are referred to as Continental Depositary
Receipts ("CDRs") are receipts issued in Europe typically by
foreign banks and trust companies that evidence ownership of
either foreign or domestic securities. Generally, ADRs, in
registered form, are designed for use in the United States
securities markets, and GDRs, EDRs, and CDRs in bearer form, are
designed for use in European securities markets.
Emerging Markets (Smith Barney International Equity, Smith Barney
Pacific Basin, Putnam Diversified Income, INVESCO Global
Strategic Income, Travelers Managed Income, Smith Barney High
Income and MFS Total Return Portfolios). Emerging market
countries include any country determined by the manager or
subadviser, as the case may be, to have an emerging market
economy, taking into account a number of factors, including the
country's foreign currency debt rating, its political and
economic stability and the development of its financial and
capital markets. The manager or subadviser determines an issuer's
principal trading market for its securities and the source of its
revenues and assets. The issuer's principal activities generally
are deemed to be located in a particular country if: (a) the
security is issued or guaranteed by the government of that
country or any of its agencies, authorities or instrumentalities;
(b) the issuer is organized under the laws of, and maintains a
principal office in, that country; (c) the issuer has its
principal securities trading market in that country; or (d) the
issuer has 50% or more of its assets in that country.
Sovereign Debt Obligations (Putnam Diversified Income, MFS Total
Return, INVESCO Global Strategic Income and Travelers Managed
Income Portfolios). A fund may purchase sovereign debt
instruments issued or guaranteed by foreign governments or their
agencies, including debt of developing countries. Obligations of
foreign governmental entities include obligations issued or
guaranteed by national, provincial, state or other governments
with taxing power or by their agencies. These obligations may or
may not be supported by the full faith and credit of a foreign
government. Sovereign debt may be in the form of conventional
securities or other types of debt instruments such as loans or
loan participations. Sovereign debt of developing countries may
involve a high degree of risk, and may be in default or present
the risk of default. Governmental entities responsible for
repayment of the debt may be unable or unwilling to repay
principal and interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for
repayment of principal and interest may depend on political as
well as economic factors. Although some sovereign debt, such as
Brady Bonds, is collateralized by U.S. Government securities,
repayment of principal interest is not guaranteed by the U.S.
Government.
Brady Bonds (Putnam Diversified Income, MFS Total Return, INVESCO
Global Strategic Income and Travelers Managed Income Portfolios).
A fund may invest in Brady Bonds which are debt restructurings
that provide for the exchange of cash and loans for newly issued
bonds. Brady Bonds have been issued by the governments of
Albania, Argentina, Brazil, Bulgaria, Costa Rica, Croatia,
Dominican Republic, Ecuador, Ivory Coast, Jordan, Mexico,
Morocco, Nigeria, Panama, Peru, Philippines, Poland, Slovenia,
Uruguay, Venezuela and Vietnam and are expected to be issued by
other emerging market countries. Investors should recognize that
Brady Bonds do not have a long payment history. In addition,
Brady Bonds are often rated below investment grade. Brady Bonds
may be collateralized or uncollateralized, are issued in various
currencies (primarily the U.S. dollar) and are actively traded in
the secondary market for Latin American debt. The Salomon
Brothers Brady Bond Index provides a benchmark that can be used
to compare returns of emerging market Brady Bonds with returns in
other bond markets, e.g., the U.S. bond market.
The funds may invest in either collateralized or uncollateralized
Brady Bonds. U.S. dollar-denominated, collateralized Brady Bonds,
which may be fixed rate par bonds or floating rate discount
bonds, are collateralized in full as to principal by U.S.
Treasury zero coupon bonds having the same maturity as the bonds.
Interest payments on such bonds generally are collateralized by
cash or securities in an amount that, in the case of fixed rate
bonds, is equal to at least one year of rolling interest payments
or, in the case of floating rate bonds, initially is equal to at
least one year's rolling interest payments based on the
applicable interest rate at that time and is adjusted at regular
intervals thereafter.
Samurai and Yankee Bonds (INVESCO Global Strategic Income and
Putnam Diversified Income Portfolios). Subject to their
fundamental investment restrictions, these funds may invest in
yen-denominated bonds sold in Japan by non-Japanese issuers
("Samurai bonds"), and may invest in dollar-denominated bonds
sold in the United States by non-U.S. issuers ("Yankee bonds").
It is the policy of the funds to invest in Samurai or Yankee bond
issues only after taking into account considerations of quality
and liquidity, as well as yield.
Investments in Other Investment Companies providing exposure to
Foreign Markets (INVESCO Global Strategic Income Portfolio). With
respect to certain countries, investments by the fund presently
may be made only by acquiring shares of other investment
companies with local governmental approval to invest in those
countries. The fund may invest in the securities of closed-end
investment companies within the limits of the 1940 Act. These
limitations currently provide that, in general, the fund may
purchase shares of a closed-end investment company unless
(a) such a purchase would cause the fund to own in the aggregate
more than 3 percent of the total outstanding voting securities of
the investment company or (b) such a purchase would cause the
fund to have more than 5 percent of its total assets invested in
the investment company or more than 10 percent of its aggregate
assets invested in an aggregate of all such investment companies.
Investment in such investment companies may also involve the
payment of substantial premiums above the value of such
companies' portfolio securities. The fund does not intend to
invest in such vehicles or funds unless, in the judgment of
management, the potential benefits of such investments justify
the payment of any applicable premiums. The yield of such
securities will be reduced by operating expenses of such
companies including payments to the investment managers of those
investment companies. At such time as direct investment in these
countries is allowed, the fund will anticipate investing directly
in these markets.
MONEY MARKET SECURITIES
Commercial Bank Obligations (each fund). For the purposes of each
fund's investment policies with respect to bank obligations (such
as certificates of deposit ("CDs"), time deposits ("TDs") and
bankers' acceptances), obligations of foreign branches of U.S.
banks and of foreign banks may be general obligations of the
parent bank in addition to the issuing bank, or may be limited by
the terms of a specific obligation and by government regulation.
As with investment in non-U.S. securities in general, investments
in the obligations of foreign branches of U.S. banks and of
foreign banks may subject the fund to investment risks that are
different in some respects from those of investments in
obligations of domestic issuers. See "Investment Risks."
Although a fund will typically acquire obligations issued and
supported by the credit of U.S. or foreign banks having total
assets at the time of purchase in excess of U.S. $1 billion (or
the equivalent thereof), this U.S. $1 billion figure is not a
fundamental investment policy or restriction of the fund. For
calculation purposes with respect to the U.S. $1 billion figure,
the assets of a bank will be deemed to include the assets of its
U.S. and non-U.S. branches.
Commercial Paper (each fund). With respect to each fund's
investment policies with respect to commercial paper, such
security consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand
note (which is a type of commercial paper) represents a direct
borrowing arrangement involving periodically fluctuating rates of
interest under a letter agreement between a commercial paper
issuer and an institutional lender, pursuant to which the lender
may determine to invest varying amounts. Transfer of such notes
is usually restricted by the issuer, and there is no secondary
trading market for such notes. Each fund, except Smith Barney
Money Market Portfolio, therefore, may not invest in a master
demand note, if as a result more than 15% of the value of each
such fund's total assets would be invested in such notes and
other illiquid securities. Smith Barney Money Market Portfolio
may not invest in such notes if more than 10% of the value of its
total assets would be invested in such notes and other illiquid
securities.
Indexed Commercial Paper (INVESCO Global Strategic Income
Portfolio). The fund may invest without limitation in commercial
paper that is indexed to certain specific foreign currency
exchange rates. The terms of such commercial paper provide that
its principal amount is adjusted upwards or downwards (but not
below zero) at maturity to reflect changes in the exchange rate
between two currencies while the obligation is outstanding. The
fund will purchase such commercial paper with the currency in
which it is denominated and, at maturity, will receive interest
and principal payments thereon in that currency, but the amount
of principal payable by the issuer at maturity will change in
proportion to the change (if any) in the exchange rate between
the two specified currencies between the date the instrument is
issued and the date the instrument matures. While such commercial
paper entails the risk of loss of principal, the potential for
realizing gains as a result of changes in foreign currency
exchange rates enables the fund to hedge against a decline in the
U.S. dollar value of investments denominated in foreign
currencies while seeking to provide an attractive money market
rate of return. The fund will not purchase such commercial paper
for speculation.
OTHER INVESTMENT PRACTICES
Illiquid and Restricted Securities. Each fund may purchase
securities that are restricted as to resale ("restricted
securities") under the Securities Act of 1933, as amended (the
"1933 Act"). Some restricted securities can be offered and sold
to "qualified institutional buyers" under Rule 144A under the
1933 Act. 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 the 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.
Repurchase Agreements (each fund). Each fund may enter into
repurchase agreements, wherein the seller agrees to repurchase a
security from the fund at an agreed-upon future date, normally
the next business day. The resale price is greater than the
purchase price, which reflects the agreed-upon rate of return for
the period the fund holds the security and which is not related
to the coupon rate on the purchased security. Each fund requires
continual maintenance of the market value of the collateral in
amounts at least equal to the repurchase price plus accrued
interest, thus risk is limited to the ability of the seller to
pay the agreed-upon amount on the delivery date; however, if the
seller defaults, realization upon the collateral by the fund may
be delayed or limited or the fund might incur a loss if the value
of the collateral securing the repurchase agreement declines and
might incur disposition costs in connection with liquidating the
collateral. A fund will only enter into repurchase agreements
with broker/dealers or other financial institutions that are
deemed creditworthy by the Manager under guidelines approved by
the Board of Directors. It is the policy of each fund (except the
Smith Barney Money Market Portfolio) not to invest in repurchase
agreements that do not mature within seven days if any such
investment together with any other illiquid assets held by a fund
amount to more than 15% of that fund's net assets. The Smith
Barney Money Market Portfolio may not invest in such securities
if, together with any other illiquid assets held by it amount to
more than 10% of its total assets.
Reverse Repurchase Agreements (Smith Barney Pacific Basin, Smith
Barney International Equity, Smith Barney Aggressive Growth,
Smith Barney Mid Cap and INVESCO Global Strategic Income
Portfolios). The fund may enter into reverse repurchase
agreements with the same parties with whom it may enter into
repurchase agreements. Repurchase agreements involve the sale of
fund securities with an agreement to repurchase the securities at
an agreed-upon price, date and interest payment and have the
characteristics of borrowing. Since the proceeds of borrowings
under reverse repurchase agreements are invested, this would
introduce the speculative factor known as "leverage." The
securities purchased with the funds obtained from the agreement
and securities collateralizing the agreement will have maturity
dates no later than the repayment date. Generally the effect of
such a transaction is that the fund can recover all or most of
the cash invested in the fund securities involved during the term
of the reverse repurchase agreement, while in many cases it will
be able to keep some of the interest income associated with those
securities. Such transactions are only advantageous if the fund
has an opportunity to earn a greater rate of interest on the cash
derived from the transaction than the interest cost of obtaining
that cash. Opportunities to realize earnings from the use of the
proceeds equal to or greater than the interest required to be
paid may not always be available, and the fund intends to use the
reverse repurchase technique only when management believes it
will be advantageous to the fund. The use of reverse repurchase
agreements may exaggerate any interim increase or decrease in the
value of the participating fund's assets. The fund's custodian
bank will maintain a separate account for the fund with
securities having a value equal to or greater than such
commitments.
At the time the fund enters into a reverse repurchase agreement,
it will establish and maintain a segregated account with an
approved custodian containing cash or liquid securities that have
a value no less than the repurchase price, including accrued
interest. Reverse repurchase agreements will be treated as
borrowings and will be considered in the fund's overall borrowing
limitation.
Borrowing and Leverage (each fund). Each fund may borrow from
banks, on a secured or unsecured basis. If the fund borrows and
uses the proceeds to make additional investments, income and
appreciation from such investments will improve its performance
if they exceed the associated borrowing costs but impair its
performance if they are less than such borrowing costs. This
speculative factor is known as "leverage." Only Smith Barney
Pacific Basin, Smith Barney International Equity, Smith Barney
Aggressive Growth and INVESCO Global Strategic Income Portfolios
will utilize leverage. In addition, AIM Capital Appreciation
Portfolio may, but has no current intention to, engage in
leverage. Should any fund engage in leverage, immediately after
such borrowing the value of its assets, including the amount
borrowed, less liabilities, must be equal to at least 300% of the
amount borrowed, plus all outstanding borrowings.
"Dollar Roll" Transactions (MFS Total Return, INVESCO Global
Strategic Income, Travelers Managed Income and Putnam Diversified
Income Portfolios). A fund may enter into "dollar roll"
transactions pursuant to which the fund sells fixed income
securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (i.e., same type,
coupon and maturity) securities on a specified future date. The
MFS Total Return Portfolio may enter in similar transactions
pursuant to which the fund sells mortgage-backed securities for
delivery in the future and simultaneously contracts to repurchase
substantially similar securities on a specified future date
(generally within 30 days). During the roll period, a fund
forgoes principal and interest paid on the securities. The fund
is compensated for the lost interest by the difference between
the current sales price and the lower price for the future
purchase (often referred to as the "drop") as well as by the
interest earned on the cash proceeds of the initial sale. A fund
may also be compensated by receipt of a commitment fee.
Since a fund will receive interest on the securities in which it
invests the transaction proceeds, such transactions may involve
leverage. However, since such securities must satisfy the quality
requirements of the fund and will mature on or before the
settlement date on the transaction, management believes that such
transactions do not present the risks to the funds that are
associated with other types of leverage. MFS Total Return
Portfolio will only enter into covered rolls, where there is an
offsetting cash position or a cash equivalent security position
which matures on or before the forward settlement date of the
dollar roll transaction. Dollar roll transactions are considered
borrowings by the funds and will be subject to each fund's
overall borrowing limitation. Dollar roll transactions are
considered speculative.
Securities Lending (each fund except Smith Barney Large
Capitalization Growth, Van Kampen Enterprise and Smith Barney
Money Market Portfolios). A fund may seek to increase its net
investment income by lending its securities provided such loans
are callable at any time and are continuously secured by cash or
U.S. government securities equal to no less than the market
value, determined daily, of the securities loaned. The fund will
receive amounts equal to dividends or interest on the securities
loaned. It will also earn income for having made the loan because
cash collateral pursuant to these loans will be invested in
short-term money market instruments. In connection with lending
of securities the fund may pay reasonable finders, administrative
and custodial fees.
Management will limit such lending to not more than the
percentages shown below:
Fund
Limit as a %
of Total Assets
Smith Barney Pacific Basin
Portfolio
15%
Smith Barney International Equity
Portfolio
15%
Smith Barney Large Cap Value
Portfolio
20%
Alliance Growth Portfolio
25%
AIM Capital Appreciation
Portfolio
33 1/3%
Smith Barney Aggressive Growth
Portfolio
33 1/3%
Smith Barney Mid Cap Portfolio
33 1/3%
MFS Total Return Portfolio
30%
INVESCO Global Strategic Income
Portfolio
30%
Travelers Managed Income
Portfolio
33 1/3%
Putnam Diversified Income
Portfolio
25%
Smith Barney High Income
Portfolio
20%
Where voting or consent rights with respect to loaned securities
pass to the borrower, management will follow the policy of
calling the loan, in whole or in part as may be appropriate, to
permit the exercise of such voting or consent rights if the
issues involved have a material effect on the fund's investment
in the securities loaned. Apart from lending its securities and
acquiring debt securities of a type customarily purchased by
financial institutions, none of the foregoing funds will make
loans to other persons. The risks in lending portfolio
securities, as with other extensions of secured credit, consist
of possible delay in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Loans will only
be made to borrowers whom management deems to be of good standing
and will not be made unless, in the judgment of management, the
interest to be earned from such loans would justify the risk.
By lending its securities, a fund can increase its income by
continuing to receive interest on the loaned securities, by
investing the cash collateral in short-term instruments or by
obtaining yield in the form of interest paid by the borrower when
U.S. government securities are used as collateral. Each fund will
adhere to the following conditions whenever it lends its
securities: (1) the fund must receive at least 102% cash
collateral or equivalent securities from the borrower, which
amount of collateral will be maintained by daily marking to
market; (2) the borrower must increase the collateral whenever
the market value of the securities loaned rises above the level
of the collateral; (3) the fund must be able to terminate the
loan at any time; (4) the 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; (5) the fund may pay only reasonable custodian fees
in connection with the loan; and (6) voting rights on the loaned
securities may pass to the borrower, except that, if a material
event adversely affecting the investment in the loaned securities
occurs, the fund's Board of Directors must terminate the loan and
regain the fund's right to vote the securities.
When-Issued, Delayed Delivery and Forward Commitment Securities
(Smith Barney International Equity, Smith Barney Large Cap Value,
Smith Barney Large Capitalization Growth, Alliance Growth, Smith
Barney Aggressive Growth, Smith Barney Mid Cap, MFS Total Return,
INVESCO Global Strategic Income, Travelers Managed Income, Putnam
Diversified Income and Smith Barney High Income Portfolios). A
fund may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. Such transactions arise
when securities are purchased or sold by a fund with payment and
delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the fund at
the time of entering into the transaction. In when-issued or
delayed-delivery transactions, delivery of the securities occurs
beyond normal settlement periods, but no payment or delivery will
be made by a fund prior to the actual delivery or payment by the
other party to the transaction. A fund will not accrue income
with respect to a when-issued or delayed-delivery security prior
to its stated delivery date.
Purchasing such securities involves the risk of loss if the value
of the securities declines prior to settlement date. The sale of
securities for delayed delivery involves the risk that the prices
available in the market on the delivery date may be greater than
those obtained in the sale transaction. Each fund's custodian
will maintain, in a segregated account on behalf of the fund,
cash, U.S. government securities or other liquid securities
having a value equal to or greater than the fund's purchase
commitments; the custodian will likewise segregate securities
sold on a delayed basis. Placing securities rather than cash in
the segregated account may have a leveraging effect on the fund's
net asset value per share. To the extent that the fund remains
substantially fully invested in securities at the same time that
it has committed to purchase securities on a when-issued or
delayed-delivery basis, greater fluctuations in its net asset
value per share may occur than if it had set aside cash to
satisfy its purchase commitments.
Short Sales Against the Box (AIM Capital Appreciation, Van Kampen
Enterprise, INVESCO Global Strategic Income, and Smith Barney
High Income Portfolios). A fund may make short sales of
securities in order to reduce market exposure and/or to increase
its income if, at all times when a short position is open, (AIM
Capital Appreciation Portfolio will limit investments such that
nor more than 10% of the value of its nets assets will be
deposited as collateral for such sales at any time) the fund owns
an equal or greater amount of such securities or owns preferred
stock, debt or warrants convertible or exchangeable into an equal
or greater number of the shares of the securities sold short.
Short sales of this kind are referred to as short sales "against
the box." The broker-dealer that executes a short sale generally
invests the cash proceeds of the sale until they are paid to the
fund. Arrangements may be made with the broker-dealer to obtain a
portion of the interest earned by the broker on the investment of
short sale proceeds. The fund will segregate the securities
against which short sales against the box have been made in a
special account with its custodian.
DERIVATIVE CONTRACTS
Futures, Options and Currency Transactions (Smith Barney Pacific
Basin, Smith Barney International Equity, Alliance Growth, AIM
Capital Appreciation, Van Kampen Enterprise, Smith Barney Mid
Cap, MFS Total Return, INVESCO Global Strategic Income, Putnam
Diversified Income and Smith Barney High Income Portfolios). The
following information on options, futures contracts and related
options applies to the funds. In addition, new options and
futures contracts and various combinations thereof continue to be
developed and the funds may invest in any such options and
contracts as may be developed to the extent consistent with its
investment objective and regulatory and tax requirements
applicable to investment companies.
A fund may enter into contracts for the purchase or sale for
future delivery of equity or fixed-income securities, foreign
currencies or contracts based on financial indices including
interest rates or an index of U.S. government or foreign
government securities or equity or fixed-income securities
("futures contracts"), and may buy and write put and call options
to buy or sell futures contracts ("options on futures
contracts"); provided, however, that the AIM Capital Appreciation
Portfolio and Smith Barney Mid Cap Portfolio may only write
covered call options. 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. When a fund buys or sells a futures contract it
incurs a contractual obligation to receive or deliver the
underlying instrument (or a cash payment based on the difference
between the underlying instrument's closing price and the price
at which the contract was entered into) at a specified price on a
specified date. An option on a futures contract gives a fund the
right (but not the obligation) to buy or sell a futures contract
at a specified price on or before a specified date.
The funds will not enter into transactions in futures contracts
and options on futures contracts for speculation and will not
enter into such transactions other than to hedge against
potential changes in interest or currency exchange rates or the
price of a security or a securities index which might correlate
with or otherwise adversely affect either the value of the fund's
securities or the prices of securities which the fund is
considering buying at a later date. The Smith Barney Pacific
Basin, Smith Barney International Equity, MFS Total Return and
Smith Barney High Income Portfolios, however, may enter into
futures contracts and options on futures contracts for non-
hedging purposes, provided that the aggregate initial margin and
premiums on such non-hedging positions does not exceed 5% of the
liquidation value of a fund's assets.
Although futures contracts by their terms call for the delivery
or acquisition of the underlying commodities or a cash payment
based on the value of the underlying commodities, in most cases
the contractual obligation is offset before the delivery date of
the contract by buying, in the case of a contractual obligation
to sell, or selling, in the case of a contractual obligation to
buy, an identical futures contract on a commodities exchange.
Such a transaction cancels the obligation to make or take
delivery of the commodities. Since all transactions in the
futures market are made through a member of, and are offset or
fulfilled through a clearinghouse associated with, the exchange
on which the contracts are traded, a fund will incur brokerage
fees when it buys or sells futures contracts.
A fund will not (1) enter into any futures contracts or options
on futures contracts if immediately thereafter the aggregate
margin deposits on all outstanding futures contracts positions
held by the fund and premiums paid on outstanding options on
futures contracts, after taking into account unrealized profits
and losses, would exceed 5% of the market value of the total
assets of the fund or (2) enter into any futures contracts or
options on futures contracts if the aggregate amount of the
fund's commitments under outstanding futures contracts positions
and options on futures contracts written by the fund would exceed
the market value of the total assets of the fund.
Writing Covered Call Options (Smith Barney Pacific Basin, Smith
Barney International Equity, Smith Barney Large Cap Value,
Alliance Growth, AIM Capital Appreciation, Van Kampen Enterprise,
Smith Barney Mid Cap, MFS Total Return, INVESCO Global Strategic
Income Portfolio, Putnam Diversified Income and Smith Barney High
Income Portfolios). A fund may write (sell) covered call options.
A fund may write (sell) covered call options for hedging purposes
or to increase its portfolio return. Covered call options will
generally be written on securities and currencies which, in the
opinion of management, are not expected to make any major price
moves in the near future but which, over the long term, are
deemed to be attractive investments for the fund. (AIM Capital
Appreciation Portfolio will not write covered call options for
speculative purposes).
A call option gives the holder (buyer) the right to purchase a
security or currency at a specified price (the exercise price) at
any time until a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may
be assigned an exercise notice by the broker-dealer through whom
such option was sold, requiring him to deliver the underlying
security or currency against payment of the exercise price. This
obligation terminates upon the expiration of the call option, or
such earlier time at which the writer effects a closing purchase
transaction by purchasing an option identical to that previously
sold. Management believes that the writing of covered call
options is less risky than writing uncovered or "naked" options,
which the funds will not do.
Fund securities or currencies on which call options may be
written will be purchased solely on the basis of investment
considerations consistent with each fund's investment objective.
When writing a covered call option, the fund, in return for the
premium, gives up the opportunity for profit from a price
increase in the underlying security or currency above the
exercise price and retains the risk of loss should the price of
the security or currency decline. Unlike one who owns securities
or currencies not subject to an option, the fund has no control
over when it may be required to sell the underlying securities or
currencies, since the option may be exercised at any time prior
to the option's expiration. If a call option which the fund has
written expires, the fund will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the
market value of the underlying security or currency during the
option period. If the call option is exercised, the fund will
realize a gain or loss from the sale of the underlying security
or currency. The security or currency covering the call option
will be maintained in a segregated account of the fund's
custodian. The fund does not consider a security or currency
covered by a call option to be "pledged" as that term is used in
the fund's policy which limits the pledging or mortgaging of its
assets.
The premium the fund receives for writing a call option is deemed
to constitute the market value of an option. The premium the fund
will receive from writing a call option will reflect, among other
things, the current market price of the underlying security or
currency, the relationship of the exercise price to such market
price, the historical price volatility of the underlying security
or currency, and the length of the option period. In determining
whether a particular call option should be written on a
particular security or currency, management will consider the
reasonableness of the anticipated premium and the likelihood that
a liquid secondary market will exist for those options. The
premium received by the fund for writing covered call options
will be recorded as a liability in the fund's statement of assets
and liabilities. This liability will be adjusted daily to the
option's current market value. The liability will be extinguished
upon expiration of the option or delivery of the underlying
security or currency upon the exercise of the option. The
liability with respect to a listed option will also be
extinguished upon the purchase of an identical option in a
closing transaction.
Closing transactions will be effected in order to realize a
profit on an outstanding call option, to prevent an underlying
security or currency from being called, or to permit the sale of
the underlying security or currency. Furthermore, effecting a
closing transaction will permit the fund to write another call
option on the underlying security or currency with either a
different exercise price, expiration date or both. If the fund
desires to sell a particular security or currency from its
portfolio on which it has written a call option or purchases a
put option, it will seek to effect a closing transaction prior
to, or concurrently with, the sale of the security or currency.
There is no assurance that the fund will be able to effect such
closing transactions at a favorable price. If the fund cannot
enter into such a transaction, it may be required to hold a
security or currency that it might otherwise have sold, in which
case it would continue to be a market risk with respect to the
security or currency.
Each fund will pay transaction costs in connection with the
writing of options and in entering into closing purchase
contracts. Transaction costs relating to options activity are
normally higher than those applicable to purchases and sales of
portfolio securities.
Call options written by each fund will normally have expiration
dates of less than nine months from the date written. The
exercise price of the options may be below, equal to or above the
current market values of the underlying securities or currencies
at the time the options are written. From time to time, the fund
may purchase an underlying security or currency for delivery in
accordance with the exercise of an option, rather than delivering
such security or currency from its portfolio. In such cases,
additional costs will be incurred.
Each fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more,
respectively, than the premium received from the writing of the
option. Because increases in the market price of a call option
will generally reflect increases in the market price of the
underlying security or currency, any loss resulting from the
repurchase of a call option is likely to be offset in whole or in
part by appreciation of the underlying security or currency owned
by the fund.
Purchasing Call Options (Smith Barney Pacific Basin, Smith Barney
International Equity, Smith Barney Large Cap Value, Alliance
Growth, Van Kampen Enterprise, Smith Barney Mid Cap, MFS Total
Return, INVESCO Global Strategic Income, Putnam Diversified
Income and Smith Barney High Income Portfolios). A fund may
purchase call options. As the holder of a call option, a fund has
the right to purchase the underlying security or currency at the
exercise price at any time during the option period. The fund may
enter into closing sale transactions with respect to such
options, exercise them or permit them to expire. Call options may
be purchased by the fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options enables the fund to
acquire the security or currency at the exercise price of the
call option plus the premium paid. At times the net cost of
acquiring the security or currency in this manner may be less
than the cost of acquiring the security or currency directly.
This technique may also be useful to the fund in purchasing a
large block of securities that would be more difficult to acquire
by direct market purchases. So long as it holds such a call
option rather than the underlying security or currency itself,
the fund is partially protected from any unexpected decline in
the market price of the underlying security or currency and in
such event could allow the call option to expire, incurring a
loss only to the extent of the premium paid for the option.
A fund may also purchase call options on underlying securities or
currencies it owns in order to protect unrealized gains on call
options previously written by it. Call options may also be
purchased at times to avoid realizing losses that would result in
a reduction of the fund's current return. It is a policy of the
INVESCO Global Strategic Income Portfolio that aggregate premiums
paid for put and call options will not exceed 5% of the fund's
total assets at the time of purchase.
Purchasing Put Options (Smith Barney Pacific Basin, Smith Barney
International Equity, Smith Barney Large Cap Value, Alliance
Growth, Van Kampen Enterprise, Smith Barney Mid Cap, MFS Total
Return, INVESCO Global Strategic Income, Putnam Diversified
Income and Smith Barney High Income Portfolios). A fund may
purchase put options. As the holder of a put option, the fund has
the right to sell the underlying security or currency at the
exercise price at any time during the option period. The fund may
enter into closing sale transactions with respect to such
options, exercise them or permit them to expire.
Each fund may purchase a put option on an underlying security or
currency (a "protective put") owned by the fund as a hedging
technique in order to protect against an anticipated decline in
the value of the security or currency. Such hedge protection is
provided only during the life of the put option when the fund, as
the holder of the put option, is able to sell the underlying
security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's
exchange value. For example, a put option may be purchased in
order to protect unrealized appreciation of a security or
currency when management deems it desirable to continue to hold
the security or currency. The premium paid for the put option and
any transaction costs would reduce any gains otherwise available
for distribution when the security or currency is eventually
sold.
Each fund may also purchase put options at a time when the fund
does not own the underlying security or currency. By purchasing
put options on a security or currency it does not own, the fund
seeks to benefit from a decline in the market price of the
underlying security or currency. If the put option is not sold
when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than
the exercise price during the life of the put option, the fund
will lose its entire investment in the put option. In order for
the purchase of a put option to be profitable, the market price
of the underlying security or currency must decline sufficiently
below the exercise price to cover the premium and transaction
costs, unless the put option is sold in a closing sale
transaction.
The premium paid by a fund when purchasing a put option will be
recorded as an asset in the fund's statement of assets and
liabilities. This asset will be adjusted daily to the option's
current market value, which will be calculated as described in
"Determination of Net Asset Value" in the Prospectus. The asset
will be extinguished upon expiration of the option or the
delivery of the underlying security or currency upon the exercise
of the option. The asset with respect to a listed option will
also be extinguished upon the writing of an identical option in a
closing transaction.
Options on Securities and on Foreign Currencies (each fund). In
an effort to reduce fluctuations in net asset value or to
increase portfolio return, the funds may write covered put and
call options and may buy put and call options and warrants on
securities traded on U.S. and foreign securities exchanges. AIM
Capital Appreciation Portfolio and Smith Barney Mid Cap Portfolio
may write (sell) only covered call options. The purpose of such
transactions is to hedge against changes in the market value of
portfolio securities caused by fluctuating interest rates,
fluctuating currency exchange rates and changing market
conditions, and to close out or offset existing positions in such
options or futures contracts as described below. A fund may write
and buy options on the same types of securities that the fund
could buy directly and may buy options on financial indices as
described above with respect to futures contracts. There are no
specific limitations on the writing and buying of options on
securities.
A put option gives the holder the right, upon payment of a
premium, to deliver a specified amount of a security to the
writer of the option on or before a fixed date at a predetermined
price. A call option gives the holder the right, upon payment of
a premium, to call upon the writer to deliver a specified amount
of a security on or before a fixed date at a predetermined price.
In purchasing an option, the fund would be in a position to
realize a gain if, during the option period, the price of the
underlying security increased (in the case of a call) or
decreased (in the case of a put) by an amount in excess of the
premium paid and would realize a loss if the price of the
underlying security did not increase (in the case of a call) or
decrease (in the case of a put) during the period by more than
the amount of the premium. If a put or call option bought by the
fund were permitted to expire without being sold or exercised,
the fund would lose the amount of the premium.
Although they entitle the holder to buy equity securities,
warrants on and options to purchase equity securities do not
entitle the holder to dividends or voting rights with respect to
the underlying securities, nor do they represent any rights in
the assets of the issuer of those securities.
If a put or call option written by a fund were exercised, the
fund would be obligated to buy or sell the underlying security at
the exercise price. Writing a put option involves the risk of a
decrease in the market value of the underlying security, in which
case the option could be exercised and the underlying security
would then be sold by the option holder to the fund at a higher
price than its current market value. Writing a call option
involves the risk of an increase in the market value of the
underlying security, in which case the option could be exercised
and the underlying security would then be sold by the fund to the
option holder at a lower price than its current market value.
Those risks could be reduced by entering into an offsetting
transaction. The fund retains the premium received from writing a
put or call option whether or not the option is exercised.
A fund may buy put and call options and may write covered put and
call options on foreign currencies to hedge against declines in
the U.S. dollar value of foreign currency-denominated securities
held by the fund and against increases in the U.S. dollar cost of
foreign currency-denominated securities being considered for
purchase by the fund. As in the case of other options, however,
the writing of an option on a foreign currency will constitute
only a partial hedge, up to the amount of the premium received,
and the fund could be required to buy or sell foreign currencies
at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates, although,
in the event of rate movements adverse to the fund's options
position, the option may expire worthless and the fund will lose
the amount of the premium. There is no specific percentage
limitation on a fund's investments in options on foreign
currencies.
A fund may buy or write options in privately negotiated
transactions on the types of securities and indices based on the
types of securities in which the fund is permitted to invest
directly. The fund will effect such transactions only with
investment dealers and other financial institutions (such as
commercial banks or savings and loan institutions) deemed
creditworthy, and only pursuant to procedures adopted by
management for monitoring the creditworthiness of those entities.
To the extent that an option bought or written by the fund in a
negotiated transaction is illiquid, the value of an option bought
or the amount of the fund's obligations under an option written
by the fund, as the case may be, will be subject to the fund's
limitation on illiquid investments. In the case of illiquid
options, it may not be possible for the fund to effect an
offsetting transaction at a time when management believes it
would be advantageous for the fund to do so.
Options on Securities Indices (Smith Barney Pacific Basin, Smith
Barney International Equity, Alliance Growth, Van Kampen
Enterprise, Smith Barney Mid Cap, MFS Total Return, INVESCO
Global Strategic Income, Putnam Diversified Income and Smith
Barney High Income Portfolios). A fund may enter into options on
securities indices. Through the writing or purchase of index
options, a fund can achieve many of the same objectives as
through the use of options on individual securities. Options on
securities indices are similar to options on a security except
that, rather than the right to take or make delivery of a
security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the securities
index upon which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price
of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of
the option. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount. Unlike
options on securities (which require, upon exercise, delivery of
the underlying security), settlements of options on securities
indices, upon exercise thereof, are in cash, and the gain or loss
of an option on an index depends on price movements in the market
generally (or in a particular industry or segment of the market
on which the underlying index base) rather than price movements
in individual securities, as is the case with respect to options
on securities.
When the fund writes an option on a securities index, it will be
required to deposit with its custodian eligible securities equal
in value to 100% of the exercise price in the case of a put, or
the contract's value in the case of a call. In addition, where
the fund writes a call option on a securities index at a time
when the contract value exceeds the exercise price, the fund will
segregate, until the option expires or is closed out, cash or
cash equivalents equal in value to such excess.
Options on securities and index options involve risks similar to
those risks relating to transactions in financial futures
described above. Also, an option purchased by the fund may expire
worthless, in which case the fund would lose the premium paid
therefor.
Except as provided below, each fund intends to write over-the-
counter options only with primary U.S. government securities
dealers recognized by the Federal Reserve Bank of New York. Also,
the contracts which each fund has in place with such primary
dealers will provide that each fund has the absolute right to
repurchase an option it writes at any time at a price which
represents the fair market value, as determined in good faith
through negotiation between the parties, but which in no event
will exceed a price determined pursuant to a formula in the
contract. Although the specific formula may vary between
contracts with different primary dealers, the formula will
generally be based on a multiple of the premium received by a
fund for writing the option, plus the amount, if any, of the
option's intrinsic value (i.e., the amount that the option is in-
the-money). The formula may also include a factor to account for
the difference between the price of the security and the strike
price of the option if the option is written out-of-money. Each
fund will treat all or a part of the formula price as illiquid
for purposes of the SEC illiquidity ceiling. Each fund may also
write over-the-counter options with non-primary dealers,
including foreign dealers, and will treat the assets used to
cover these options as illiquid for purposes of such SEC
illiquidity ceiling.
Forward Currency Transactions (Smith Barney Pacific Basin, Smith
Barney International Equity, Alliance Growth, Smith Barney Mid
Cap, MFS Total Return, INVESCO Global Strategic Income, Putnam
Diversified Income and Smith Barney High Income Portfolios). A
fund may enter into forward foreign currency exchange contracts
("forward currency contracts") to attempt to minimize the risk to
the fund from adverse changes in the relationship between the
U.S. dollar and other currencies. A forward currency contract is
an obligation to buy or sell an amount of a specified currency
for an agreed price (which may be in U.S. dollars or a foreign
currency) at a future date which is individually negotiated
between currency traders and their customers. A fund may enter
into a forward currency contract, for example, when it enters
into a contract to buy or sell a security denominated in a
foreign currency in order to "lock in" the U.S. dollar price of
the security ("transaction hedge"). Additionally, when a fund
believes that a foreign currency in which the portfolio
securities are denominated may suffer a substantial decline
against the U.S. dollar, the fund may enter into a forward
currency contract to sell an amount of that foreign currency
approximating the value of some or all of the portfolio
securities denominated in that currency, or, when the fund
believes that the U.S. dollar may suffer a substantial decline
against a foreign currency, the fund may enter into a forward
currency contract to buy that foreign currency for a fixed U.S.
dollar amount ("position hedge"). A fund also may enter into a
forward currency contract with respect to a currency where the
fund is considering the purchase of investments denominated in
that currency but has not yet done so ("anticipatory hedge"). In
any of these circumstances the fund may, alternatively, enter
into a forward currency contract with respect to a different
foreign currency when the fund believes that the U.S. dollar
value of that currency will correlate with the U.S. dollar value
of the currency in which portfolio securities of, or being
considered for purchase by, the fund are denominated ("cross
hedge"). A fund may invest in forward currency contracts with
stated contract values of up to the value of the fund's assets.
The MFS Total Return and Putnam Diversified Income Portfolios may
also enter into forward currency contracts for non-hedging
purposes, subject to applicable law.
The matching of the increase in value of a forward contract and
the decline in the U.S. dollar equivalent value of the foreign
currency denominated asset that is the subject of the hedge
generally will not be precise. In addition, the fund may not
always be able to enter into foreign currency forward contracts
at attractive prices and this will limit the fund's ability to
use such contract to hedge or cross-hedge its assets. Also, with
regard to the fund's use of cross-hedges, there can be no
assurance that historical correlations between the movement of
certain foreign currencies relative to the U.S. dollar will
continue. Thus, at any time poor correlation may exist between
movements in the exchange rates of the foreign currencies
underlying the fund's cross-hedges and the movements in the
exchange rates of the foreign currencies in which the fund's
assets that are the subject of such cross-hedges are denominated.
Forward contracts are traded in an interbank market conducted
directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no
deposit requirement and is consummated without payment of any
commission. A fund, however, may enter into forward contracts
with deposit requirements or commissions.
A put option on currency gives the fund, as purchaser, the right
(but not the obligation) to sell a specified amount of currency
at the exercise price until the expiration of the option. A call
option gives the fund, as purchaser, the right (but not the
obligation) to purchase a specified amount of currency at the
exercise price until its expiration. The fund might purchase a
currency put option, for example, to protect itself during the
contract period against a decline in the value of a currency in
which it holds or anticipates holding securities. If the
currency's value should decline, the loss in currency value
should be offset, in whole or in part, by an increase in the
value of the put. If the value of the currency instead should
rise, any gain to the fund would be reduced by the premium it had
paid for the put option. A currency call option might be
purchased, for example, in anticipation of, or to protect
against, a rise in the value of a currency in which the fund
anticipates purchasing securities.
A fund's ability to establish and close out positions in foreign
currency options is subject to the existence of a liquid market.
There can be no assurance that a liquid market will exist for a
particular option at any specific time. In addition, options on
foreign currencies are affected by all of those factors that
influence foreign exchange rates and investments generally.
A position in an exchange-listed option may be closed out only on
an exchange that provides a secondary market for identical
options. Exchange markets for options on foreign currencies exist
but are relatively new, and the ability to establish and close
out positions on the exchanges is subject to maintenance of a
liquid secondary market. Closing transactions may be effected
with respect to options traded in the over-the-counter ("OTC")
markets (currently the primary markets for options on foreign
currencies) only by negotiating directly with the other party to
the option contract or in a secondary market for the option if
such market exists. Although the fund intends to purchase only
those options for which there appears to be an active secondary
market, there is no assurance that a liquid secondary market will
exist for any particular option at any specific time. In such
event, it may not be possible to effect closing transactions with
respect to certain options, with the result that the fund would
have to exercise those options which it has purchased in order to
realize any profit. Any OTC options acquired by each fund and
assets used as "cover" for OTC options written by the fund would
be considered illiquid and subject to each fund's limitation on
investing in such securities.
A fund also may enter into forward contracts to buy or sell at a
later date instruments in which the fund may invest directly or
on financial indices based on those instruments. The market for
those types of forward contracts is developing and it is not
currently possible to identify instruments on which forward
contracts might be created in the future.
A fund may also enter into currency swaps where each party
exchanges one currency for another on a particular date and
agrees to reverse the exchange on a later date at a specific
exchange rate.
Interest Rate, Securities Index, Financial Futures and Currency
Futures Contracts (Smith Barney Pacific Basin, Smith Barney
International Equity, Alliance Growth, Smith Barney Mid Cap, MFS
Total Return, INVESCO Global Strategic Income, Putnam Diversified
Income Portfolio and Smith Barney High Income Portfolios). A fund
may enter into interest rate, securities index, financial futures
and currency futures contracts ("Futures" or "Futures
Contracts"). AIM Capital Appreciation Portfolio and Smith Barney
Mid Cap Portfolio may enter into stock index futures contracts
and Van Kampen Enterprise Portfolio may enter in stock index and
interest rate futures contracts. A fund may enter into Futures
Contracts as a hedge against changes in prevailing levels of
interest rates or currency exchange rates in order to establish
more definitely the effective return on securities or currencies
held or committed to be acquired by the fund. A fund's hedging
may include holding Futures as an offset against anticipated
changes in interest or currency exchange rates. A fund may also
enter into Futures Contracts based on financial indices including
any index of U.S. government securities, foreign government
securities or corporate debt securities.
A Futures Contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific
financial instrument or currency for a specified price at a
designated date, time and place. The purchaser of a Futures
Contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the
contract ("current contract value") and the price at which the
contract was originally struck. No physical delivery of the debt
securities underlying the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin
deposits must be maintained at all times that the Futures
Contract is outstanding.
The principal interest rate and currency Futures exchanges in the
United States are the Board of Trade of the City of Chicago and
the Chicago Mercantile Exchange. Futures exchanges and trading
are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission. Futures are traded in London at the
London International Financial Futures Exchange.
Although techniques other than sales and purchases of Futures
Contracts could be used to reduce the fund's exposure to interest
rate and currency exchange rate fluctuations, the fund may be
able to hedge its exposure more effectively and at a lower cost
through using Futures Contracts.
Although Futures Contracts typically require future delivery of
and payment for financial instruments or currencies, Futures
Contracts are usually closed out before the delivery date.
Closing out an open Futures Contract sale or purchase is effected
by entering into an offsetting Futures Contract purchase or sale,
respectively, for the same aggregate amount of the identical
financial instrument or currency and the same delivery date. If
the offsetting purchase price is less than the original sale
price, the fund realizes a gain; if it is more, the fund realizes
a loss. Conversely, if the offsetting sale price is more than the
original purchase price, the fund realizes a gain; if it is less,
the fund realizes a loss. The transaction costs must also be
included in these calculations. There can be no assurance,
however, that the fund will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a
particular time. If the fund is not able to enter into an
offsetting transaction, the fund will continue to be required to
maintain the margin deposits of the underlying financial
instrument or currency on the relevant delivery date.
As an example of an offsetting transaction, the contractual
obligations arising from the sale of one Futures Contract of
September Treasury Bills on an exchange may be fulfilled at any
time before delivery under the Futures Contract is required
(i.e., on a specific date in September, the "delivery month") by
the purchase of another Futures Contract of September Treasury
Bills on the same exchange. In such instance the difference
between the price at which the Futures Contract was sold and the
price paid for the offsetting purchase, after allowance for
transaction costs, represents the profit or loss to the fund.
Persons who trade in Futures Contracts may be broadly classified
as "hedgers" and "speculators." Hedgers, whose business activity
involves investment or other commitment in securities or other
obligations, use the Futures markets to offset unfavorable
changes in value that may occur because of fluctuations in the
value of the securities and obligations held or committed to be
acquired by them or fluctuations in the value of the currency in
which the securities or obligations are denominated. Debtors and
other obligors may also hedge the interest cost of their
obligations. The speculator, like the hedger, generally expects
neither to deliver nor to receive the financial instrument
underlying the Futures Contract, but, unlike the hedger, hopes to
profit from fluctuations in prevailing interest rates or currency
exchange rates.
Each fund's Futures transactions will be entered into for
traditional hedging purposes; that is, Futures Contracts will be
sold to protect against a decline in the price of securities or
currencies that the fund owns, or Futures Contracts will be
purchased to protect a fund against an increase in the price of
securities or currencies it has committed to purchase or expects
to purchase. Smith Barney International Equity, Smith Barney
Pacific Basin, Smith Barney Mid Cap, MFS Total Return and Smith
Barney High Income Portfolios may each also enter into Futures
transactions for non-hedging purposes, provided that the
aggregate initial margin and premiums on such non-hedging
positions does not exceed 5% of the liquidation value of a fund's
assets.
"Margin" with respect to Futures Contracts is the amount of funds
that must be deposited by the fund with a broker in order to
initiate Futures trading and to maintain the fund's open
positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended
to assure the fund's performance of the Futures Contract. The
margin required for a particular Futures Contract is set by the
exchange on which the Futures Contract is traded, and may be
significantly modified from time to time by the exchange during
the term of the Futures Contract. Futures Contracts are
customarily purchased and sold on margins, which may be 5% or
less of the value of the Futures Contract being traded.
If the price of an open Futures Contract changes (by increase in
the case of a sale or by decrease in the case of a purchase) so
that the loss on the Futures Contract reaches a point at which
the margin on deposit does not satisfy margin requirements, the
broker will require an increase in the margin deposit ("variation
margin"). If, however, the value of a position increases because
of favorable price changes in the Futures Contract so that the
margin deposit exceeds the required margin, it is anticipated
that the broker will pay the excess to the fund. In computing
daily net asset values, the fund will mark to market the current
value of its open Futures Contracts. Each fund expects to earn
interest income on its margin deposits.
Options on Futures Contracts (Smith Barney Pacific Basin, Smith
Barney International Equity, Alliance Growth, Van Kampen
Enterprise, Smith Barney Mid Cap, MFS Total Return, INVESCO
Global Strategic Income, Putnam Diversified Income and Smith
Barney High Income Portfolios). A fund may enter into options on
Futures Contracts. Options on Futures Contracts are similar to
options on securities or currencies except that options on
Futures Contracts give the purchaser the right, in return for the
premium paid, to assume a position in a Futures Contract (a long
position if the option is a call and a short position if the
option is a put), rather than to purchase or sell the Futures
Contract, at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the delivery
of the Futures position by the writer of the option to the holder
of the option will be accompanied by delivery of the accumulated
balance in the writer's Futures margin account which represents
the amount by which the market price of the Futures Contract, at
exercise, exceeds (in the case of a call) or is less than (in the
case of a put) the exercise price of the option on the Futures
Contract. If an option is exercised on the last trading day prior
to the expiration date of the option, the settlement will be made
entirely in cash equal to the difference between the exercise
price of the option and the closing level of the securities or
currencies upon which the Futures Contracts are based on the
expiration date. Purchasers of options who fail to exercise their
options prior to the exercise date suffer a loss of the premium
paid.
As an alternative to purchasing call and put options on Futures,
each fund may purchase call and put options on the underlying
securities or currencies themselves (see "Purchasing Put Options"
and "Purchasing Call Options" above). Such options would be used
in a manner identical to the use of options on Futures Contracts.
To reduce or eliminate the leverage then employed by the fund or
to reduce or eliminate the hedge position then currently held by
the fund, the fund may seek to close out an option position by
selling an option covering the same securities or currency and
having the same exercise price and expiration date. The ability
to establish and close out positions on options on Futures
Contracts is subject to the existence of a liquid market. It is
not certain that this market will exist at any specific time.
In order to assure that the funds will not be deemed to be
"commodity pools" for purposes of the Commodity Exchange Act,
regulations of the Commodity Futures Trading Commission ("CFTC")
require that each fund enter into transactions in Futures
Contracts and options on Futures Contracts only (i) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for
non-hedging purposes, provided that the aggregate initial margin
and premiums on such non-hedging positions does not exceed 5% of
the liquidation value of the fund's assets.
Yield Curve Options (MFS Total Return Portfolio). The fund may
enter into options on the "spread," or yield differential,
between two fixed income securities, in transactions referred to
as "yield curve" options. In contrast to other types of options,
a yield curve option is based on the difference between the
yields of designated securities, rather than the prices of the
individual securities, and is settled through cash payments.
Accordingly, a yield curve option is profitable to the holder if
this differential widens (in the case of a call) or narrows (in
the case of a put), regardless of whether the yields of the
underlying securities increase or decrease.
Yield curve options may be used for the same purposes as other
options on securities. Specifically, the fund may purchase or
write such options for hedging purposes. For example, the fund
may purchase a call option on the yield spread between two
securities, if it owns one of the securities and anticipates
purchasing the other security and wants to hedge against an
adverse change in the yield spread between the two securities.
The fund may also purchase or write yield curve options for other
than hedging purposes (i.e., in an effort to increase its current
income) if, in the judgment of management, the fund will be able
to profit from movements in the spread between the yields of the
underlying securities. The trading of yield curve options is
subject to all of the risks associated with the trading of other
types of options. In addition, however, such options present risk
of loss even if the yield of one of the underlying securities
remains constant, if the spread moves in a direction or to an
extent which was not anticipated. Yield curve options written by
the fund will be "covered". A call (or put) option is covered if
the fund holds another call (or put) option on the spread between
the same two securities and maintains in a segregated account
with its custodian cash or cash equivalents sufficient to cover
the fund's net liability under the two options. Therefore, the
fund's liability for such a covered option is generally limited
to the difference between the amount of the fund's liability
under the option written by the fund less the value of the option
held by the fund. Yield curve options may also be covered in such
other manner as may be in accordance with the requirements of the
counterparty with which the option is traded and applicable laws
and regulations. Yield curve options are traded over-the-counter
and because they have been only recently introduced, established
trading markets for these securities have not yet developed.
Swaps and Swap-Related Products (Smith Barney Pacific Basin,
Smith Barney International Equity, MFS Total Return, INVESCO
Global Strategic Income and Smith Barney High Income Portfolios).
As one way of managing its exposure to different types of
investments, a fund may enter into interest rate swaps, currency
swaps and other types of available swap agreements, such as caps,
collars and floors. Swaps involve the exchange by a fund with
another party of cash payments based upon different interest rate
indexes, currencies, and other prices or rates, such as the value
of mortgage prepayment rates. For example, in the typical
interest rate swap, a fund might exchange a sequence of cash
payments based on a floating rate index for cash payments based
on a fixed rate. Payments made by both parties to a swap
transaction are based on a principal amount determined by the
parties.
A fund may also purchase and sell caps, floors and collars. In a
typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment
of a fee by the counterparty. For example, the purchase of an
interest rate cap entitles the buyer, to the extent that a
specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount
from the counterparty selling such interest rate cap. The sale of
an interest rate floor obligates the seller to make payments to
the extent that a specified interest rate falls below an agreed-
upon level. A collar arrangement combines elements of buying a
cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure
from one type of investment to another. For example, if a fund
agreed to exchange payments in dollars for payments in foreign
currency, in each case based on a fixed rate, the swap agreement
would tend to decrease the fund's exposure to U.S. interest rates
and increase its exposure to foreign currency and interest rates.
Caps and floors have an effect similar to buying or writing
options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a fund's
investments and its share price and yield.
Swap agreements are sophisticated hedging instruments that
typically involve a small investment of cash relative to the
magnitude of risks assumed. As a result, swaps can be highly
volatile and may have a considerable impact on a fund's
performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if
the counterparty's creditworthiness deteriorates. A fund may also
suffer losses if it is unable to terminate outstanding swap
agreements or reduce its exposure through offsetting
transactions. Each fund expects to enter into these transactions
primarily to preserve a return or spread on a particular
investment or portion of its portfolio or to protect against any
increase in the price of securities the fund anticipates
purchasing at a later date. Each fund intends to use these
transactions as a hedge and not as a speculative investment. Swap
agreements may be individually negotiated and structured to
include exposure to a variety of different types of investments
or market factors. Depending on their structure, swap agreements
may increase or decrease a fund's exposure to long or short-term
interest rates (in the U.S. or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors
such as securities prices or inflation rates. Swap agreements can
take many different forms and are known by a variety of names. A
fund is not limited to any particular form or variety of swap
agreement if management determines it is consistent with the
fund's investment objective and policies.
A fund may enter into swaps, caps and floors on either an asset-
based or liability-based basis, depending on whether it is
hedging its assets or its liabilities, and will usually enter
into interest rate swaps on a net basis, i.e., the two payment
streams are netted with the fund receiving or paying, as the case
may be, only the net amount of the two payments. Inasmuch as
these hedging transactions are entered into for good faith
hedging purposes, management and the funds believe such
obligations do not constitute senior securities and, accordingly
will not treat them as being subject to its borrowing
restrictions. The net amount of the excess, if any, of a fund's
obligations over its entitlements with respect to each interest
rate swap will be accrued on a daily basis and an amount of cash
or liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated
account by its custodian. If a fund enters into a swap agreement
on other than a net basis, it will maintain cash or liquid assets
with a value equal to the full amount of such fund's accrued
obligations under the agreement. The funds will not enter into
any swap, cap, floor or collar transaction unless the unsecured
senior debt or the claims-paying ability of the other party
thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering
into such transaction. The most significant factor in the
performance of swaps, caps, floors and collars is the change in
specific interest rate, currency or other factor that determines
the amount of payments to be made under the arrangement. If
management is incorrect in its forecasts of such factors, the
investment performance of the fund would be less than what it
would have been if these investment techniques had not been used.
If a swap agreement calls for payments by the fund the fund must
be prepared to make such payments when due. In addition, if the
counterparty's creditworthiness declined, the value of the swap
agreement would be likely to decline, potentially resulting in
losses. If the counterparty defaults, the fund's risk of loss
consists of the net amount of payments that the fund is
contractually entitled to receive. The fund anticipates that it
will be able to eliminate or reduce its exposure under these
arrangements by assignment or other disposition or by entering
into an offsetting agreement with the same or another
counterparty. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms
acting both as principals and as agents utilizing swap
documentation. As a result, the swap market has become relatively
liquid. Caps and floors are more recent innovations for which
standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps.
RISK FACTORS
General. Investors should realize that risk of loss is inherent
in the ownership of any securities and that each fund's net asset
value will fluctuate, reflecting the fluctuations in the market
value of its portfolio positions (other than Smith Barney Money
Market Portfolio). The following sections describe some of the
important risk factors involved in connection with the types of
investments or investment practices indicated. See "Investment
Objectives and Management Policies" and "Investment Practices"
for a description of the permissible investments and investment
practices of each fund.
Fixed Income Securities. Investments in fixed income securities
may subject the funds to risks, including the following.
Interest Rate Risk. When interest rates decline, the
market value of fixed income securities tends to increase.
Conversely, when interest rates increase, the market value of
fixed income securities tends to decline. The volatility of a
security's market value will differ depending upon the security's
duration, the issuer and the type of instrument.
Default Risk/Credit Risk. Investments in fixed income
securities are subject to the risk that the issuer of the
security could default on its obligations, causing a fund to
sustain losses on such investments. A default could impact both
interest and principal payments.
Call Risk and Extension Risk. Fixed income securities may
be subject to both call risk and extension risk. Call risk
exists when the issuer may exercise its right to pay principal on
an obligation earlier than scheduled, which would cause cash
flows to be returned earlier than expected. This typically
results when interest rates have declined and a fund will suffer
from having to reinvest in lower yielding securities. Extension
risk exists when the issuer may exercise its right to pay
principal on an obligation later than scheduled, which would
cause cash flows to be returned later than expected. This
typically results when interest rates have increased, and a fund
will suffer from the inability to invest in higher yield
securities.
Foreign Securities (in general). Investments in foreign
securities involve risks that are different in some respects from
investments in securities of U.S. issuers, such as the risk of
fluctuations in the value of the currencies in which they are
denominated, the risk of adverse political, social, economic and
diplomatic developments, the possible imposition of exchange
controls or other foreign governmental laws or restrictions and,
with respect to certain countries, the possibility of
expropriation of assets, nationalization or confiscatory taxation
or limitations on the removal of funds or other assets of the
funds. Securities of some foreign companies and banks are less
liquid and more volatile than securities of comparable domestic
companies and banks. Non-U.S. securities markets, while growing
in volume have, for the most part, substantially less volume than
U.S. markets, and there is generally less government supervision
and regulation of exchanges, brokers and issuers than there is in
the U.S. Dividend and interest income (and, in some cases,
capital gains) from non-U.S. securities will generally be subject
to withholding or other taxes by the country in which the issuer
is located and may not be recoverable by the fund or the
investors. There also may be less publicly available information
about foreign issuers than domestic issuers, and foreign issuers
generally are not subject to the uniform accounting, auditing and
financial reporting standards, practices and requirements
applicable to domestic issuers. Delays may be encountered in
settling securities transactions in certain foreign markets, and
the funds will incur costs in converting foreign currencies into
U.S. dollars. Investments in foreign securities also may result
in higher expenses due to the cost of converting foreign currency
to U.S. dollars, the payment of fixed brokerage commission on
foreign exchanges, the expense of maintaining securities with
foreign custodians, the imposition of transfer taxes or
transaction charges associated with foreign exchanges or foreign
withholding taxes. There is also a risk of the adoption of
government regulations that might adversely affect the payment of
principal and interest on securities held by a fund. In addition,
a fund may encounter greater difficulties in invoking legal
processes abroad than would be the case in the U.S. Finally,
changes in foreign currency exchange rates will, to the extent a
fund does not adequately hedge against such fluctuations, affect
the value of securities in its portfolio and the unrealized
appreciation or depreciation of investments so far as U.S.
investors are concerned.
Emerging Markets Securities. Because of the special risks
associated with investing in emerging markets, an investment in a
fund that invests in emerging markets may be considered
speculative. Investors are strongly advised to consider carefully
the special risks involved in emerging markets, which are in
addition to the usual risks of investing in developed foreign
markets around the world.
The risks of investing in securities in emerging countries
include: (i) less social, political and economic stability; (ii)
the small current size of the markets for such securities and the
currently low or nonexistent volume of trading, which result in a
lack of liquidity and in greater price volatility; (iii) certain
national policies which may restrict the fund's investment
opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; (iv) foreign
taxation; and (v) the absence of developed structures governing
private or foreign investment or allowing for judicial redress
for injury to private property.
Investors should note that upon the accession to power of
authoritarian regimes, the governments of a number of emerging
market countries previously expropriated large quantities of real
and personal property similar to the property which maybe
represented by the securities purchased by the funds. The claims
of property owners against those governments were never finally
settled. There can be no assurance that any property represented
by securities purchased by funds will not also be expropriated,
nationalized, or otherwise confiscated. If such confiscation were
to occur, the funds could lose a substantial portion of their
investments in such countries. Each fund's investments would
similarly be adversely affected by exchange control regulation in
any of those countries.
Certain countries in which the funds may invest may have vocal
minorities that advocate radical religious or revolutionary
philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for wide-
spread destruction or confiscation of property owned by
individuals and entities foreign to such country and could cause
the loss of the funds' investment in those countries.
Settlement mechanisms in emerging market securities may be less
efficient and reliable than in more developed markets. In such
emerging securities markets there may be share registration and
delivery delays and failures.
Investing in emerging markets involves risks relating to
potential political and economic instability within such markets
and the risks of expropriation, nationalization, confiscation of
assets and property, the imposition of restrictions on foreign
investments and the repatriation of capital invested. In Eastern
Europe, for example, upon the accession to power of Communist
regimes in the past, the governments of a number of Eastern
European countries expropriated a large amount of property. The
claims of many property owners against those governments were
never finally settled. There can be no assurance that any
investments that a Portfolio might make in an emerging market
would not be expropriated, nationalized or otherwise confiscated
at some time in the future. In the event of such expropriation,
nationalization or other confiscation in any emerging market,
each fund could lose its entire investment in that market. Many
emerging market countries have also experienced substantial, and
in some periods extremely high, rates of inflation for many
years. Inflation and rapid fluctuations in inflation rates have
had and may continue to have negative effects on the economies
and securities of certain emerging market countries.
Economies in emerging markets generally are dependent heavily
upon international trade and, accordingly, have been and may
continue to be affected adversely by trade barriers, exchange
controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been
and may continue to be affected adversely by economic conditions
in the countries in which they trade.
The securities markets of emerging countries are substantially
smaller, less developed, less liquid and more volatile than the
securities markets of the United States and other more developed
countries. Disclosure and regulatory standards in many respects
are less stringent than in the United States and other major
markets. There also may be a lower level of monitoring and
regulation of emerging securities markets and the activities of
investors in such markets, and enforcement of existing
regulations has been extremely limited.
In addition, brokerage commissions, custodial services and other
costs relating to investment in foreign markets generally are
more expensive than in the United States, particularly with
respect to emerging markets. Such markets have different
settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace
with the volume of securities transactions, making it difficult
to conduct such transactions. The inability of a fund to make
intended securities purchases due to settlement problems could
cause it to miss attractive investment opportunities. Inability
to dispose of a portfolio security caused by settlement problems
could result either in losses to a fund due to subsequent
declines in value of the portfolio security or, if the fund has
entered into a contract to sell the security, could result in
possible liability to the purchaser.
The risk also exists that an emergency situation may arise in one
or more emerging markets as a result of which trading of
securities may cease or may be substantially curtailed and prices
for the portfolio securities in such markets may not be readily
available. Section 22(e) of the 1940 Act permits a registered
investment company to suspend redemption of its shares for any
period during which an emergency exists, as determined by the
SEC. Accordingly, if a fund believes that appropriate
circumstances warrant, it will promptly apply to the SEC for a
determination that an emergency exists within the meaning of
Section 22(a) of the 1940 Act. During the period commencing from
a fund's identification of such conditions until the date of SEC
action, the portfolio securities in the affected markets will be
valued at fair value as determined in good faith by or under the
direction of the Board of Directors.
Economic and Monetary Union (EMU). EMU began on January 1, 1999
when 11 European countries adopted a single currency -- the Euro.
EMU may create new economic opportunities for investors, such as
lower interest rates, easier cross-border mergers, acquisitions
and similar restructurings, more efficient distribution and
product packaging and greater competition. Budgetary decisions
remain in the hands of each participating country, but are
subject to each country's commitment to avoid "excessive
deficits" and other more specific budgetary criteria. A European
Central Bank is responsible for setting the official interest
rate within the Euro zone. EMU and the introduction of the Euro,
however, present unique risks and uncertainties for investors in
EMU-participating countries, including: (i) monetary and
economic union on this scale has never before been attempted;
(ii) there is uncertainty whether participating countries will
remain committed to EMU in the face of changing economic
conditions; (iii) instability within EMU may increase the
volatility of European markets and may adversely affect the
prices of securities of European issuers in the funds'
portfolios; (iv) there is uncertainty concerning the fluctuation
of the Euro relative to non-Euro currencies during the transition
period from January 1, 1999 to December 31, 2000, and beyond; and
(v) there is no assurance that interest rate, tax and labor
regimes of EMU-participating countries will converge over time.
These and other factors may cause market disruption and could
adversely affect European securities and currencies held by the
funds.
Sovereign Debt. Investments in the sovereign debt of foreign
countries involve special risks. The issuer of the debt or the
governmental authorities that control the repayment of the debt
may be unable or unwilling to repay principal or interest when
due in accordance with the terms of such debt. Periods of
economic uncertainty may result in the volatility of market
prices of sovereign debt obligations, and in turn a fund's net
asset value, to a greater extent than the volatility inherent in
domestic fixed income securities.
A sovereign debtor's willingness or ability to repay principal
and pay interest in a timely manner may be affected by, among
other factors, its cash flow situation, the extent of its foreign
reserves, the availability of sufficient foreign exchange on the
date a payment is due, the relative size of the debt service
burden to the economy as a whole, the sovereign debtor's policy
toward principal international lenders and the political
constraints to which a sovereign debtor may be subject. Emerging
market governments could default on their sovereign debt. Such
sovereign debtors also may be dependent on expected disbursements
from foreign governments, multilateral agencies and other
entities abroad to reduce principal and interest arrearages on
their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned
on a sovereign debtor's implementation of economic reforms and/or
economic performance and the timely service of such debtor's
obligations. Failure to implement such reforms, achieve such
levels of economic performance or repay principal or interest
when due, may result in the cancellation of such third parties'
commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely
service its debts.
The occurrence of political, social or diplomatic changes in one
or more of the countries issuing sovereign debt could adversely
affect a fund's investments. Emerging markets are faced with
social and political issues and some of them have experienced
high rates of inflation in recent years and have extensive
internal debt. Among other effects, high inflation and internal
debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance
governmental programs, and may have other adverse social,
political and economic consequences. Political changes or a
deterioration of a country's domestic economy or balance of trade
may affect the willingness of countries to service their
sovereign debt. Although management intends to manage each fund
in a manner that will minimize the exposure to such risks, there
can be no assurance that adverse political changes will not cause
a fund to suffer a loss of interest or principal on any of its
holdings.
In recent years, some of the emerging market countries have
encountered difficulties in servicing their sovereign debt
obligations. Some of these countries have withheld payments of
interest and/or principal of sovereign debt. These difficulties
have also led to agreements to restructure external debt
obligations in particular, commercial bank loans, typically by
rescheduling principal payments, reducing interest rates and
extending new credits to finance interest payments on existing
debt. In the future, holders of emerging market sovereign debt
securities may be requested to participate in similar
rescheduling of such debt. Certain emerging market countries are
among the largest debtors to commercial banks and foreign
governments. Currently, Brazil, Russia and Mexico are among the
largest debtors among developing countries. At times certain
emerging market countries have declared moratoria on the payment
of principal and interest on external debt; such a moratorium is
currently in effect in certain emerging market countries. There
is no bankruptcy proceeding by which a creditor may collect in
whole or in part sovereign debt on which an emerging market
government has defaulted.
The ability of emerging market governments to make timely
payments on their sovereign debt securities is likely to be
influenced strongly by a country's balance of trade and its
access to trade and other international credits. A country whose
exports are concentrated in a few commodities could be vulnerable
to a decline in the international prices of one or more of such
commodities. Increased protectionism on the part of a country's
trading partners could also adversely affect its exports. Such
events could diminish a country's trade account surplus, if any.
To the extent that a country receives payments for its exports in
currencies other than hard currencies, its ability to make hard
currency payments could be affected.
As noted above, sovereign debt obligations issued by emerging
market governments generally are deemed to be the equivalent in
terms of quality to securities rated below investment grade by
Moody's and S&P. Such securities are regarded as predominantly
speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the
obligations and involve major risk exposure to adverse
conditions. Some of such securities, with respect to which the
issuer currently may not be paying interest or may be in payment
default, may be comparable to securities rated D by S&P or C by
Moody's. The funds may have difficulty disposing of and valuing
certain sovereign debt obligations because there may be a limited
trading market for such securities. Because there is no liquid
secondary market for many of these securities, each fund
anticipates that such securities could be sold only to a limited
number of dealers or institutional investors.
Currency Risks. The funds that invest substantially in securities
denominated in currencies other than the U.S. dollar, or that
hold foreign currencies, will be affected favorably or
unfavorably by exchange control regulations or changes in the
exchange rates between such currencies and the U.S. dollar.
Changes in currency exchange rates will influence the value of
each fund's shares and also may affect the value of dividends and
interest earned by the funds and gains and losses realized by the
funds. Currencies generally are evaluated on the basis of
fundamental economic criteria (e.g., relative inflation and
interest rate levels and trends, growth rate forecasts, balance
of payments status and economic policies) as well as technical
and political data. The exchange rates between the U.S. dollar
and other currencies are determined by supply and demand in the
currency exchange markets, the international balance of payments,
governmental intervention, speculation and other economic and
political conditions. If the currency in which a security is
denominated appreciates against the U.S. dollar, the dollar value
of the security will increase. Conversely, a decline in the
exchange rate of the currency would adversely affect the value of
the security expressed in U.S. dollars.
Real Estate Investment Trusts. The values of securities issued by
REITs are affected by tax and regulatory requirements and by
perceptions of management skill. They are also subject to heavy
cash flow dependency, defaults by borrowers or tenants, self-
liquidation, the possibility of failing to qualify for the
ability to avoid tax by satisfying distribution requirements
under the Internal Revenue Code of 1986, as amended, and failing
to maintain exemption from the 1940 Act. Also, the fund will
indirectly bear its proportionate share of expenses incurred by
REITs in which the fund invests. REITs are also sensitive to
factors such as changes in real estate values and property taxes,
interest rates, overbuilding and creditworthiness of the issuer.
Zero Coupon, Pay-In-Kind and Delayed Interest Securities. The
values of these securities may be highly volatile as interest
rates rise or fall. In addition, the fund's investments in zero
coupon, pay-in-kind and delayed interest securities will result
in special tax consequences. Although zero coupon securities do
not make interest payments, for tax purposes a portion of the
difference between a zero coupon security's maturity value and
its purchase price is taxable income of the fund each year. The
value of zero-coupon bonds is subject to greater fluctuation in
market value in response to changes in market interest rates than
bonds of comparable maturity which pay interest currently. Both
zero-coupon and payment-in-kind bonds allow an issuer to avoid
the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than
bonds that pay interest currently. Even though such bonds do not
pay current interest in cash, the fund is nonetheless required to
accrue interest income on such investments and to distribute such
amounts at least annually to shareholders. Accordingly, for a
fund to continue to qualify for tax treatment as a regulated
investment company and to avoid income and possibly excise tax,
the fund may be required to distribute as a dividend an amount
that is greater than the total amount of cash it actually
receives. These distributions must be made from the fund's cash
assets or, if necessary, from the proceeds of sales of portfolio
securities. The fund will not be able to purchase additional
income-producing securities with cash used to make such
distributions and its current income ultimately may be reduced as
a result.
Ratings Categories. General. In general, the ratings of
nationally recognized statistical rating organizations ("NRSROs")
represent the opinions of these organizations as to the quality
of securities that they rate. Such ratings, however, are relative
and subjective, and are not absolute standards of quality and do
not evaluate the market value risk of the securities. It is
possible that an NRSRO might not change its rating of a
particular issue to reflect subsequent events. These ratings may
be used by a fund as initial criteria for the selection of
portfolio securities, but each fund also will rely upon the
independent advice of the manager or the subadviser, as the case
may be, to evaluate potential investments. Management will take
various factors into consideration in evaluating the
creditworthiness of an issue, whether rated or non-rated. These
factors may include, among others, the issuer's financial
resources, its sensitivity to economic conditions and trends, the
operating history of and the community support for the facility
financed by the issue, the capabilities of the issuer's
management, and regulatory matters.
Investment Grade Categories. Fixed Income securities rated in the
highest four ratings categories for long-term debt by an NRSRO
are considered "investment grade." Obligations rated in the
lowest of the top four ratings (e.g. Baa by Moody's or BBB by
S&P) are considered to have some speculative characteristics.
Unrated securities will be considered to be investment grade if
deemed by the manager or subadviser to be comparable in quality
to instruments so rated, or if other outstanding obligations of
the issuers of such securities are rated Baa/BBB or better. For a
description of the ratings, see Appendix A.
Lower-Rated and Non-Rated Securities. The funds that may invest
in debt securities rated below investment grade are subject to
special risks, including a greater risk of loss of principal and
non-payment of interest. An investor should carefully consider
the following factors before investing in these funds.
Generally, lower-quality securities offer a higher return
potential than investment grade securities but involve greater
volatility of price and greater risk of loss of income and
principal, including the possibility of default or bankruptcy of
the issuers of such securities. Lower-quality securities and
comparable non-rated securities will likely have large
uncertainties or major risk exposure to adverse conditions and
are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with
the terms of the obligation. The occurrence of adverse conditions
and uncertainties would likely reduce the value of securities
held by a fund, with a commensurate effect on the value of the
fund's shares.
The markets in which lower-quality securities or comparable non-
rated securities are traded generally are more limited than those
in which higher-quality securities are traded. The existence of
limited markets for these securities may restrict the
availability of securities for a fund to purchase and also may
restrict the ability of a fund to obtain accurate market
quotations for purposes of valuing securities and calculating net
asset value or to sell securities at their fair value. The public
market for lower-quality securities and comparable non-rated
securities is relatively new and has not fully weathered a major
economic recession. Any such economic downturn could adversely
affect the ability of issuers of lower-quality securities to
repay principal and pay interest thereon.
While the market values of lower-quality securities and
comparable non-rated securities tend to react less to
fluctuations in interest rate levels than do those of investment
grade securities, the market values of certain of these
securities also tend to be more sensitive to individual corporate
developments and changes in economic conditions than higher-
quality securities. In addition, lower-quality securities and
comparable non-rated securities generally present a higher degree
of credit risk. Issuers of lower-quality securities and
comparable non-rated securities are often highly leveraged and
may not have more traditional methods of financing available to
them so that their ability to service their debt obligations
during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default
by such issuers is significantly greater because lower-quality
securities and comparable non-rated securities generally are
unsecured and frequently are subordinated to the prior payment of
senior indebtedness. A Portfolio may incur additional expenses to
the extent that it is required to seek recovery upon a default in
the payment of principal or interest on its portfolio holdings.
Securities of Unseasoned Issuers. The issuers of these securities
may lack a significant operating history and be dependent on
products or services without an established market share.
Borrowing and Leverage. Leverage creates an opportunity for
increased returns to shareholders of a fund but, at the same
time, creates special risk considerations. For example, leverage
may exaggerate changes in the net asset value of a fund's shares
and in the fund's yield. Although the principal or stated value
of such borrowings will be fixed, the portfolio assets may change
in value during the time the borrowing is outstanding. By
leveraging the fund, changes in net asset values, higher or
lower, may be greater in degree than if leverage was not
employed. Leverage will create interest or dividend expenses for
a fund which can exceed the income from the assets retained. To
the extent the income or other gain derived from securities
purchased with borrowed funds exceeds the interest and other
charges the fund will have to pay in respect thereof, the fund's
net income or other gain will be greater than if leverage had not
been used. Conversely, if the income or other gain from the
incremental assets is not sufficient to cover the cost of
leverage, the net income or other gain of the fund will be less
than if leverage had not been used. If the amount of income from
the incremental securities is insufficient to cover the cost of
borrowing, securities might have to be liquidated to obtain
required funds. Depending on market or other conditions, such
liquidations could be disadvantageous to a fund.
Reverse Repurchase Agreements. Reverse repurchase agreements
involve the risk that the market value of the securities retained
in lieu of sale by the fund may decline below the price of the
securities the fund has sold but is obliged to repurchase. In the
event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, such buyer
or its trustee or receiver may receive an extension of time to
determine whether to enforce the fund's obligation to repurchase
the securities, and the fund's use of the proceeds of the reverse
repurchase agreements may effectively be restricted pending such
decision.
Loan Participations or Assignments. The funds may have difficulty
disposing of assignments and loan participations. The liquidity
of such securities is limited, and each fund anticipates that
such securities could be sold only to a limited number of
institutional investors. The lack of a liquid secondary market
could have an adverse impact on the value of such securities and
on each fund's ability to dispose of particular assignments or
participations when necessary to meet the fund's liquidity needs
or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack
of a liquid secondary market for assignments and participations
also may make it more difficult for the fund to assign a value to
those securities for purposes of valuing the fund's portfolio and
calculating its net asset value.
Certain of the loan participations acquired by a fund may involve
revolving credit facilities or other standby financing
commitments which obligate the fund to pay additional cash on a
certain date or on demand. These commitments may have the effect
of requiring a fund to increase its investment in a company at a
time when it might not otherwise decide to do so (including at a
time when the company's financial condition makes it unlikely
that such amounts will be repaid). To the extent that a fund is
committed to advance additional funds, it will at all times hold
and maintain in a segregated account cash or other high grade
debt obligations in an amount sufficient to meet such
commitments. A fund's ability to receive payments of principal,
interest and other amounts due in connection with these
investments will depend primarily on the financial condition of
the borrower. In selecting the loan participations and other
direct investments which a fund will purchase, management will
rely upon its own credit analysis (and not that of the original
lending institution's) of the borrower. As a fund may be required
to rely upon another lending institution to collect and pass on
to it amounts payable with respect to the loan and to enforce its
rights under the loan, an insolvency, bankruptcy or
reorganization of the lending institution may delay or prevent a
fund from receiving such amounts. In such cases, a fund will
evaluate as well the creditworthiness of the lending institution
and will treat both the borrower and the lending institution as
an "issuer" of the loan participation for purposes of certain
investment restrictions pertaining to the diversification of the
fund's portfolio investments. In connection with purchasing
participations, a fund generally will have no right to enforce
compliance by the borrower with the terms of the loan agreement
relating to the loan, nor any rights of set-off against the
borrower, and a fund may not directly benefit from any collateral
supporting the loan in which it has purchased the participation.
As a result, a fund will assume the credit risk of both the
borrower and the lender that is selling the participation.
The highly leveraged nature of many such loans may make such
loans especially vulnerable to adverse changes in economic or
market conditions. Investments in such loans may involve
additional risks to a fund. For example, if a loan is foreclosed,
a fund could become part owner of any collateral, and would bear
the costs and liabilities associated with owning and disposing of
the collateral. In addition, it is conceivable that under
emerging legal theories of lender liability, a fund could be held
liable as a co-lender. It is unclear whether loans and other
forms of direct indebtedness offer securities law protection
against fraud and misrepresentation. In the absence of definitive
regulatory guidance, a fund relies on management's research in an
attempt to avoid situations where fraud or misrepresentation
could adversely affect the fund. In addition, loan participations
and other direct investments may not be in the form of securities
or may be subject to restrictions on transfer, and only limited
opportunities may exist to resell such instruments. As a result,
a fund may be unable to sell such investments at an opportune
time or may have to resell them at less than fair market value.
To the extent that management determines that any such
investments are illiquid, a fund will include them in the
investment limitations described below.
Derivative Instruments. In accordance with its investment
policies, a fund may invest in certain derivative instruments,
which are securities or contracts that provide for payments based
on or "derived" from the performance of an underlying asset,
index or other economic benchmark. Essentially, a derivative
instrument is a financial arrangement or a contract between two
parties (and not a true security like a stock or a bond).
Transactions in derivative instruments can be, but are not
necessarily, riskier than investments in conventional stocks,
bonds and money market instruments. A derivative instrument is
more accurately viewed as a way of reallocating risk among
different parties or substituting one type of risk for another.
Every investment by a fund, including an investment in
conventional securities, reflects an implicit prediction about
future changes in the value of that investment. Every fund
investment also involves a risk that the portfolio manager's
expectations will be wrong. Transactions in derivative
instruments often enable a fund to take investment positions that
more precisely reflect the portfolio manager's expectations
concerning the future performance of the various investments
available to the fund. Derivative instruments can be a
legitimate and often cost-effective method of accomplishing the
same investment goals as could be achieved through other
investment in conventional securities.
Derivative contracts include options, futures contracts, forward
contracts, forward commitment and when-issued securities
transactions, forward foreign currency exchange contracts and
interest rate, mortgage and currency swaps. The following are
the principal risks associated with derivative instruments.
Market risk: The instrument will decline in value or that
an alternative investment would have appreciated more, but this
is no different from the risk of investing in conventional
securities.
Leverage and associated price volatility: Leverage causes
increased volatility in the price and magnifies the impact of
adverse market changes, but this risk may be consistent with the
investment objective of even a conservative fund in order to
achieve an average portfolio volatility that is within the
expected range for that type of fund.
Credit risk: The issuer of the instrument may default on
its obligation to pay interest and principal.
Liquidity and valuation risk: Many derivative instruments
are traded in institutional markets rather than on an exchange.
Nevertheless, many derivative instruments are actively traded and
can be priced with as much accuracy as conventional securities.
Derivative instruments that are custom designed to meet the
specialized investment needs of a relatively narrow group of
institutional investors such as the funds are not readily
marketable and are subject to a fund's restrictions on illiquid
investments.
Correlation risk: There may be imperfect correlation
between the price of the derivative and the underlying asset.
For example, there may be price disparities between the trading
markets for the derivative contract and the underlying asset.
Each derivative instrument purchased for a fund's portfolio is
reviewed and analyzed by the fund's portfolio manager to assess
the risk and reward of each such instrument in relation the
fund's portfolio investment strategy. The decision to invest in
derivative instruments or conventional securities is made by
measuring the respective instrument's ability to provide value to
the fund and its shareholders.
Special Investment Considerations and Risks With Respect to
Futures, Options and Currency Transactions and Swaps and Swap-
Related Products. The successful use of the investment practices
described above with respect to futures contracts, options on
futures contracts, forward contracts, options on securities and
on foreign currencies, and swaps and swap-related products draws
upon skills and experience which are different from those needed
to select the other instruments in which the fund invests. Should
interest or exchange rates or the prices of securities or
financial indices move in an unexpected manner, a fund may not
achieve the desired benefits of futures, options, swaps and
forwards or may realize losses and thus be in a worse position
than if such strategies had not been used. Unlike many exchange-
traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits with respect to options on
currencies, forward contracts and other negotiated or over-the-
counter instruments, and adverse market movements could therefore
continue to an unlimited extent over a period of time. In
addition, the correlation between movements in the price of the
securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
With respect to interest rate swaps, each fund recognizes that
such arrangements are relatively illiquid and will include the
principal amount of the obligations owed to it under a swap as an
illiquid security for purposes of the fund's investment
restrictions except to the extent a third party (such as a large
commercial bank) has guaranteed the fund's ability to offset the
swap at any time.
A fund's ability to dispose of its positions in the foregoing
instruments will depend on the availability of liquid markets in
the instruments. Markets in a number of the instruments are
relatively new and still developing, and it is impossible to
predict the amount of trading interest that may exist in those
instruments in the future. Particular risks exist with respect to
the use of each of the foregoing instruments and could result in
such adverse consequences to the fund as the possible loss of the
entire premium paid for an option bought by the fund, and the
inability of the fund, as the writer of a covered call option, to
benefit from the appreciation of the underlying securities above
the exercise price of the option. As a result, no assurance can
be given that the fund will be able to use those instruments
effectively for the purposes set forth above.
In connection with its transactions in futures, options, swaps
and forwards, each fund may be required to place assets in a
segregated account with the fund's custodian bank to ensure that
the fund will be able to meet its obligations under these
instruments. Assets held in a segregated account generally may
not be disposed of for so long as the fund maintains the
positions giving rise to the segregation requirement. Segregation
of a large percentage of the fund's assets could impede
implementation of the fund's investment policies or the fund's
ability to meet redemption requests or other current obligations.
Particular Risks of Futures Contracts. The prices of futures
contracts are volatile and are influenced, among other things, by
actual and anticipated changes in interest rates, which in turn
are affected by fiscal and monetary policies and national and
international political and economic events.
At best, the correlation between changes in prices of futures
contracts and of the securities or currencies being hedged can be
only approximate. The degree of imperfection of correlation
depends upon circumstances such as: variations in speculative
market demand for futures and for debt securities or currencies,
including technical influences in futures trading; and
differences between the financial instruments being hedged and
the instruments underlying the standard futures contracts
available for trading, with respect to interest rate levels,
maturities, and creditworthiness of issuers. A decision of
whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest rate trends.
Because of the low margin deposits required, futures trading
involves an extremely high degree of leverage. As a result, a
relatively small price movement in a futures contract may result
in immediate and substantial loss, as well as gain, to the
investor. For example, if at the time of purchase, 10% of the
value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract
would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then
closed out. A 15% decrease would result in a loss equal to 150%
of the original margin deposit, if the futures contract were
closed out. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures
contract. The fund, however, would presumably have sustained
comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after
the decline.
Furthermore, in the case of a futures contract purchase, in order
to be certain that the fund has sufficient assets to satisfy its
obligations under a futures contract, the fund sets aside and
commits to back the futures contract an amount of cash, U.S.
government securities and other liquid, high-grade debt
securities equal in value to the current value of the underlying
instrument less the margin deposit. In the case of a futures
contract sale, a fund will either set aside amounts as in the
case of a futures contract purchase, own the security underlying
the contract, or hold a call option permitting the fund to
purchase the same futures contract at a price no higher than the
contract price. Assets used as cover cannot be sold while the
position in the corresponding futures contract is open, unless
they are replaced with similar assets. As a result, the
commitment of a significant portion of the fund's assets to cover
could impede portfolio management or the fund's ability to meet
redemption requests or other current obligations.
Most United States futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular
type of futures contract, no trades may be made on that day at a
price beyond that limit. The daily limit governs only price
movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices
have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting
some futures traders to substantial losses.
Mortgage-Backed Securities. To the extent a fund purchases
mortgage-related securities at a premium, mortgage foreclosures
and prepayments of principal (which may be made at any time
without penalty) may result in some loss of the fund's principal
investment to the extent of the premium paid. The yield generated
by a fund that invests in mortgage-related securities may be
affected by reinvestment of prepayments at higher or lower rates
than the original investment. In addition, like other debt
securities, the values of mortgage-related securities, including
government and government related mortgage pools, generally will
fluctuate in response to market interest rates.
Other Asset-Backed Securities. The estimated life of an asset-
backed security varies with the prepayment experience with
respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of an asset-backed security, will
be primarily a function of current market interest rates,
although other economic and demographic factors may be involved.
For example, falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while
rising interest rates generally decrease the rate of prepayments.
An acceleration in prepayments in response to sharply falling
interest rates will shorten the security's average maturity and
limit the potential appreciation in the security's value relative
to a conventional debt security. Consequently, asset-backed
securities are not as effective in locking in high long-term
yields. Conversely, in periods of sharply rising rates,
prepayments generally slow, increasing the security's average
life and its potential for price depreciation.
INVESTMENT RESTRICTIONS
The funds have adopted the following investment restrictions and
policies that are "fundamental" and cannot be changed without the
approval of a "majority of the outstanding voting securities" of
the fund affected by the change, as defined under the 1940 Act
(see "Other Information about the Company-Voting Rights").
Following the list of each fund's fundamental investment
restrictions which is set forth below is a list of other policies
or restrictions that are not fundamental. Investment policies and
restrictions that are not fundamental may be changed by the
Company's Board of Directors without shareholder approval. If a
fund adheres to a percentage restriction at the time of an
investment by the fund, a later increase or decrease in
percentage resulting solely from a change in values of portfolio
securities or amount of total or net assets will not be
considered a violation of such percentage restriction.
Each of the Smith Barney Pacific Basin, Smith Barney
International Equity and Smith Barney Large Cap Value Portfolios
may not:
1. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
2. Invest more than 25% of its total assets in
securities, the issuers of which conduct their principal business
activities in the same industry. For purposes of this limitation,
securities of the U.S. government (including its agencies and
instrumentalities) and securities of state or municipal
governments and their political subdivisions are not considered
to be issued by members of any industry.
3. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
4. With respect to Smith Barney Large Cap Value
Portfolio, borrow money, except that (a) the 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)
the 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), the 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. With respect to both Smith Barney Pacific Basin and
Smith Barney International Equity Portfolios, borrow money,
except that (a) the fund may borrow from banks under certain
circumstances where the fund's Manager reasonably believes that
(i) the cost of borrowing and related expenses will be exceeded
by the fund's return from investments of the proceeds of the
borrowing in fund securities, or (ii) the meeting of redemption
requests might otherwise require the untimely disposition of
securities, in an amount not exceeding 33 1/3% of the value of
the fund's total assets (including the amount borrowed), valued
at the lesser of cost or market, less liabilities (not including
the amount borrowed) and (b) the fund may, to the extent
consistent with its investment policies, enter into reverse
repurchase agreements, forward roll transactions and similar
investment strategies and techniques.
6. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
7. Engage in the business of underwriting securities
issued by other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
8. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.
Notwithstanding any other investment restriction of Smith Barney
Pacific Basin Portfolio, Smith Barney International Equity
Portfolio or Smith Barney Large Cap Value Portfolio, each such
fund may invest all of its investable assets in an open-end
management investment company having the same investment
objective and restrictions as the fund.
In addition, the following nonfundamental policies have also been
adopted by Smith Barney Pacific Basin Portfolio, Smith Barney
International Equity Portfolio and Smith Barney Large Cap Value
Portfolio. The funds may not:
1. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by the 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.
2. Have more than 15% of its net assets invested in
puts, calls, straddles, spreads or combinations thereof.
3. Purchase oil, gas or other mineral leases, rights or
royalty contracts or exploration or development programs, except
that the fund may invest in the securities of companies which
operate, invest in, or sponsor such programs.
4. Invest more than 5% of its total assets in any issuer
with less than three years of continuous operation (including
that of predecessors) or so-called "unseasoned" equity securities
that are not either admitted for trading on a national stock
exchange or regularly quoted in the over-the-counter market.
5. Invest in any company for the purpose of exercising
control of management.
6. Acquire securities subject to restrictions on
disposition or securities for which there is no readily available
market, enter into repurchase agreements or purchase time
deposits or variable amount master demand notes, if any of the
foregoing have a term or demand feature of more than seven days,
or purchase OTC options or set aside assets to cover OTC options
written by the fund if, immediately after and as a result, the
value of such securities would exceed, in the aggregate, 15% of
the fund's net assets. Subject to this limitation, the Company's
Board of Directors has authorized the fund to invest in
restricted securities if such investment is consistent with the
fund's investment objective and has authorized such securities to
be considered to be liquid to the extent the Manager determines
on a daily basis that there is a liquid institutional market for
such securities. The Board of Directors retains ultimate ongoing
responsibility for the determination that a restricted security
is liquid.
7. Invest in securities of another investment company
except as permitted by Section 12(d)(1)(a) of the 1940 Act, or as
part of a merger, consolidation, or acquisition.
The Smith Barney Large Capitalization Growth Portfolio may not:
1. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
2. Invest more than 25% of its total assets in
securities, the issuers of which conduct their principal business
activities in the same industry. For purposes of this limitation,
securities of the U.S. government (including its agencies and
instrumentalities) and securities of state or municipal
governments and their political subdivisions are not considered
to be issued by members of any industry.
3. Borrow money, except that (a) the 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)
the 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), the 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.
4. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
5. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
6. Engage in the business of underwriting securities
issued by other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
7. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder
In addition, the following nonfundamental policies have also been
adopted by Smith Barney Large Capitalization Growth Portfolio.
The fund may not:
1. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by the 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.
2. Invest in oil, gas or other mineral leases or
exploration or development programs.
3. Write or sell puts, calls, straddles, spreads or
combinations of those transactions, except as permitted under the
fund's investment objective and policies.
4. Invest in securities of another investment company
except as permitted by Section 12(d)(1)(a) of the 1940 Act, or as
part of a merger, consolidation or acquisition
5. Purchase a security if, as a result, the fund would
then have more than 5% of its total assets invested in securities
of issuers (including predecessors) that have been in continuous
operation for fewer than three years, except that this limitation
will be deemed to apply to the entity supplying the revenues from
which the issue is to be paid, in the case of private activity
bonds purchased.
6. Make investments for the purpose of exercising
control of management.
The Alliance Growth Portfolio may not:
1. Borrow money, except that (a) the 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)
the 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), the 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.
2. Engage in the business of underwriting securities
issued by other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
3. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
4. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
5. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.
6. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
7. Invest more than 25% of its total assets in
securities of any one industry. (Obligations of a foreign
government and its agencies or instrumentalities constitute a
separate "industry" from those of another foreign government.)
Notwithstanding any other investment restriction of Alliance
Growth Portfolio, the fund may invest all of its investable
assets in an open-end management investment company having the
same investment objective and restrictions as the fund.
In addition, the following nonfundamental policies have also been
adopted by Alliance Growth Portfolio. The fund may not:
1. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by the 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.
2. Purchase securities issued by any other registered
investment company or investment trust except (a) by purchase in
the open market where no commission or profit to a sponsor or
dealer results from such purchase other than the customary
broker's commission, or (b) where no commission or profit to a
sponsor or dealer results from such purchase, or (c) when such
purchase, though not in the open market, is part of a plan of
merger or consolidation; provided, however, that the fund will
not purchase such securities if such purchase at the time thereof
would cause more than 5% of its total assets (taken at market
value) to be invested in the securities of such issuers; and,
provided further, that the fund's purchases of securities issued
by an open-end investment company will be consistent with the
provisions of the 1940 Act.
3. Make investments for the purpose of exercising
control or management.
4. Invest in interests in oil, gas, or other mineral
exploration or development programs, although the fund may
purchase securities which are secured by such interests and may
purchase securities of issuers which invest in or deal in oil,
gas or other mineral exploration or development programs.
5. Purchase warrants, if, as a result, the fund would
have more than 5% of its total assets invested in warrants or
more than 2% of its total assets invested in warrants which are
not listed on the New York Stock Exchange or the American Stock
Exchange.
The AIM Capital Appreciation Portfolio may not:
1. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
2. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.
3. Engage in the business of underwriting securities
issued by other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
4. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
5. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
6. Invest more than 25% of its total assets in
securities, the issuers of which conduct their principal business
activities in the same industry. For purposes of this limitation,
securities of the U.S. government (including its agencies and
instrumentalities) and securities of state or municipal
governments and their political subdivisions are not considered
to be issued by members of any industry.
In addition, AIM Capital Appreciation Portfolio treats as
fundamental its policy concerning borrowing. In accordance with
this policy, the fund may borrow funds from a bank (including its
custodian bank) to purchase or carry securities only if,
immediately after such borrowing, the value of the fund's assets,
including the amount borrowed, less its liabilities, is equal to
at least 300% of the amount borrowed, plus all outstanding
borrowings. For the purpose of determining this 300% asset
coverage requirement, the fund's liabilities will not include the
amount borrowed but will include the market value, at the time of
computation, of all securities borrowed by the fund in connection
with short sales. The amount of borrowing will also be limited by
the applicable margin limitations imposed by the Federal Reserve
Board. If at any time the value of the fund's assets should fail
to meet the 300% asset coverage requirement, the fund will,
within three days, reduce its borrowings to the extent necessary.
The fund may be required to eliminate partially or totally its
outstanding borrowings at times when it may not be desirable for
it to do so.
In addition, the following nonfundamental policies have also been
adopted by AIM Capital Appreciation Portfolio. The fund may not:
1. Purchase warrants, valued at the lower of cost or
market, in excess of 5% of the value of the Fund's net assets,
and no more than 2% of such value may be warrants which are not
listed on the New York or American Stock Exchanges.
2. Invest for the purpose of exercising control over or
management of any company, except to the extent that in fund may
purchase securities of other investment companies.
3. Invest in interests in oil, gas or other mineral
exploration or development programs.
The Van Kampen Enterprise Portfolio may not:
1. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
2. Engage in the business of underwriting securities
issued by other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
3. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
4. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder taking into account any rule or
order of the SEC exempting the fund from the limitation imposed
by Section 12(d)(1) of the 1940 Act.
5. Invest more than 25% of its total assets in
securities issued by companies in any one industry, provided,
however, that this limitation excludes shares of other open-end
investment companies owned by the fund but includes the fund's
pro rata portion of the securities and other assets owned by any
such company.
6. Borrow money, except that (a) the 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)
the 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), the 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.
7. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.
Notwithstanding any other investment restriction of Van Kampen
Enterprise Portfolio, the fund may invest all of its investable
assets in an open-end management investment company having the
same investment objective and restrictions as the fund.
In addition, the following nonfundamental policies have also been
adopted by Van Kampen Enterprise Portfolio. The fund may not:
1. Invest more than 5% of the value of its total assets
in securities of companies which (including predecessor companies
or operations) have been in business less than three years,
provided, however, that this limitation excludes shares of other
open-end investment companies owned by the fund but includes the
fund's pro rata portion of the securities and other assets owned
by any such company.
2. Acquire any private placement if it would cause more
than 2% of the net assets of the fund, as determined at the time
the fund agrees to any such acquisition, to be invested in
private placements and other assets not having readily available
market quotations, provided, however, that this limitation
excludes shares of other open-end investment companies owned by
the fund but includes the fund's pro rata portion of the
securities and other assets owned by any such company; and,
provided further, that this limitation excludes securities that
have been issued pursuant to Rule 144A under the 1933 Act ("Rule
144A securities").
3. Invest more than 5% of its net assets in warrants or
rights valued at the lower of cost or market, not more than 2% of
its net assets in warrants or rights (valued on such basis) which
are not listed on the New York or American Stock Exchanges.
Warrants or rights acquired in units or attached to other
securities are not subject to the foregoing limitations.
5. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in
securities that are illiquid.
6. Invest in interests in oil, gas, or other mineral
exploration or developmental programs.
7. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by the 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.
8. Make any investment in any security about which
information is not available with respect to history, management,
assets, earnings, and income of the issuer except to acquire
shares of other open-end investment companies to the extent
permitted by rule or order of the SEC exempting the fund from the
limitations imposed by Section 12(d)(1) of the 1940 Act.
9. Make any investment which involves promotion or
business management by the fund or which would subject the fund
to unlimited liability.
10. Invest in companies for the purpose of exercising
control.
11. Acquire securities of any other domestic or foreign
investment company or investment fund except in connection with a
plan of merger or consolidation with or acquisition of
substantially all the assets of such other investment company or
to acquire shares of other open-end investment companies to the
extent permitted by rule or order of the SEC exempting the fund
from the limitations imposed by Section 12(d)(1) of the 1940 Act.
Each of the Smith Barney Aggressive Growth Portfolio and the
Smith Barney Mid Cap Portfolio may not:
1. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
2. Issue "senior securities" as defined in the 1940 Act,
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.
3. 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.
In addition, the following nonfundamental policies have also been
adopted by Smith Barney Aggressive Growth and Smith Barney Mid
Cap Portfolios. The funds may not:
1. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by 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.
2. Invest in oil, gas or other mineral exploration or
development programs.
3. 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.
4. Invest for the purpose of exercising control of
management.
The MFS Total Return Portfolio may not:
1. Borrow money, except that (a) the 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)
the 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), the 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.
2. Engage in the business of underwriting securities
issued by other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
3. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder
4. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
5. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
6. Purchase any securities of an issuer of a particular
industry, if as a result, more than 25% of its gross assets would
be invested in securities of issuers whose principal business
activities are in the same industry except (i) there is no
limitation with respect to obligations issued or guaranteed by
the U.S. government or its agencies and instrumentalities and
repurchase agreements collateralized by such obligations.
7. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
Notwithstanding any other investment restriction of MFS Total
Return Portfolio, the fund may invest all of its investable
assets in an open-end management investment company having the
same investment objective and restrictions as the fund.
In addition, the following nonfundamental policies have also been
adopted by MFS Total Return Portfolio. The fund may not:
1. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in
securities that are illiquid.
2. Purchase securities issued by any other investment
company in excess of the amount permitted by the 1940 Act, except
when such purchase is part of a plan of merger or consolidation.
3. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by the fund of underlying
securities and other assets in escrow and collateral agreements
with respect to initial or maintenance margin in connection with
futures contracts and related options and options on securities,
indexes or similar items is not considered to be the purchase of
a security on margin.
4. Purchase or sell any put or call options or any
combination thereof, provided, that this shall not prevent (a)
the purchase, ownership, holding or sale of (i) warrants where
the grantor of the warrants is the issuer of the underlying
securities or (ii) put or call options or combinations thereof
with respect to securities, foreign currencies, indexes of
securities, any type of swap or any type of futures contract or
(b) the purchase, ownership, holding or sale of contracts for the
future delivery of securities or currencies.
5. Purchase or sell interests in oil, gas or mineral
leases.
The INVESCO Global Strategic Income Portfolio may not:
1. Invest 25% or more of the value of its total assets
in the securities of issuers conducting their principal business
activities in the same industry, (provided, however, that the
fund may invest all of its investable assets in an open-end
management investment company with substantially the same
investment objectives, policies and limitations as the fund)
except that this limitation shall not apply to securities issued
or guaranteed as to principal and interest by the U.S. government
or any of its agencies or instrumentalities.
2. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
3. Engage in the business of underwriting securities
issued by other persons, except to the extent that the Fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
4. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
5. Borrow money in excess of 33 1/3% of its total assets
(including the amount borrowed), less all liabilities and
indebtedness (other than borrowing). This restriction shall not
prevent the fund from entering into reverse repurchase agreements
and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other
transactions constituting borrowing by the fund may not exceed
1/3 of its total assets. In the event that the asset coverage for
the fund's borrowings falls below 300%, the fund will reduce,
within three days (excluding Sundays and holidays), the amount of
its borrowings in order to provide for 300% asset coverage.
Transactions involving options, futures contracts, options on
futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be
borrowings.
6. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.
For purposes of INVESCO Global Strategic Income Portfolio's
concentration policy contained in limitation (1) above, the fund
intends to comply with the SEC staff positions that securities
issued or guaranteed as to principal and interest by any single
foreign government or any supranational organizations in the
aggregate are considered to be securities of issuers in the same
industry.
In addition, the following nonfundamental investment policies
have been adopted by the fund. The fund may not:
1. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in
securities that are illiquid.
2. Invest in securities of an issuer if the investment
would cause the fund to own more than 10% of any class of
securities of any one issuer (provided, however, that the fund
may invest all of its investable assets in an open-end management
investment company with substantially the same investment
objectives, policies, and limitations as the fund).
3. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by the Fund of underlying
securities and other assets in escrow and collateral agreements
with respect to initial or maintenance margin in connection with
futures contracts and related options and options on securities,
indexes or similar items is not considered to be the purchase of
a security on margin.
4. Invest more than 10% of its total assets in shares of
other investment companies and invest more than 5% of its total
assets in any one investment company or acquire more than 3% of
the outstanding voting securities of any one investment company
(provided, however, that the fund may invest all of its
investable assets in an open-end management investment company
with substantially the same investment objectives, policies, and
limitations as the fund).
5. Invest in companies for the purpose of exercising
control or management (provided, however, that the fund may
invest all of its investable assets in an open-end management
investment company with substantially the same investment
objectives, policies and limitations as the fund).
6. Invest in interests in oil, gas, or other mineral
exploration or development programs.
7. Invest more than 5% of its total assets in securities
of companies having, together with their predecessors, a record
of less than three years of continuous operation (provided,
however, that the fund may invest all of its investable assets in
an open-end management investment company with substantially the
same investment objectives, policies, and limitations as the
fund).
The Travelers Managed Income Portfolio may not:
1. Concentrate the portfolio investments in any industry
by investing more than 25% of its gross assets in any one
industry. There shall be no limitation on the purchase of U.S.
Government securities by the fund when it adopts a defensive
position.
2. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
3. Engage in the business of underwriting securities
issued by other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
4. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
5. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.
6. Borrow money, except that (a) the 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)
the 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), the 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.
7. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
8. Purchase securities from or sell securities to any of
its officers or directors, except with respect to its own shares
and as is permissible under applicable statues, rules and
regulations.
Notwithstanding any other investment restriction of Travelers
Managed Income Portfolio, the fund may invest all of its
investable assets in an open-end management investment company
having the same investment objective and restrictions as the
fund.
In addition, the following nonfundamental policies have also been
adopted by Travelers Managed Income Portfolio. The fund may not:
1. Purchase securities of any other investment company
except as part of a plan of merger or consolidation.
2. Purchase securities of companies which together with
predecessors have a record of less than three years' continuous
operation, if, as a result, more than 5% of the fund's net assets
would then be invested in such securities.
3. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by the fund of underlying
securities and other assets in escrow and collateral agreements
with respect to initial or maintenance margin in connection with
futures contracts and related options and options on securities,
indexes or similar items is not considered to be the purchase of
a security on margin.
4. Invest in puts, calls, straddles, spreads and any
combination thereof.
5. Invest in oil, gas or other mineral exploration or
development programs, provided, however, this shall not prohibit
the fund from purchasing publicly traded securities of companies
engaging in whole or in part in such activities.
6. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in
securities that are illiquid.
7. Purchase securities of companies for the purpose of
exercising control.
The Putnam Diversified Income Portfolio may not:
1. Borrow money, except that (a) the 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)
the 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), the 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.
2. Engage in the business of underwriting securities
issued by other persons, except to the extent that the Fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
3. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
4. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
5. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
6. Invest more than 25% of its total assets in any one
industry. (U.S. Government securities and securities of any
foreign government, it agencies or instrumentalities, securities
of supranational entities, and securities backed by the credit of
a governmental entity are not considered to represent an
industry.)
7. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.
In addition, the following nonfundamental policy has also been
adopted by the Putnam Diversified Income Portfolio. The fund may
not:
1. Invest in securities of other registered open-end
investment companies except as they may be acquired as part of a
merger or consolidation or acquisition of assets.
2. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by the 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.
3. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in
securities that are illiquid.
4. Buy or sell oil, gas or other mineral leases, rights
or royalty contracts.
5. Make investments for the purpose of gaining control
of a company's management.
Notwithstanding any other investment restriction of Putnam
Diversified Income Portfolio, the fund may invest all of its
investable assets in an open-end management investment company
having the same investment objective and restrictions as the
fund.
The Smith Barney High Income Portfolio may not:
1. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
2. Borrow money, except that (a) the 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)
the 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), the 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.
3. Engage in the business of underwriting securities
issued by other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
4. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.
5. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
6. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
7. 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 and municipal
governments and their political subdivisions are not considered
to be issued by members of any industry.
Notwithstanding any other investment restriction of the Smith
Barney High Income Portfolio, the fund may invest all of its
investable assets in an open-end management investment company
having the same investment objective and restrictions as the
fund.
In addition, the following nonfundamental investment policies
have been adopted by the Smith Barney High Income Portfolio. The
fund may not:
1. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by the 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.
2. Invest in securities of other investment companies
registered or required to be registered under the 1940 Act,
except as they may be acquired as part of a merger,
consolidation, reorganization, acquisition of assets or an offer
of exchange, or to the extent permitted by the 1940 Act.
The Smith Barney Money Market Portfolio may not:
1. Borrow money, except that (a) the 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) the 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), the 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.
2. Invest in a manner that would cause it to fail to be
a "diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
3. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the 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 the funds' investment objective and policies); or
(d) investing in real estate investment trust securities.
4. Invest more than 25% of its assets in the securities
of issuers in any industry, except it may not invest less than
25% of its assets in bank obligations (including both domestic
and foreign bank obligations) and it reserves freedom of action
to concentrate in securities issued or guaranteed as to principal
and interest by the U.S. Government, its agencies or
instrumentalities.
5. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.
6. Engage in the business of underwriting securities
issued by other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.
7. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.
Notwithstanding any other investment restriction of Smith Barney
Money Market Portfolio, the fund may invest all of its investable
assets in an open-end management investment company having the
same investment objective and restrictions as the fund.
In addition, the following nonfundamental investment policies
have been adopted by Smith Barney Money Market Portfolio. The
fund may not:
1. Acquire securities subject to restrictions on
disposition or securities for which there is no readily available
market, enter into repurchase agreements or purchase time
deposits or variable amount master demand notes, if any of the
foregoing have a term or demand feature of more than seven days
if, immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the fund's
total assets. Subject to this limitation, the fund's Board of
Directors has authorized the fund to invest in restricted
securities if such investment is consistent with the fund's
investment objective and has authorized such securities to be
considered to be liquid to the extent the Manager determines on a
daily basis that there is a liquid institutional market for such
securities. The Board of Directors retains ultimate ongoing
responsibility for the determination that a restricted security
is liquid.
2. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except "against the box"). For purposes of this
restriction, the deposit or payment by the 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.
3. Write or purchase put or call options.
4. Purchase or otherwise acquire any security if, as a
result, more than 10% of its net assets would be invested in
securities that are illiquid.
5. Purchase or sell oil and gas interests.
6. Invest in companies for the purposes of exercising
control.
7. Invest in securities of another investment company
except as permitted by Section 12(d)(1) of the 1940 Act, or as
part of a merger, consolidation, or acquisition.
PORTFOLIO TURNOVER
Although it is anticipated that most investments of each fund
(except Smith Barney Money Market Portfolio) will be long-term in
nature, the rate of portfolio turnover will depend upon market
and other conditions, and it will not be a limiting factor when
management believes that portfolio changes are appropriate. The
historical portfolio turnover rates for each fund (except Smith
Barney Money Market Portfolio) are included in the Financial
Highlights tables in the Prospectus. A higher rate of portfolio
turnover may result in higher transaction costs, including
brokerage commissions. Portfolio turnover rates for Smith Barney
Money Market Portfolio are not shown because of the short-term
nature of the investments owned by the fund.
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 the fund's shares and to the risks
associated with the 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 the fund's performance for any future
period.
DETERMINATION OF NET ASSET VALUE
The net asset value of each fund's 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 the 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.
Securities for which market quotations are readily available are
valued on the basis of the prices reflected on the tape received
from an approved pricing service after the close of regular
trading on the NYSE on each day the NYSE is open.
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 and certain
qualified plans. 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 contractowners of the different contracts
which are funded by such separate accounts. The Board monitors
events for the existence of any material irreconcilable conflict
between or among such owners, and each insurance company will
take whatever remedial action may be necessary to resolve any
such conflict. Such action could include the sale of fund shares
by one or more of the insurance company separate accounts which
fund these contracts, which could have adverse consequences to
the fund. Material irreconcilable conflicts could result from,
for example: (a) changes in state insurance laws; (b) changes in
U.S. federal income tax laws; or (c) differences in voting
instructions between those given by variable annuity
contractowners and those given by variable life insurance
contractowners. If the Board were to conclude that separate
series of the Company should be established for variable annuity
and variable life separate accounts, each insurance company would
bear the attendant expenses. Should this become necessary,
contractowners would presumably no longer have the economies of
scale resulting from a larger combined mutual fund.
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.
MANAGEMENT
The Investment Managers.
SSB Citi. SSB Citi Fund Management LLC ("SSB Citi") serves as the
investment adviser to Smith Barney Pacific Basin Portfolio, Smith
Barney International Equity Portfolio, Smith Barney Large Cap
Value Portfolio, Smith Barney Large Capitalization Growth
Portfolio, Smith Barney Aggressive Growth Portfolio, Smith Barney
Mid Cap Portfolio, Smith Barney High Income Portfolio and Smith
Barney Money Market Portfolio. SSB Citi manages the day to day
operations of each such fund pursuant to a management agreement
entered into by the Company on behalf of each fund. Under each
management agreement, SSB Citi 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, SSB Citi will conduct a continual
program of investment, evaluation and, if appropriate, sale and
reinvestment of each fund's assets.
By written agreement, research and other departments and staff of
Salomon Smith Barney will furnish SSB Citi 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 SSB Citi; there is no charge to
the Company for such services.
SSB Citi's name was formerly SSBC Fund Management Inc., and also
formerly Mutual Management Corp., and Smith Barney Mutual Funds
Management, Inc.
TIA. Travelers Investment Adviser, Inc. ("TIA" or the "Manager"),
an affiliate of SSB Citi, manages the investment operations of
Alliance Growth Portfolio, AIM Capital Appreciation Portfolio,
Putnam Diversified Income Portfolio, MFS Total Return Portfolio,
INVESCO Global Strategic Income Portfolio and Van Kampen
Enterprise Portfolio (each, a "TIA Portfolio") pursuant to
management agreements entered into by the Company on behalf of
each TIA Portfolio.
TIA and the Company have entered into a subadvisory agreement
with a different subadviser for each TIA Portfolio. Pursuant to
each subadvisory agreement, the subadviser is responsible for the
day to day operations and investment decisions for the respective
fund and is authorized, in its discretion and without prior
consultation with TIA, to: (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; and (d) employ
professional portfolio managers and securities analysts who
provide research services to the fund.
TIA has also entered into a sub-administrative services agreement
with SSB Citi pursuant to which SSB Citi will: (a) assist TIA in
supervising all aspects of each TIA Portfolio's operations; (b)
supply each TIA Portfolio with office facilities, statistical and
research services, data processing services, clerical, accounting
and bookkeeping services; and (c) prepare reports to each TIA
Portfolio's shareholders and prepare reports to and filings with
the SEC and state blue sky authorities, if applicable. TIA pays
SSB Citi, as sub-administrator, a fee in an amount equal to an
annual rate of 0.10% of each TIA Portfolio's average daily net
assets.
Subject to the provisions of any applicable subadvisory
agreement, TIA is responsible for the investment operations of
each fund and for furnishing or causing to be furnished to each
fund advice and assistance with respect to the purchase,
retention and disposition of investments, in accordance with each
fund's investment objectives, policies and restrictions as stated
in the Prospectus and SAI.
TAMIC. Travelers Asset Management International Corporation, an
affiliate of SSB Citi and TIA, manages the investment operations
of Travelers Managed Income Portfolio pursuant to a management
agreement entered into by the Company on behalf of Travelers
Managed Income Portfolio. Under the agreement, TAMIC furnishes
investment information and advice and makes recommendations with
respect to the purchase and sale of investments based upon the
fund's investment policies. TAMIC has responsibility for the
investment decisions of the fund, subject to the supervision,
direction and approval of the Board of Directors.
General. Under each management agreement SSB Citi, TIA or TAMIC,
as the case may be, will administer the 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
or by a subadviser (pursuant to a Subadvisory Agreement) who is
identified, retained, supervised and compensated by the Manager.
Each management agreement further provides that all other
expenses not specifically assumed by SSB Citi, TIA or TAMIC 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.
SSB Citi, TIA, TAMIC and each subadviser are subject to the
supervision and direction of the Company's Board of Directors and
manage the applicable fund in accordance with its investment
objective and policies, make investment decisions for the fund,
place orders to purchase and sell securities and employ
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, except that for the Large Cap Growth Portfolio, Smith Barney
Aggressive Growth Portfolio and Smith Barney Mid Cap Portfolio,
the funds are in an initial two-year term. 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.
Code of Ethics. Pursuant to Rule 17j-1 of the 1940 Act, the
funds, their investment advisers and principal underwriter have
adopted codes of ethics that permit personnel to invest in
securities for their own accounts, including securities that may
be purchased or held by the funds. All personnel must place the
interests of clients first and avoid activities, interests and
relationships that might interfere with the duty to make
decisions in the best interests of the clients. All personal
securities transactions by employees must adhere to the
requirements of the codes and must be conducted in such a manner
as to avoid any actual or potential conflict of interest, the
appearance of such a conflict, or the abuse of an employee's
position of trust and responsibility.
Management Fees. The Manager has agreed to waive its fee to the
extent that the aggregate expenses of any of Smith Barney Large
Cap Value Portfolio, Alliance Growth Portfolio, AIM Capital
Appreciation Portfolio, Van Kampen Enterprise Portfolio,
Travelers Managed Income Portfolio, Putnam Diversified Income
Portfolio, Smith Barney High Income Portfolio, MFS Total Return
Portfolio and Smith Barney Money Market Portfolio, exclusive of
taxes, brokerage, interest and extraordinary expenses, such as
litigation and indemnification expenses, exceed 1.25% of the
average daily net assets for any fiscal year of each such fund.
The Manager has agreed to waive its fee to the extent that the
aggregate expenses of each of Smith Barney International Equity
Portfolio, Smith Barney Pacific Basin Portfolio and INVESCO
Global Strategic Income Portfolio exclusive of taxes, brokerage,
interest and extraordinary expenses, exceed 1.50% of the average
daily net assets for any fiscal year of each such fund. The
Manager has agreed to waive its fee to the extent that the
aggregate expenses of the Smith Barney Aggressive Growth
Portfolio and the Smith Barney Mid Cap Portfolio, exclusive of
taxes, brokerage, interest and extraordinary expenses, such as
litigation and indemnification expenses, exceed 1.00% and 0.95%,
respectively, 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
shareowners and by supplement to the then current Prospectus or
SAI.
Each management agreement also provides that SSB Citi, TIA or
TAMIC 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. Each
subadvisory agreement also provides that the subadviser shall not
be liable to SSB Citi, TIA, TAMIC or the fund for any error of
judgment or mistake of law or for any loss suffered by SSB Citi,
TIA, TAMIC or the fund so long as it acted in good faith without
willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard
of its obligations and duties under the subadvisory agreement.
For the periods shown, each fund paid the following management
fee:
Fund
Fiscal Year
Ended
October 31,
1997
Fiscal
Year
Ended
October 31
,
1998
Fiscal
Year
Ended
October 31
, 1999
Smith Barney Pacific Basin Portfolio
$175,112
$127,738
$148,27
2
Smith Barney International Equity
Portfolio
1,692,17
9
2,099,42
5
2,342,3
23
Smith Barney Large Cap Value
Portfolio
1,399,65
0
2,461,02
2
3,270,9
73
Smith Barney Large Capitalization
Growth Portfolio*
N/A
25,610
716,521
Alliance Growth Portfolio
3,268,01
9
5,537,28
1
8,113,7
94
AIM Capital Appreciation Portfolio
1,294,09
6
1,783,86
0
2,130,3
29
Van Kampen Enterprise Portfolio
1,045,92
5
1,677,94
3
2,079,1
52
MFS Total Return Portfolio
1,556,16
7
2,992,30
0
4,481,0
86
Smith Barney Aggressive Growth
Portfolio**
N/A
N/A
N/A
Smith Barney Mid Cap Portfolio**
N/A
N/A
N/A
INVESCO Global Strategic Income
Portfolio
201,225
244,014
207,594
Travelers Managed Income Portfolio
176,499
258,425
563,198
Putnam Diversified Income Portfolio
753,736
1,084,98
2
1,201,8
97
Smith Barney High Income Portfolio
558,996
915,654
1,133,6
95
Smith Barney Money Market
Portfolio***
650,916
622,117
1,038,5
20
* The Manager waived $25,521 of the management fees shown for
the period from May 1, 1998 (commencement of
operations) to October 31, 1998.
** The Smith Barney Aggressive Growth Portfolio and the Smith
Barney Mid Cap Portfolio commenced operations
on November 1, 1999, therefore no management fees were paid
during the fiscal year ended October 31, 1999.
*** The Manager waived $24,546 in 1997 of the management fees
shown.
The Subadvisers.
Alliance Growth Portfolio is advised by Alliance Capital
Management L.P. ("Alliance Capital"). Alliance Capital is a
Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105. For the
services provided to the fund by Alliance Capital, the Manager
pays Alliance Capital an annual fee calculated at a rate of
0.375% of the fund's average daily net assets, paid monthly.
Alliance Capital is a leading international investment manager
supervising client accounts with assets as of December 31, 1999
of more than $368 billion (of which approximately $169 billion
representing the assets of investment companies). Alliance
Capital clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds and include employee benefit
plans, as of December 31, 1999, for 28 of the Fortune 100
Companies. As of that date, Alliance Capital and its subsidiaries
employed more than 2,000 employees who operated out of six
domestic offices and the overseas offices of subsidiaries in
Chennai, Istanbul, London, Mumbai, New Delhi, Paris, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore as well as
affiliate offices in Bangalore, Cairo, Johannesburg, Vienna,
Warsaw, Hong Kong, Sao Paulo, Seoul and Moscow. The 52 U.S.
registered investment companies comprising more than 118 separate
investment portfolios managed by Alliance Capital currently have
more than 4.5 million shareholders.
As of December 31, 1999, The Equitable Life Assurance Society of
the United Stated and its subsidiaries ("Equitable") were the
direct and indirect beneficial owners of approximately 55.3% of
the units representing beneficial ownership of limited
partnership interest in Alliance. Alliance Capital Management
Holding L.P. ("Alliance Holding") owner approximately 41.9% of
the outstanding Alliance units on that date. Equity interests in
Alliance Holding are traded on the New York Stock Exchange in the
form of units. Approximately 2% of Alliance Holding's units are
owned by Equitable. Alliance Capital Management Corporation, a
wholly-owned subsidiary of Equitable, is the general partner of
both Alliance and Alliance Holdings. Equitable, a New York life
insurance company, had total assets as of September 30, 1999 of
approximately U.S. $91.8 billion and is a wholly-owned subsidiary
of AXA Financial Inc., ("AXA Financial"), a Delaware corporation
whose shares are traded on the New York Stock Exchange. As of
September 30, 1999, AXA, A French insurance holding company,
owned approximately 8% of the issued and outstanding shares of
the common stock of AXA Financial.
AIM Capital Appreciation Portfolio is advised by A I M Capital
Management, Inc. ("AIM Capital"). AIM Capital is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046 and is a wholly
owned subsidiary of A I M Advisors, Inc., which is a wholly owned
subsidiary of A I M Management Group Inc. A I M Management Group
Inc. is a holding company engaged in the financial services
business and is an indirect wholly owned subsidiary of AMVESCAP
PLC. For services provided by AIM Capital, the Manager pays to
AIM Capital an annual fee calculated at the rate of 0.375% of the
fund's average daily net assets, paid monthly.
Van Kampen Enterprise Portfolio is advised by Van Kampen Asset
Management Inc. ("VKAM"). VKAM is located at One Parkview Plaza,
Oakbrook Terrace, IL 60181 and is an indirect wholly owned
subsidiary of Morgan Stanley Dean Witter & Co. For the services
provided by VKAM, the Manager pays to VKAM an annual fee
calculated at the rate of 0.325% of the fund's average daily net
assets, paid monthly.
Putnam Diversified Income Portfolio is advised by Putnam
Investment Management, Inc. ("Putnam Management"). Putnam
Management is located at One Post Office Square, Boston,
Massachusetts 02109. Putnam Management is a subsidiary of Putnam
Investments, Inc., which, other than shares held by employees, is
a wholly owned subsidiary of Marsh & McLennan Companies, Inc. For
the services provided by Putnam Management, the Manager pays
Putnam Management an annual fee calculated at the rate of 0.35%
of the fund's average daily net assets, paid monthly.
INVESCO Global Strategic Income Portfolio is advised by AMVESCAP
PLC ("AMVESCAP"). AMVESCAP is a holding company formed in 1997
by the merger of INVESCO PLC and AIM Management Group, Inc. For
the services provided by AMVESCAP, the Manager pays to AMVESCAP
an annual fee calculated at the rate of 0.375% of the fund's
average daily net assets, paid monthly.
MFS Total Return Portfolio is advised by Massachusetts Financial
Services Company ("MFS"). MFS is located at 500 Boylston Street,
Boston, Massachusetts 02116 and is a subsidiary of Sun Life of
Canada (U.S.) Financial Services Holdings, Inc., which is an
indirect wholly owned subsidiary of Sun Life Assurance Company of
Canada. For services provided by MFS, the Manager pays MFS an
annual fee calculated at a rate equal to 0.375% of the fund's
average daily net assets, paid monthly.
Portfolio Transactions and Distribution
CFBDS, Inc., located at 21 Milk Street, Boston MA 02109-5408 (the
"Distributor"), distributes shares of the funds as principal
underwriter.
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. In addition, the Alliance Growth Portfolio will not
deal with Donaldson, Lufkin & Jenrette ("DLJ") (an affiliate of
Alliance Capital) in any transactions in which DLJ acts as
principal. In addition, the Van Kampen Enterprise Portfolio may
not deal with Morgan Stanley Dean Witter & Co. ("Morgan Stanley")
(an affiliate of VKAM) in any transaction in which Morgan Stanley
acts as principal.
Shown below are the total brokerage fees paid by the Company for
the fiscal years ended October 31, 1997, October 31, 1998 and
October 31, 1999 on behalf of the funds, the portion paid to
Salomon Smith Barney and the portion paid to other brokers for
the execution of orders allocated in consideration of research
and statistical services or solely for their ability to execute
the order. During the fiscal year ended October 31, 1997 the
total amount of commissionable transactions was $1,618,030,296,
$115,051,655 (7.11%) of which was directed to Salomon Smith
Barney and executed by unaffiliated brokers and $1,502,978,641
(92.89%) of which was directed to other brokers. During the
fiscal year ended October 31, 1998 the total amount of
commissionable transactions was $2,302,807,589, $234,697,629
(10.19%) of which was directed to Salomon Smith Barney and
executed by unaffiliated brokers and $2,068,109,960 (89.81%) of
which was directed to other brokers. During the fiscal year ended
October 31, 1999 the total amount of commissionable transactions
was $2,989,869,788, $151,780,400 (5.08%) of which was directed to
Salomon Smith Barney and executed by unaffiliated brokers and
$2,838,089,388 (94.92%) of which was directed to other brokers.
Commissions:
Fiscal Year
Ended
Total
To SalomonSmithBarney
To Others (for execution
only)
October 31,
1997
$2,325,295
$163,142 (7.02%)
$2,162,153 (92.98%)
October 31,
1998
$2,199,437
$244,471 (11.12%)
$1,954,966 (88.88%)
October 31,
1999
$4,130,627
$223,754 (5.42%)
$3,906,873 (94.58%)
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 management of the Company 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 of the Company has adopted certain
policies and procedures incorporating the standard of Rule l7e-l
issued by the SEC under the 1940 Act which requires that the
commissions paid to any Affiliated Broker must be "reasonable and
fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with
comparable transactions involving similar securities during a
comparable period of time." The Rule and the policy and
procedures also contain review requirements and require
management to furnish reports to the Board of Directors and to
maintain records in connection with such reviews.
OTHER INFORMATION ABOUT THE COMPANY
The Company, an open-end managed 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 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,
Smith Barney Aggressive Growth Portfolio, Smith Barney Mid Cap
Portfolio, MFS Total Return Portfolio, INVESCO Global Strategic
Income Portfolio, Travelers Managed Income Portfolio, Putnam
Diversified Income Portfolio, Smith Barney High Income Portfolio
and Smith Barney Money Market Portfolio. The directors also have
the power to create additional series of shares. The assets of
each fund will be segregated and separately managed and a
shareowner's interest is in the assets of the fund in which he or
she holds shares.
The directors may also authorize the creation of additional
series of shares and additional classes of shares within any
series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by
future regulations or other unforeseen circumstances). The
investment objectives, policies and restrictions applicable to
additional 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, shares 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 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 shareowner, except as such
liability may arise from his or its own bad faith, willful
misfeasance, gross negligence, or reckless disregard of his or
its duties. With the exceptions stated, the Articles of
Incorporation provide that a director, officer or employee is
entitled to be indemnified against all liability in connection
with the affairs of the 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 shareowners or by action of the
directors upon notice to the shareowners.
Voting Rights. The Company offers its shares only for purchase by
insurance company separate accounts and certain qualified plans.
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 contractowners 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 contractowner interests for
which no voting instructions are received will be voted by an
insurance company in proportion to the shares for which voting
instructions are received.
Each share of a 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. Shareowners 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 shareowner 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.
Shareowners may cause a meeting of shareowners 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 owners to one vote per share;
however, on any matter submitted to a vote of the shareowners,
all shares then entitled to vote will be voted by individual 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
shareowners of the fund involved. Additionally, approval of an
amendment to a fund's advisory or subadvisory agreement is a
matter to be determined separately by that fund. Approval of a
proposal by the shareowners of one fund is effective as to that
fund whether or not enough votes are received from the
shareowners 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 shareowners
of the Company. Shares do not have cumulative voting rights and
therefore the owners of more than 50% of the outstanding shares
of the Company may elect all of the directors irrespective of the
votes of other shareowners.
Custodians. Portfolio securities and cash owned by the Company
on behalf of Smith Barney Large Cap Value Portfolio, Smith Barney
Large Capitalization Growth Portfolio, Alliance Growth Portfolio,
AIM Capital Appreciation Portfolio, Van Kampen Enterprise
Portfolio, Smith Barney Aggressive Growth Portfolio, Smith Barney
Mid Cap Portfolio, MFS Total Return Portfolio, Travelers Managed
Income Portfolio, Putnam Diversified Income Portfolio, Smith
Barney High Income Portfolio, and Smith Barney Money Market
Portfolio are held in the custody of PNC Bank, National
Association, 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103. Foreign securities, if any, will be held in
the custody of Chase Manhattan Bank, Chase MetroTech Center,
Brooklyn, New York 11245.
Portfolio securities and cash owned by the Company on behalf of
Smith Barney Pacific Basin Portfolio, Smith Barney International
Equity Portfolio and INVESCO Global Strategic Income Portfolio
are held in the custody of Chase Manhattan Bank, Chase MetroTech
Center, Brooklyn, New York 11245.
Independent Auditors. KPMG LLP, 757 Third Avenue, New York, New
York 10017, has been selected as the Company's independent
auditors for its fiscal year ending October 31, 2000, to examine
and report on the financial statements and financial highlights
of the Company.
As of February 5, 2000, to the knowledge of the funds and the
Board of Directors, no single shareholder or "group" (as that
term is used in Section 13(d) of the Securities Act of 1934)
beneficially owned more than 5% of the outstanding shares of the
funds with the exception of the following:
Portfolio
Shareholder Name/Address
Number of Shares
Percent
Pacific Basin
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
2,120,888.525
95.12
International Equity
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
17,723,915.755
89.39
Equitable Life of Iowa
Prime Elite
Attn.: Gina Keck M51
604 Locust Street
Des Moines, IA 50306
2,093,341.039
10.56
Portfolio
Shareholder Name/Address
Number of Shares
Percent
Large Cap Value Portfolio
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
21,727,416.014
80.58
Equitable Life of Iowa
Prime Elite
Attn.: Gina Keck M51
604 Locust Street
Des Moines, IA 50306
5,226,502.390
19.39
Large Capitalization Growth
Portfolio
Travelers Insurance
Company
Separate Account QPN
401(k)-TIC
Travelers Insurance
Company
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
14,206,541.031
100
Aggressive Growth Portfolio
Travelers Insurance
Company
Separate Account QPN
401(k)-TIC
Travelers Insurance
Company
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
601,838.061
85.74
SSB Citi Asset
Management
Seed Account
Attn.: Paul Brook
388 Greenwich Street,
22nd Floor
New York, NY 10013
100,075.644
14.26
Mid Cap Portfolio
Alliance Growth Portfolio
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
42,212,421.159
100
AIM Capital Appreciation
Portfolio
Van Kampen Enterprise
Portfolio
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
12,040,796.809
100
MFS Total Return Portfolio
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
38,026,197.625
99.10
INVESCO Global Strategic
Income Portfolio
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
2,174,602.176
100
Travelers Managed Income
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
10,429,407.534
100
Putnam Diversified Income
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
13,496,556.584
99.08
High Income Portfolio
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
15,014,767.644
89.57
Equitable Life of Iowa
Prime Elite
Attn.: Gina Keck M51
604 Locust Street
Des Moines, IA 50306
1,748,012.984
10.43
Money Market Portfolio
The Travelers Ins. Co.
Attn.: Roger Ferland 5MS
One Tower Square
Hartford, CT 06183
288,982,533.700
95.07
FINANCIAL STATEMENTS
The Company's Annual Report for the fiscal year ended October 31,
1999 is incorporated herein by reference in its entirety. It was
filed with the Securities and Exchange Commission on January 19,
2000, (Accession Number 91155-00-000045).
APPENDIX A
RATINGS ON DEBT OBLIGATIONS BOND (AND NOTES)
Moody's Investors Service, Inc.
Aaa - Bonds that are rated "Aaa" are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group they comprise what
are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in "Aaa" securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present
that make the long term risks appear somewhat larger than in "Aaa"
securities.
A - Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present that suggest a
susceptibility to impairment sometime in the future.
Baa - Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds
in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C - Bonds which are rated C are the lowest class of bonds and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Note: The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
Standard & Poor's
AAA - Debt rated "AAA" has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the highest rated issues
only in small degree.
A- Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB - Debt rated "BBB" is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated 'BB', 'B', 'CCC', 'CC' or 'C' is
regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance
with the terms of the obligation. 'BB' indicates the lowest
degree of speculation and 'C' the highest degree of speculation.
While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Plus (+) or Minus (-): The ratings from 'AA' to 'B' may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful
completion of the project being financed by the debt being rated
and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no
comment on the likelihood of, or the risk of default upon failure
of, such completion. The investor should exercise judgment with
respect to such likelihood and risk.
L - The letter "L" indicates that the rating pertains to the
principal amount of those bonds where the underlying deposit
collateral is fully insured by the Federal Savings & Loan
Insurance Corp. or the Federal Deposit Insurance Corp.
+ - Continuance of the rating is contingent upon S&P's receipt
of closing documentation confirming investments and cash
flow.
* - Continuance of the rating is contingent upon S&P's receipt
of an executed copy of the escrow agreement.
NR - Indicates no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P
does not rate a particular type of obligation as a matter of
policy.
Fitch IBCA, Inc.
AAA - Bonds rated AAA by Fitch have the lowest expectation of
credit risk. The obligor has an exceptionally strong capacity for
timely payment of financial commitments which is highly unlikely
to be adversely affected by foreseeable events.
AA - Bonds rated AA by Fitch have a very low expectation of
credit risk. They indicate very strong capacity for timely
payment of financial commitment. This capacity is not
significantly vulnerable to foreseeable events.
A - Bonds rated A by Fitch are considered to have a low
expectation of credit risk. The capacity for timely payment of
financial commitments is considered to be strong, but may be more
vulnerable to changes in economic conditions and circumstances
than bonds with higher ratings.
BBB - Bonds rated BBB by Fitch currently have a low expectation
of credit risk. The capacity for timely payment of financial
commitments is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely
to impair this capacity. This is the lowest investment grade
category assigned by Fitch.
BB - Bonds rated BB by Fitch carry the possibility of credit risk
developing, particularly as the result of adverse economic change
over time. Business or financial alternatives may, however, be
available to allow financial commitments to be met. Securities
rated in this category are not considered by Fitch to be
investment grade.
B - Bonds rated B by Fitch carry significant credit risk,
however, a limited margin of safety remains. Although financial
commitments are currently being met, capacity for continued
payment depends upon a sustained, favorable business and economic
environment.
CCC, CC, C - Default on bonds rated CCC, CC, and C by Fitch is a
real possibility. The capacity to meet financial commitments
depends solely on a sustained, favorable business and economic
environment. Default of some kind on bonds rated CC appears
probable, a C rating indicates imminent default.
Plus and minus signs are used by Fitch to indicate the relative
position of a credit within a rating category. Plus and minus
signs however, are not used in the AAA category.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.
Issuers rated "Prime-1" (or related supporting institutions) have
a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment will normally be evidenced by the
following characteristics: leading market positions in well-
established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earnings
coverage of fixed financial changes and high internal cash
generation; well-established access to a range of financial
markets and assured sources of alternate liquidity.
Issuers rated "Prime-2" (or related supporting institutions) have
strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Standard & Poor's
A-1 - This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Those issuers determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation
is strong. However, the relative degree of safety is not as high
as for issues designated A-1.
Fitch IBCA, Inc.
Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to
three years, including commercial paper, certificates of deposit,
medium-term notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term
rating on the existence of liquidity necessary to meet financial
commitment in a timely manner.
Fitch's short-term ratings are as follows:
F1+ - Issues assigned this rating are regarded as having the
strongest capacity for timely payments of financial commitments.
The "+" denotes an exceptionally strong credit feature.
F1 - Issues assigned this rating are regarded as having the
strongest capacity for timely payment of financial commitments.
F2 - Issues assigned this rating have a satisfactory capacity for
timely payment of financial commitments, but the margin of safety
is not as great as in the case of the higher ratings.
F3 - The capacity for the timely payment of financial commitments
is adequate; however, near-term adverse changes could result in a
reduction to non investment grade.
Duff & Phelps Inc.
Duff 1+ - Indicates the highest certainty of timely payment:
short-term liquidity is clearly outstanding, and safety is just
below risk-free United States Treasury short-term obligations.
Duff 1 - Indicates a high certainty of timely payment.
Duff 2 - Indicates a good certainty of timely payment: liquidity
factors and company fundamentals are sound. The Thomson BankWatch
("TBW")
TBW-1 - Indicates a very high degree of likelihood that principal
and interest will be paid on a timely basis.
TBW-2 - While the degree of safety regarding timely repayment of
principal and interest is strong, the relative degree of safety
is not as high as for issues rated TBW-1.
g:\legal\funds\$sts\2000\secdocs\SAI2000 114
u:\legal\funds\$sts\1999\secdocs\sai299 A-5
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.
a.6 Amendment to Articles of Incorporation dated as of
June 9, 1999 is incorporated by reference to Exhibit
a.6 to Post-Effective Amendment No. 13 filed
herewith.
a.7 Articles Supplementary to Articles of Incorporation
dated as of October 13, 1999 is incorporated by
reference to Exhibit a.7 to Post-Effective Amendment
No. 13 filed herewith.
a.8 Articles Supplementary to Articles of Incorporation
dated as of October 13, 1999 is incorporated by
reference to Exhibit a.8 to Post-Effective Amendment
No. 13 filed herewith.
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.
d.23 Management Agreement between Registrant on behalf of
Smith Barney Aggressive Growth Portfolio and SSB Citi
Fund Management LLC is incorporated by reference to
Exhibit d.23 to Post-Effective Amendment No. 13 filed
herewith.
d.24 Management Agreement between Registrant on behalf of
Smith Barney Mid Cap Portfolio and SSB Citi Fund
Management LLC is incorporated by reference to
Exhibit d.23 to Post-Effective Amendment No. 13 filed
herewith.
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 is filed herewith.
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 is filed herewith.
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.
SSB Citi Fund Management LLC (successor to SSBC Fund
Management Inc.) ("SSB Citi"). SSB Citi was incorporated
in December 1968 under the laws of the State of Delaware.
On September 21, 1999, SSB Citi was converted into a
Delaware Limited Liability Company. SSB Citi is a
registered investment adviser and is a wholly owned
subsidiary of Salomon Smith Barney Holdings Inc., which in
turn is a wholly owned subsidiary of Citigroup Inc. SSB
Citi is primarily engaged in the investment advisory
business. Information as to executive officers and
directors of SSB Citi is included in its Form ADV filed
with the SEC (Registration number 801-8314) and is
incorporated herein by reference.
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
CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Equity Portfolio, CitiFundsSM Large Cap
Growth
Portfolio, CitiFundsSM Intermediate Income Portfolio,
CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM Emerging Asian Markets Equity Portfolio,
CitiFundsSM U.S. Treasury Reserves, CitiFundsSM Cash Reserves,
CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves, CitiFundsSM Institutional
U.S.
Treasury Reserves, CitiFundsSM Institutional Liquid Reserves,
SM Institutional Cash Reserves, CitiFundsSM Tax Free Reserves,
CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves,
CitiFundsSM New York Tax Free Reserves, CitiFundsSM Balanced
Portfolio,
CitiFundsSM Small Cap Value Portfolio, CitiFundsSM Growth &
Income
Portfolio,
CitiFundsSM Small Cap Growth Portfolio, CitiFundsSM National
Tax Free Income Portfolio, CitiFundsSM New York Tax Free Income
Portfolio,
CitiSelect VIP Folio 200, Citiselect VIP Folio 300,
CitiSelect (VIP Folio 400, CitiSelect (VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect (Folio
200,
CitiSelect (Folio 300, CitiSelect (Folio 400, and CitiSelect
(Folio
500.
CFBDS is also the placement agent for Large Cap Value Portfolio,
International Portfolio, Foreign Bond Portfolio,
Intermediate Income Portfolio, Short-Term Portfolio,
Growth & Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio, Emerging
Asian Markets Equity Portfolio, Tax Free Reserves Portfolio,
Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio.
CFBDS, Inc. is also the distributor for the following
Smith Barney Mutual Fund registrants:
Consulting Group Capital Markets Funds
Greenwich Street Series Fund
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Institutional Cash Management Fund, Inc.
Smith Barney Investment Trust
Smith Barney Investment Funds Inc.
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney Variable Account Funds
Smith Barney World Funds, Inc.
Travelers Series Fund Inc.
And various series of unit investment trusts.
CFBDS also serves as the distributor for the following funds: The
Travelers Fund UL for Variable Annuities, The Travelers Fund VA
for Variable Annuities, The Travelers Fund BD for Variable
Annuities, The Travelers Fund BD II for Variable Annuities, The
Travelers Fund BD III for Variable Annuities, The Travelers Fund
BD IV for Variable Annuities, The Travelers Fund ABD for Variable
Annuities, The Travelers Fund ABD II for Variable Annuities, The
Travelers Separate Account PF for Variable Annuities, The
Travelers Separate Account PF II for Variable Annuities, The
Travelers Separate Account QP for Variable Annuities, The
Travelers Separate Account TM for Variable Annuities, The
Travelers Separate Account TM II for Variable Annuities, The
Travelers Separate Account Five for Variable Annuities, The
Travelers Separate Account Six for Variable Annuities, The
Travelers Separate Account Seven for Variable Annuities, The
Travelers Separate Account Eight for Variable Annuities, The
Travelers Fund UL for Variable Annuities, The Travelers Fund UL
II for Variable Annuities, The Travelers Variable Life Insurance
Separate Account One, The Travelers Variable Life Insurance
Separate Account Two, The Travelers Variable Life Insurance
Separate Account Three, The Travelers Variable Life Insurance
Separate Account Four, The Travelers Separate Account MGA, The
Travelers Separate Account MGA II, The Travelers Growth and
Income Stock Account for Variable Annuities, The Travelers
Quality Bond Account for Variable Annuities, The Travelers Money
Market Account for Variable Annuities, The Travelers Timed Growth
and Income Stock Account for Variable Annuities, The Travelers
Timed Short-Term Bond Account for Variable Annuities, The
Travelers Timed Aggressive Stock Account for Variable Annuities,
The Travelers Timed Bond Account for Variable Annuities.
CFBDS, Inc. is also the distributor for the following
Salomon Brothers funds:
Salomon Brothers Opportunity Fund Inc
Salomon Brothers Investors Fund Inc
Salomon Brothers Capital Fund Inc
Salomon Brothers Series Funds Inc
Salomon Brothers Institutional Series Funds Inc
Salomon Brothers Variable Series Funds Inc
In addition, CFBDS is also the distributor for the
Centurion Funds, Inc.
(b) The information required by this Item 27 with respect
to each director and officer of CFBDS is incorporated by
reference to Schedule A of Form BD filed by CFBDS pursuant
to the Securities and Exchange Act of 1934 (File No. 8-
32417).
(c) Not applicable.
Item 28. Location of Accounts and Records.
PNC Bank, National Association, 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103, will maintain the
custodian records for the Smith Barney Large Cap Value
Portfolio, Alliance Growth Portfolio, AIM Capital
Appreciation Portfolio, Van Kampen 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, Smith Barney Aggressive Growth Portfolio,
Smith Barney Mid Cap 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 INVESCO
Global Strategic Income Portfolio, each as required by
Section 31 (a) of the Investment Company Act of 1940, as
amended (the "1940 Act").
PFPC Global Fund Services (formerly First Data Investor
Services Group, Inc,) 101 Federal Street, Boston,
Massachusetts 02110, will maintain records relating its
function as the sub-transfer agent.
Smith Barney Private Trust Company, 388 Greenwich Street,
New York, New York 10013, will maintain the records
relating to its function as transfer agent.
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 25th of February, 2000.
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
February 25,
2000
Abraham E. Cohen
Director
February 25,
2000
/s/ Michael E.
Gellert+
Director
February 25,
2000
(Michael E.
Gellert)
/s/ Victor K.
Atkins*
Director
February 25,
2000
(Victor K. Atkins)
/s/ Robert A.
Frankel*
Director
February 25,
2000
(Robert A.
Frankel)
/s/ Rainer
Greeven*
Director
February 25,
2000
(Rainer Greeven)
/s/ Susan M.
Heilbron*
Director
February 25,
2000
(Susan M.
Heilbron)
/s/Lewis E.
Daidone
(Lewis E. Daidone)
Senior Vice
President and
Treasurer (Chief
Financial and
Accounting Officer)
February 25,
2000
_________________________________________________________________
______________
* Signed by Lewis E. Daidone, their duly authorized attorney-in-
fact, pursuant to power of attorney dated June 8, 1994.
+ Signed by Lewis E. Daidone, their duly authorized attorney-in-
fact, pursuant to power of attorney dated July 30, 1999.
By: /s/Lewis E. Daidone February
25, 2000
Lewis E. Daidone
EXHIBIT INDEX
a.6 Amendment to Article of Incorporation
a.7 Articles Supplementary to Article of Incorporation
a.8 Articles Supplementary to Article of Incorporation
d.23 Management Agreement
d.24 Management Agreement
j. Auditors' Consent filed herewith
n. Financial Data Schedules filed herewith
TRAVELERS SERIES FUND INC.
ARTICLES OF AMENDMENT
CHANGING NAME OF SERIES
PURSUANT TO MGCL SECTION 2-605
Travelers Series Fund Inc., a Maryland corporation, having
its principal office in Baltimore City, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended to
provide as follows:
The name of the "GT Global Strategic Income Portfolio" series
of capital stock of the Corporation is hereby changed to the
"INVESCO Global Strategic Income Portfolio" series of capital stock
of the Corporation.
SECOND: The amendment does not change the outstanding
authorized capital stock of the Corporation or the aggregate par
value thereof.
THIRD: The foregoing amendment to the Charter of the
Corporation has been approved by a majority of the Corporation's
Board of Directors and is limited to changes expressly permitted by
Section 2-605 of the Maryland General Corporation Law.
FOURTH: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940.
FIFTH: The amendment to the Charter of the Corporation
effected hereby shall become effective at 9:00 a.m. on June 10,
1999.
IN WITNESS WHEREOF, the Corporation has caused these presents
to be signed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on this 9th day of June, 1999.
ATTEST: TRAVELERS SERIES FUND
INC.
____________________________________
________________________
______________
Name: Christina T. Sydor Name: Lewis E. Daidone
Title: Secretary Title: Senior Vice
President/Treasurer
THE UNDERSIGNED, the Senior Vice President/Treasurer of
Travelers Series Fund Inc. who executed on behalf of the
Corporation the foregoing Articles of Amendment of which this
certificate is made a part, hereby acknowledges in the name and on
behalf of the Corporation the foregoing Articles of Amendment to be
the corporate act of the Corporation and hereby certifies to the
best of his knowledge, information and belief the matters and facts
set forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
_______________________________
Name: Lewis E. Daidone
Title: Senior Vice
President/Treasurer
U:\legal\funds\$sts\2000\secdocs\Artamend
TRAVELERS SERIES FUND INC.
ARTICLES SUPPLEMENTARY
Travelers Series Fund Inc., a Maryland corporation, having
its principal office in Baltimore City, Maryland (the
"Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority of the Board of Directors
to classify and reclassify unissued shares of capital stock of the
Corporation, the Board of Directors has:
(a) reclassified 250,000,000 unissued shares, par value
$.00001 per share, of the Putnam Diversified Income Portfolio
Series of the Corporation as a separate portfolio of shares
(the "Smith Barney Aggressive Growth Portfolio") designated
"Smith Barney Aggressive Growth Portfolio Shares" by setting
before the issuance of such shares the preferences,
conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or
conditions of redemption of such shares as hereinafter set
forth; and
(b) reserving the authority to further classify or
reclassify any unissued shares of the Corporation, the Smith
Barney Large Capitalization Growth Portfolio (two hundred
fifty million shares authorized), the AIM Capital
Appreciation Portfolio (two hundred fifty million shares
authorized), the Smith Barney Large Cap Value Portfolio
(formerly known as Smith Barney Income and Growth Portfolio)
(five hundred million shares authorized), the Alliance Growth
Portfolio (five hundred million shares authorized), the Van
Kampen Enterprise Portfolio (formerly known as Van Kampen
American Capital Enterprise Portfolio) (five hundred million
shares authorized), the Smith Barney International Equity
Portfolio (five hundred million shares authorized), the Smith
Barney Pacific Basin Portfolio (two hundred fifty million
shares authorized), the Travelers Managed Income Portfolio
(formerly known as TBC Managed Income Portfolio) (two hundred
fifty million shares authorized), the Putnam Diversified
Income Portfolio (two hundred fifty million shares
authorized), the INVESCO Global Strategic Income Portfolio
(formerly known as GT Global Strategic Income Portfolio) (two
hundred fifty million shares authorized), the Smith Barney
High Income Portfolio (five hundred million shares
authorized), the MFS Total Return Portfolio (five hundred
million shares authorized) and the Smith Barney Money Market
Portfolio (one billion shares authorized), together with any
further series or portfolios from time to time created by the
Board of Directors, are referred to hereinafter individually
as a "Portfolio" and collectively as "Portfolios" or "Capital
Stock."
SECOND: A description of the preferences, conversion or
other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of
the Smith Barney Aggressive Growth Portfolio Shares are as follows:
(a) Assets Belonging to the Smith Barney Aggressive Growth
Portfolio. All consideration received by the Corporation for
the issue or sale of Smith Barney Aggressive Growth Portfolio
Shares, together with all assets in which such consideration
is invested or reinvested, all income, earnings, profits and
proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong
exclusively to the Smith Barney Aggressive Growth Portfolio
for all purposes, subject only to the rights of creditors,
and shall be so recorded upon the books of account of the
Corporation. Such consideration, assets, income, earnings,
profits and proceeds, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds,
in whatever form the same may be, together with any General
Items (as hereinafter defined) allocated to the Smith Barney
Aggressive Growth Portfolio as provided in the following
sentence, are herein referred to as "assets belonging to" the
Smith Barney Aggressive Growth Portfolio. In the event that
there are any assets, income, earnings, profits or proceeds
thereof, funds or payments which are not readily identifiable
as belonging to any particular Portfolio (collectively
"General Items"), such General Items shall be allocated to
the Smith Barney Aggressive Growth Portfolio to such extent,
if any, as is determined in accordance with generally
accepted accounting principles applicable to investment
companies or in good faith by the Board of Directors. The
portion, if any, of General Items so allocated to the Smith
Barney Aggressive Growth Portfolio shall belong to that
Portfolio and each such allocation shall be conclusive and
binding upon the shareholders of the Smith Barney Aggressive
Growth Portfolio for all purposes.
(b) Liabilities Belonging to the Smith Barney Aggressive
Growth Portfolio. The assets belonging to the Smith Barney
Aggressive Growth Portfolio shall be charged with the
liabilities of the Corporation in respect of the Smith Barney
Aggressive Growth Portfolio and all expenses, costs, charges
and reserves attributable to the Smith Barney Aggressive
Growth Portfolio, and any general liabilities, expenses,
costs, charges or reserves of the Corporation which are not
readily identifiable as belonging to any particular Portfolio
shall be allocated and charged to the Smith Barney Aggressive
Growth Portfolio to such extent, if any, as is determined in
good faith by the Board of Directors. The liabilities,
expenses, costs, charges and reserves allocated and so
charged to the Smith Barney Aggressive Growth Portfolio are
herein referred to as "liabilities belonging to" that
Portfolio. Each such allocation of liabilities, expenses,
costs, charges and reserves shall be conclusive and binding
upon the shareholders of the Smith Barney Aggressive Growth
Portfolio for all purposes.
(c) Dividends and Capital Gains Distributions. When, as and
if declared by the Board of Directors, the shareholders of
the Smith Barney Aggressive Growth Portfolio shall be
entitled to receive, as a Portfolio and in preference to any
other Portfolio, dividends and distributions on the Smith
Barney Aggressive Growth Portfolio Shares, from the income
and capital gains, accrued or realized, of the assets
belonging to the Smith Barney Aggressive Growth Portfolio
after providing for actual and accrued liabilities belonging
to the Smith Barney Aggressive Growth Portfolio, in such
amounts, in such manner and at such times as the Board of
Directors may determine, and such shareholders shall not be
entitled to receive any dividends or distributions from the
income or capital gains of any other assets of the
Corporation.
(d) Liquidation. In the event of the liquidation or
dissolution of the Corporation, the shareholders of the Smith
Barney Aggressive Growth Portfolio shall be entitled to
receive, as a Portfolio and in preference to any other
Portfolio, when and as declared by the Board of Directors,
the excess of the assets belonging to the Smith Barney
Aggressive Growth Portfolio over the liabilities belonging to
the Smith Barney Aggressive Growth Portfolio, and such
shareholders shall not be entitled to receive any other
assets of the Corporation. The assets so distributable to
the shareholders of the Smith Barney Aggressive Growth
Portfolio shall be distributed among such shareholders in
proportion to the number of the Smith Barney Aggressive
Growth Portfolio Shares owned by them.
(e) Voting. On each matter submitted to a vote of the
shareholders of the Corporation, each shareholder of a Smith
Barney Aggressive Growth Portfolio Share shall be entitled to
one vote for each such share owned and all shareholders of
the Corporation shall vote irrespective of the Portfolio
thereof as a single class with all shares of all other
Portfolios that are also voting irrespective of the Portfolio
thereof ("Single Portfolio Voting"); provided, however, that
(a) as to any matter with respect to which a separate vote of
the Smith Barney Aggressive Growth Portfolio is required by
the Investment Company Act of 1940 or rules and regulations
thereunder or would be required under the Maryland General
Corporation Law, such requirements as to a separate vote by
that Portfolio shall apply in lieu of Single Portfolio Voting
as described above; (b) in the event that the separate vote
requirements referred to in (a) above apply with respect to
one or more other Portfolios, then, subject to (c) below, the
Smith Barney Aggressive Growth Portfolio Shares shall vote as
a single class with the shares of all other Portfolios that
are also not entitled to a separate vote; and (c) as to any
matter which does not affect the interest of the Smith Barney
Aggressive Growth Portfolio, holders of Smith Barney
Aggressive Growth Portfolio Shares shall not be entitled to
vote. As to any matter with respect to which a separate vote
of the Smith Barney Aggressive Growth Portfolio is required
pursuant to proviso (a) of the preceding sentence,
notwithstanding any provision of law requiring any action on
that matter to be taken or authorized by the holders of a
greater proportion than a majority of the Smith Barney
Aggressive Growth Portfolio Shares entitled to vote thereon,
such action shall be valid and effective if taken or
authorized by the affirmative vote of the holders of a
majority of the Smith Barney Aggressive Growth Portfolio
Shares outstanding and entitled to vote thereon.
(f) Redemption. Each holder of assets belonging to the
Smith Barney Aggressive Growth Portfolio Shares shall be
entitled at his option to require the Corporation to redeem
all or any part of his Smith Barney Aggressive Growth
Portfolio Shares and each such Smith Barney Aggressive Growth
Portfolio Share is subject to redemption or repurchase, all
as provided in Article FIFTH of the Corporation's Articles of
Incorporation, and the net asset value of a Smith Barney
Aggressive Growth Portfolio Share for such purposes shall be
computed in accordance with the provisions of Article FIFTH
of the Corporation's Articles of Incorporation, as modified
by subsection (g) below. The Corporation shall have the
option, exercisable in accordance with procedures from time
to time specified in its then- effective Prospectus under the
Securities Act of 1933, to redeem or repurchase issued Smith
Barney Aggressive Growth Portfolio Shares at net asset value,
and the net asset value of a Smith Barney Aggressive Growth
Portfolio Share for such purposes shall also be computed in
accordance with the provisions of Article FIFTH of the
Corporation's Articles of Incorporation, as modified by
subsection (g) below.
(g) Net Asset Value. The net asset value of each Smith
Barney Aggressive Growth Portfolio Share shall be the
quotient obtained by dividing the value of the net assets of
the Smith Barney Aggressive Growth Portfolio (being the value
of the assets belonging to the Smith Barney Aggressive Growth
Portfolio less the liabilities belonging to the Smith Barney
Aggressive Growth Portfolio) by the total number of such
Smith Barney Aggressive Growth Portfolio Shares outstanding.
The Board of Directors shall establish such method or methods
of determining the value of the assets belonging to each of
the Smith Barney Aggressive Growth Portfolio (which may be
different from the method or methods established with respect
to any other Portfolio) as it, in its sole discretion, deems
necessary or desirable, consistent with the Investment
Company Act of 1940 and the rules and regulations thereunder.
(h) Equality. All Smith Barney Aggressive Growth Portfolio
Shares shall represent an equal proportionate interest in the
assets belonging to the Smith Barney Aggressive Growth
Portfolio (subject to the liabilities belonging to the Smith
Barney Aggressive Growth Portfolio), and each Smith Barney
Aggressive Growth Portfolio Share, shall be equal to each
other Smith Barney Aggressive Growth Portfolio Share.
THIRD: These Articles Supplementary do not increase the
authorized stock of the Corporation.
IN WITNESS WHEREOF, Travelers Series Fund Inc. has caused
these presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on the 13th day of
October, 1999.
WITNESS: TRAVELERS SERIES FUND INC.
__________________________________ By:
__________________________________
Christina T. Sydor, Secretary Heath B. McLendon,
President
THE UNDERSIGNED, President of Travelers Series Fund Inc., who
executed on behalf of the Corporation Articles Supplementary of
which this Certificate is made a part, hereby acknowledges in the
name and on behalf of said Corporation the foregoing Articles
Supplementary to be the corporate act of said Corporation and
hereby certifies that the matters and facts set forth herein with
respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
______________________________
Heath B. McLendon,
President
g:\fundacctg\legal\funds\$sts\2000\secdocs\agartsup
TRAVELERS SERIES FUND INC.
ARTICLES SUPPLEMENTARY
Travelers Series Fund Inc., a Maryland corporation, having
its principal office in Baltimore City, Maryland (the
"Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority of the Board of Directors
to classify and reclassify unissued shares of capital stock of the
Corporation, the Board of Directors has:
(a) reclassified 250,000,000 unissued shares, par value
$.00001 per share, of the Travelers Managed Income Portfolio
Series of the Corporation as a separate portfolio of shares
(the "Smith Barney Mid Cap Portfolio") designated "Smith
Barney Mid Cap Portfolio Shares" by setting before the
issuance of such shares the preferences, conversion or other
rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of
redemption of such shares as hereinafter set forth; and
(b) reserving the authority to further classify or
reclassify any unissued shares of the Corporation, the Smith
Barney Large Capitalization Growth Portfolio (two hundred
fifty million shares authorized), the AIM Capital
Appreciation Portfolio (two hundred fifty million shares
authorized), the Smith Barney Large Cap Value Portfolio
(formerly known as Smith Barney Income and Growth Portfolio)
(five hundred million shares authorized), the Alliance Growth
Portfolio (five hundred million shares authorized), the Van
Kampen Enterprise Portfolio (formerly known as Van Kampen
American Capital Enterprise Portfolio) (five hundred million
shares authorized), the Smith Barney International Equity
Portfolio (five hundred million shares authorized), the Smith
Barney Pacific Basin Portfolio (two hundred fifty million
shares authorized), the Travelers Managed Income Portfolio
(formerly known as TBC Managed Income Portfolio) (two hundred
fifty million shares authorized), the Putnam Diversified
Income Portfolio (two hundred fifty million shares
authorized), the INVESCO Global Strategic Income Portfolio
(formerly known as GT Global Strategic Income Portfolio) (two
hundred fifty million shares authorized), the Smith Barney
High Income Portfolio (five hundred million shares
authorized), the MFS Total Return Portfolio (five hundred
million shares authorized) and the Smith Barney Money Market
Portfolio (one billion shares authorized), together with any
further series or portfolios from time to time created by the
Board of Directors, are referred to hereinafter individually
as a "Portfolio" and collectively as "Portfolios" or "Capital
Stock."
SECOND: A description of the preferences, conversion or
other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of
the Smith Barney Mid Cap Portfolio Shares are as follows:
(a) Assets Belonging to the Smith Barney Mid Cap Portfolio.
All consideration received by the Corporation for the issue
or sale of Smith Barney Mid Cap Portfolio Shares, together
with all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong
exclusively to the Smith Barney Mid Cap Portfolio for all
purposes, subject only to the rights of creditors, and shall
be so recorded upon the books of account of the Corporation.
Such consideration, assets, income, earnings, profits and
proceeds, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds, in
whatever form the same may be, together with any General
Items (as hereinafter defined) allocated to the Smith Barney
Mid Cap Portfolio as provided in the following sentence, are
herein referred to as "assets belonging to" the Smith Barney
Mid Cap Portfolio. In the event that there are any assets,
income, earnings, profits or proceeds thereof, funds or
payments which are not readily identifiable as belonging to
any particular Portfolio (collectively "General Items"), such
General Items shall be allocated to the Smith Barney Mid Cap
Portfolio to such extent, if any, as is determined in
accordance with generally accepted accounting principles
applicable to investment companies or in good faith by the
Board of Directors. The portion, if any, of General Items so
allocated to the Smith Barney Mid Cap Portfolio shall belong
to that Portfolio and each such allocation shall be
conclusive and binding upon the shareholders of the Smith
Barney Mid Cap Portfolio for all purposes.
(b) Liabilities Belonging to the Smith Barney Mid Cap
Portfolio. The assets belonging to the Smith Barney Mid Cap
Portfolio shall be charged with the liabilities of the
Corporation in respect of the Smith Barney Mid Cap Portfolio
and all expenses, costs, charges and reserves attributable to
the Smith Barney Mid Cap Portfolio, and any general
liabilities, expenses, costs, charges or reserves of the
Corporation which are not readily identifiable as belonging
to any particular Portfolio shall be allocated and charged to
the Smith Barney Mid Cap Portfolio to such extent, if any, as
is determined in good faith by the Board of Directors. The
liabilities, expenses, costs, charges and reserves allocated
and so charged to the Smith Barney Mid Cap Portfolio are
herein referred to as "liabilities belonging to" that
Portfolio. Each such allocation of liabilities, expenses,
costs, charges and reserves shall be conclusive and binding
upon the shareholders of the Smith Barney Mid Cap Portfolio
for all purposes.
(c) Dividends and Capital Gains Distributions. When, as and
if declared by the Board of Directors, the shareholders of
the Smith Barney Mid Cap Portfolio shall be entitled to
receive, as a Portfolio and in preference to any other
Portfolio, dividends and distributions on the Smith Barney
Mid Cap Portfolio Shares, from the income and capital gains,
accrued or realized, of the assets belonging to the Smith
Barney Mid Cap Portfolio after providing for actual and
accrued liabilities belonging to the Smith Barney Mid Cap
Portfolio, in such amounts, in such manner and at such times
as the Board of Directors may determine, and such
shareholders shall not be entitled to receive any dividends
or distributions from the income or capital gains of any
other assets of the Corporation.
(d) Liquidation. In the event of the liquidation or
dissolution of the Corporation, the shareholders of the Smith
Barney Mid Cap Portfolio shall be entitled to receive, as a
Portfolio and in preference to any other Portfolio, when and
as declared by the Board of Directors, the excess of the
assets belonging to the Smith Barney Mid Cap Portfolio over
the liabilities belonging to the Smith Barney Mid Cap
Portfolio, and such shareholders shall not be entitled to
receive any other assets of the Corporation. The assets so
distributable to the shareholders of the Smith Barney Mid Cap
Portfolio shall be distributed among such shareholders in
proportion to the number of the Smith Barney Mid Cap
Portfolio Shares owned by them.
(e) Voting. On each matter submitted to a vote of the
shareholders of the Corporation, each shareholder of a Smith
Barney Mid Cap Portfolio Share shall be entitled to one vote
for each such share owned and all shareholders of the
Corporation shall vote irrespective of the Portfolio thereof
as a single class with all shares of all other Portfolios
that are also voting irrespective of the Portfolio thereof
("Single Portfolio Voting"); provided, however, that (a) as
to any matter with respect to which a separate vote of the
Smith Barney Mid Cap Portfolio is required by the Investment
Company Act of 1940 or rules and regulations thereunder or
would be required under the Maryland General Corporation Law,
such requirements as to a separate vote by that Portfolio
shall apply in lieu of Single Portfolio Voting as described
above; (b) in the event that the separate vote requirements
referred to in (a) above apply with respect to one or more
other Portfolios, then, subject to (c) below, the Smith
Barney Mid Cap Portfolio Shares shall vote as a single class
with the shares of all other Portfolios that are also not
entitled to a separate vote; and (c) as to any matter which
does not affect the interest of the Smith Barney Mid Cap
Portfolio, holders of Smith Barney Mid Cap Portfolio Shares
shall not be entitled to vote. As to any matter with respect
to which a separate vote of the Smith Barney Mid Cap
Portfolio is required pursuant to proviso (a) of the
preceding sentence, notwithstanding any provision of law
requiring any action on that matter to be taken or authorized
by the holders of a greater proportion than a majority of the
Smith Barney Mid Cap Portfolio Shares entitled to vote
thereon, such action shall be valid and effective if taken or
authorized by the affirmative vote of the holders of a
majority of the Smith Barney Mid Cap Portfolio Shares
outstanding and entitled to vote thereon.
(f) Redemption. Each holder of assets belonging to the
Smith Barney Mid Cap Portfolio Shares shall be entitled at
his option to require the Corporation to redeem all or any
part of his Smith Barney Mid Cap Portfolio Shares and each
such Smith Barney Mid Cap Portfolio Share is subject to
redemption or repurchase, all as provided in Article FIFTH of
the Corporation's Articles of Incorporation, and the net
asset value of a Smith Barney Mid Cap Portfolio Share for
such purposes shall be computed in accordance with the
provisions of Article FIFTH of the Corporation's Articles of
Incorporation, as modified by subsection (g) below. The
Corporation shall have the option, exercisable in accordance
with procedures from time to time specified in its then-
effective Prospectus under the Securities Act of 1933, to
redeem or repurchase issued Smith Barney Mid Cap Portfolio
Shares at net asset value, and the net asset value of a Smith
Barney Mid Cap Portfolio Share for such purposes shall also
be computed in accordance with the provisions of Article
FIFTH of the Corporation's Articles of Incorporation, as
modified by subsection (g) below.
(g) Net Asset Value. The net asset value of each Smith
Barney Mid Cap Portfolio Share shall be the quotient obtained
by dividing the value of the net assets of the Smith Barney
Mid Cap Portfolio (being the value of the assets belonging to
the Smith Barney Mid Cap Portfolio less the liabilities
belonging to the Smith Barney Mid Cap Portfolio) by the total
number of such Smith Barney Mid Cap Portfolio Shares
outstanding. The Board of Directors shall establish such
method or methods of determining the value of the assets
belonging to each of the Smith Barney Mid Cap Portfolio
(which may be different from the method or methods
established with respect to any other Portfolio) as it, in
its sole discretion, deems necessary or desirable, consistent
with the Investment Company Act of 1940 and the rules and
regulations thereunder.
(h) Equality. All Smith Barney Mid Cap Portfolio Shares
shall represent an equal proportionate interest in the assets
belonging to the Smith Barney Mid Cap Portfolio (subject to
the liabilities belonging to the Smith Barney Mid Cap
Portfolio), and each Smith Barney Mid Cap Portfolio Share,
shall be equal to each other Smith Barney Mid Cap Portfolio
Share.
THIRD: These Articles Supplementary do not increase the
authorized stock of the Corporation.
IN WITNESS WHEREOF, Travelers Series Fund Inc. has caused
these presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on the 13th day of
October, 1999.
WITNESS: TRAVELERS SERIES FUND INC.
______________________________ By:
__________________________________
Christina T. Sydor, Secretary Heath B. McLendon,
President
THE UNDERSIGNED, President of Travelers Series Fund Inc., who
executed on behalf of the Corporation Articles Supplementary of
which this Certificate is made a part, hereby acknowledges in the
name and on behalf of said Corporation the foregoing Articles
Supplementary to be the corporate act of said Corporation and
hereby certifies that the matters and facts set forth herein with
respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
______________________________
Heath B. McLendon,
President
g:fundacctg\legal\funds\$sts\2000\secdocs\mcartsup
MANAGEMENT AGREEMENT
TRAVELERS SERIES FUND INC.
Smith Barney Mid Cap Portfolio
October 13,
1999
SSB Citi Fund Management LLC
388 Greenwich Street
New York, NY 10013
Dear Sirs:
Travelers Series Fund Inc. (the "Company"), a corporation
organized under the laws of the State of Maryland, on behalf of the
Smith Barney Mid Cap Portfolio (the "Portfolio"), confirms its
agreement with SSB Citi Fund Management LLC (the "Manager"), as
follows:
1. Investment Description; Appointment
The Company desires to employ its capital relating to the
Portfolio by investing and reinvesting in investments of the kind
and in accordance with the investment objective(s), policies and
limitations specified in the prospectus (the "Prospectus") and the
statement of additional information (the "Statement") filed with
the Securities and Exchange Commission as part of the Company's
Registration Statement on Form N-1A on February 23, 1994 as amended
from time to time, and in the manner and to the extent as may from
time to time be approved by the Board of Directors of the Company
(the "Board"). Copies of the Prospectus and the Statement have
been or will be submitted to the Manager. The Company agrees
promptly to provide copies of all amendments to the Prospectus and
the Statement to the Manager on an on-going basis. The Company
desires to employ and hereby appoints the Manager to act as manager
of the Portfolio. The Manager accepts the appointment and agrees to
furnish the services for the compensation set forth below.
2. Services as Investment Manager
Subject to the supervision, direction and approval of the
Board of the Company, the Manager shall (a) maintain compliance
procedures for the Portfolio that it reasonably believes are
adequate to ensure the Portfolio's compliance with (i) the
Investment Company Act of 1940, as amended (the "1940 Act") and the
rules and regulations promulgated thereunder and (ii) the
Portfolio's investment objective(s), policies and restrictions as
stated in the Prospectus and the Statement; (b) make investment
decisions for the Portfolio; (c) place purchase and sale orders for
portfolio transactions on behalf of the Portfolio; (d) employ
professional portfolio managers and securities analysts who provide
research services to the Portfolio; and (e) administer the
Portfolio's corporate affairs and, in connection therewith, furnish
the Portfolio with office facilities and with clerical, bookkeeping
and recordkeeping services at such office facilities. In providing
those services, the Manager will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment
of the Portfolio's assets.
3. Brokerage
In selecting brokers or dealers (including, if permitted by
applicable law, Salomon Smith Barney Inc.) to execute transactions
on behalf of the Portfolio, the Manager will seek the best overall
terms available. In assessing the best overall terms available for
any transaction, the Manager will consider factors it deems
relevant, including, but not limited to, the breadth of the market
in the security, the price of the security, the financial condition
and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or
dealers to execute a particular transaction, and in evaluating the
best overall terms available, the Manager is authorized to consider
the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934), provided to
the Portfolio and/or other accounts over which the Manager or its
affiliates exercise investment discretion. Nothing in this
paragraph shall be deemed to prohibit the Manager from paying an
amount of commission for effecting a securities transaction in
excess of the amount of commission another member of an exchange,
broker, or dealer would have charged for effecting that
transaction, if the Manager determined in good faith that such
amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member, broker, or
dealer, viewed in terms of either that particular transaction or
its overall responsibilities with respect to the Portfolio and/or
other accounts over which the Manager or its affiliates exercise
investment discretion.
4. Information Provided to the Company
The Manager shall keep the Company informed of developments
materially affecting the Portfolio, and shall, on its own
initiative, furnish the Company from time to time with whatever
information the Manager believes is appropriate for this purpose.
5. Standard of Care
The Manager shall exercise its best judgment and shall act in
good faith in rendering the services listed in paragraphs 2 and 3
above. The Manager shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Company in
connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect
or purport to protect the Manager against any liability to the
Company or the shareholders of the Portfolio to which the Manager
would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or by reason of the Manager's reckless disregard of its
obligations and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Portfolio will pay the Manager an annual fee
calculated at the rate of 0.75% of the Portfolio's average daily
net assets; the fee is calculated daily and paid monthly. The fee
for the period from the Effective Date (defined below) of the
Agreement to the end of the month during which the Effective Date
occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of
this Agreement before the end of a month, the fee for such part of
that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon
the date of termination of this Agreement. For the purpose of
determining fees payable to the Manager, the value of the
Portfolio's net assets shall be computed at the times and in the
manner specified in the Prospectus and/or the Statement.
7. Expenses
The Manager shall bear all expenses (excluding brokerage
costs, custodian fees, auditors fees or other expenses to be borne
by the Portfolio or the Company) in connection with the performance
of its services under this Agreement. The Portfolio shall bear
certain other expenses to be incurred in its operation, including,
but not limited to investment advisory, any sub-advisory and any
administration fees; fees for necessary professional and brokerage
services; fees for any pricing service; the costs of regulatory
compliance; and pro rata costs associated with maintaining the
Company's legal existence and shareholder relations. All other
expenses not specifically assumed by the Manager hereunder on
behalf of the Portfolio are borne by the Company.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Portfolio
(including fees pursuant to this Agreement and the Portfolio's
administration agreements, if any, but excluding interest, taxes,
brokerage and extraordinary expenses) exceed the expense limitation
of any state having jurisdiction over the Portfolio, the Manager
shall reduce its fee to the Portfolio by the proportion of such
excess expense equal to the proportion that its fee hereunder bears
to the aggregate of fees paid by the Portfolio for investment
management, advice and administration in that year, to the extent
required by state law. A fee reduction pursuant to this paragraph
8, if any, shall be estimated, reconciled and paid on a monthly
basis. The Company confirms that, as of the date of this
Agreement, no such expense limitation is applicable to the
Portfolio.
9. Services to Other Companies or Accounts
The Company understands that the Manager now acts, will
continue to act and may act in the future as investment manager or
adviser to fiduciary and other managed accounts, and as investment
manager or adviser to other investment companies, and the Company
has no objection to the Manager's so acting, provided that whenever
the Portfolio and one or more other investment companies or
accounts managed or advised by the Manager have available funds for
investment, investments suitable and appropriate for each will be
allocated in accordance with a formula believed to be equitable to
each company and account. The Portfolio recognizes that in some
cases this procedure may adversely affect the size of the position
obtainable for the Portfolio. In addition, the Portfolio
understands that the persons employed by the Manager to assist in
the performance of the Manager's duties under this Agreement will
not devote their full time to such service and nothing contained in
this Agreement shall be deemed to limit or restrict the right of
the Manager or any affiliate of the Manager to engage in and devote
time and attention to other businesses or to render services of
whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective October 13, 1999 (the
"Effective Date") and shall continue for an initial two-year term
and shall continue thereafter so long as such continuance is
specifically approved at least annually as required by the 1940
Act. This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board of the Company or by vote of holders
of a majority (as defined in the 1940 Act and the rules thereunder)
of the outstanding voting securities of the Portfolio, or upon 60
days' written notice, by the Manager. This Agreement will also
terminate automatically in the event of its assignment (as defined
in the 1940 Act and the rules thereunder).
11. Representation by the Company
The Company represents that a copy of the Articles of
Incorporation is on file with the Secretary of the State of
Maryland.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance of this Agreement by signing and
returning the enclosed copy of this Agreement.
Very truly yours,
TRAVELERS SERIES FUND INC.
By: /s/ Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman
Accepted:
SSB CITI FUND MANAGEMENT LLC
By: /s/ Christina T. Sydor
Name: Christina T. Sydor
Title: Secretary and General Counsel
g:\fundacctg\legal\funds\$sts\2000\secdocs\midcapagmt
MANAGEMENT AGREEMENT
TRAVELERS SERIES FUND INC.
Smith Barney Aggressive Growth Portfolio
October 13,
1999
SSB Citi Fund Management LLC
388 Greenwich Street
New York, NY 10013
Dear Sirs:
Travelers Series Fund Inc. (the "Company"), a corporation
organized under the laws of the State of Maryland, on behalf of the
Smith Barney Aggressive Growth Portfolio (the "Portfolio"),
confirms its agreement with SSB Citi Fund Management LLC (the
"Manager"), as follows:
1. Investment Description; Appointment
The Company desires to employ its capital relating to the
Portfolio by investing and reinvesting in investments of the kind
and in accordance with the investment objective(s), policies and
limitations specified in the prospectus (the "Prospectus") and the
statement of additional information (the "Statement") filed with
the Securities and Exchange Commission as part of the Company's
Registration Statement on Form N-1A on February 23, 1994 as amended
from time to time, and in the manner and to the extent as may from
time to time be approved by the Board of Directors of the Company
(the "Board"). Copies of the Prospectus and the Statement have
been or will be submitted to the Manager. The Company agrees
promptly to provide copies of all amendments to the Prospectus and
the Statement to the Manager on an on-going basis. The Company
desires to employ and hereby appoints the Manager to act as manager
of the Portfolio. The Manager accepts the appointment and agrees to
furnish the services for the compensation set forth below.
2. Services as Investment Manager
Subject to the supervision, direction and approval of the
Board of the Company, the Manager shall (a) maintain compliance
procedures for the Portfolio that it reasonably believes are
adequate to ensure the Portfolio's compliance with (i) the
Investment Company Act of 1940, as amended (the "1940 Act") and the
rules and regulations promulgated thereunder and (ii) the
Portfolio's investment objective(s), policies and restrictions as
stated in the Prospectus and the Statement; (b) make investment
decisions for the Portfolio; (c) place purchase and sale orders for
portfolio transactions on behalf of the Portfolio; (d) employ
professional portfolio managers and securities analysts who provide
research services to the Portfolio; and (e) administer the
Portfolio's corporate affairs and, in connection therewith, furnish
the Portfolio with office facilities and with clerical, bookkeeping
and recordkeeping services at such office facilities. In providing
those services, the Manager will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment
of the Portfolio's assets.
3. Brokerage
In selecting brokers or dealers (including, if permitted by
applicable law, Salomon Smith Barney Inc.) to execute transactions
on behalf of the Portfolio, the Manager will seek the best overall
terms available. In assessing the best overall terms available for
any transaction, the Manager will consider factors it deems
relevant, including, but not limited to, the breadth of the market
in the security, the price of the security, the financial condition
and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or
dealers to execute a particular transaction, and in evaluating the
best overall terms available, the Manager is authorized to consider
the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934), provided to
the Portfolio and/or other accounts over which the Manager or its
affiliates exercise investment discretion. Nothing in this
paragraph shall be deemed to prohibit the Manager from paying an
amount of commission for effecting a securities transaction in
excess of the amount of commission another member of an exchange,
broker, or dealer would have charged for effecting that
transaction, if the Manager determined in good faith that such
amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member, broker, or
dealer, viewed in terms of either that particular transaction or
its overall responsibilities with respect to the Portfolio and/or
other accounts over which the Manager or its affiliates exercise
investment discretion.
4. Information Provided to the Company
The Manager shall keep the Company informed of developments
materially affecting the Portfolio, and shall, on its own
initiative, furnish the Company from time to time with whatever
information the Manager believes is appropriate for this purpose.
5. Standard of Care
The Manager shall exercise its best judgment and shall act in
good faith in rendering the services listed in paragraphs 2 and 3
above. The Manager shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Company in
connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect
or purport to protect the Manager against any liability to the
Company or the shareholders of the Portfolio to which the Manager
would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or by reason of the Manager's reckless disregard of its
obligations and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Portfolio will pay the Manager an annual fee
calculated at the rate of 0.80% of the Portfolio's average daily
net assets; the fee is calculated daily and paid monthly. The fee
for the period from the Effective Date (defined below) of the
Agreement to the end of the month during which the Effective Date
occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of
this Agreement before the end of a month, the fee for such part of
that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon
the date of termination of this Agreement. For the purpose of
determining fees payable to the Manager, the value of the
Portfolio's net assets shall be computed at the times and in the
manner specified in the Prospectus and/or the Statement.
7. Expenses
The Manager shall bear all expenses (excluding brokerage
costs, custodian fees, auditors fees or other expenses to be borne
by the Portfolio or the Company) in connection with the performance
of its services under this Agreement. The Portfolio shall bear
certain other expenses to be incurred in its operation, including,
but not limited to investment advisory, any sub-advisory and any
administration fees; fees for necessary professional and brokerage
services; fees for any pricing service; the costs of regulatory
compliance; and pro rata costs associated with maintaining the
Company's legal existence and shareholder relations. All other
expenses not specifically assumed by the Manager hereunder on
behalf of the Portfolio are borne by the Company.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Portfolio
(including fees pursuant to this Agreement and the Portfolio's
administration agreements, if any, but excluding interest, taxes,
brokerage and extraordinary expenses) exceed the expense limitation
of any state having jurisdiction over the Portfolio, the Manager
shall reduce its fee to the Portfolio by the proportion of such
excess expense equal to the proportion that its fee hereunder bears
to the aggregate of fees paid by the Portfolio for investment
management, advice and administration in that year, to the extent
required by state law. A fee reduction pursuant to this paragraph
8, if any, shall be estimated, reconciled and paid on a monthly
basis. The Company confirms that, as of the date of this
Agreement, no such expense limitation is applicable to the
Portfolio.
9. Services to Other Companies or Accounts
The Company understands that the Manager now acts, will
continue to act and may act in the future as investment manager or
adviser to fiduciary and other managed accounts, and as investment
manager or adviser to other investment companies, and the Company
has no objection to the Manager's so acting, provided that whenever
the Portfolio and one or more other investment companies or
accounts managed or advised by the Manager have available funds for
investment, investments suitable and appropriate for each will be
allocated in accordance with a formula believed to be equitable to
each company and account. The Portfolio recognizes that in some
cases this procedure may adversely affect the size of the position
obtainable for the Portfolio. In addition, the Portfolio
understands that the persons employed by the Manager to assist in
the performance of the Manager's duties under this Agreement will
not devote their full time to such service and nothing contained in
this Agreement shall be deemed to limit or restrict the right of
the Manager or any affiliate of the Manager to engage in and devote
time and attention to other businesses or to render services of
whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective October 13, 1999 (the
"Effective Date") and shall continue for an initial two-year term
and shall continue thereafter so long as such continuance is
specifically approved at least annually as required by the 1940
Act. This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board of the Company or by vote of holders
of a majority (as defined in the 1940 Act and the rules thereunder)
of the outstanding voting securities of the Portfolio, or upon 60
days' written notice, by the Manager. This Agreement will also
terminate automatically in the event of its assignment (as defined
in the 1940 Act and the rules thereunder).
11. Representation by the Company
The Company represents that a copy of the Articles of
Incorporation is on file with the Secretary of the State of
Maryland.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance of this Agreement by signing and
returning the enclosed copy of this Agreement.
Very truly yours,
TRAVELERS SERIES FUND INC.
By: /s/ Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman
Accepted:
SSB CITI FUND MANAGEMENT LLC
By: /s/ Christina T. Sydor
Name: Christina T. Sydor
Title: Secretary and General Counsel
g:fundacctg\legal\funds\$sts\2000\secdocs\aggragmt
Independent Auditors' Consent
To the Shareholders and Board of Directors of
Travelers Series Fund Inc.:
We consent to the incorporation by reference, with respect to the
portfolios listed below for the Travelers Series Fund Inc. in this
Prospectus and Statement of Additional Information, of our report
dated December 15, 1999, on the statement of assets and
liabilities, and the related statement of operations, the
statements of changes in net assets, and the financial highlights
for each of the periods described below. These financial
statements and financial highlights and our report thereon are
included in the Annual Report of the Fund as filed on Form N-30D.
We also consent to the references to our firm under the headings
"Financial Highlights" in the Prospectus and "Independent
Auditors" in the Statement of Additional Information.
Portfolio
Smith Barney International Equity Portfolio
Statement of Assets and Liabilities Year ended October 31, 1999
Smith Barney Pacific Basin Portfolio
Statement of Operations Year ended October 31, 1999
INVESCO Global Strategic Income Portfolio
Statements of Changes in Net Assets Two years ended October
31, 1999
Smith Barney High Income Portfolio
Financial Highlights Five years ended October 31,
1999
Putnam Diversified Income Portfolio
MFS Total Return Portfolio
Travelers Managed Income Portfolio
Smith Barney Money Market Portfolio
Smith Barney Large Cap Value Portfolio
Alliance Growth Portfolio
Van Kampen Enterprise Portfolio
AIM Capital Appreciation Portfolio
Statement of Assets and Liabilities Year ended October 31,
1999
Statement of Operations Year ended October 31, 1999
Statements of Changes in Net Assets Two years ended October
31, 1999
Financial Highlights Four years ended October 31, 1999
and for the period from October 10, 1995 to October 31, 1995
Smith Barney Large Capitalization Growth Portfolio
Statement of Assets and Liabilities Year ended October 31,
1999
Statement of Operations Year ended October 31, 1999
Statements of Changes in Net Assets Year ended October
31, 1999
and period from May 1, 1998 to October 31,
1998
Financial Highlights Year ended October 31, 1999
and for the period from May 1, 1998 to October 31, 1998
KPMG LLP
New York, New York
February 21, 2000
Page
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 1
<NAME> SMITH BARNEY LARGE CAP VALUE PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<INVESTMENTS-AT-COST> 482,775,398
<INVESTMENTS-AT-VALUE> 454,839,318
<RECEIVABLES> 2,979,799
<ASSETS-OTHER> 10,454
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 548,829,571
<PAYABLE-FOR-SECURITIES> 4,747,558
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 402,167
<TOTAL-LIABILITIES> 5,149,725
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 461,663,346
<SHARES-COMMON-STOCK> 27,423,892
<SHARES-COMMON-PRIOR> 22,367,328
<ACCUMULATED-NII-CURRENT> 6,775,481
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,177,099
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 63,063,920
<NET-ASSETS> 543,679,846
<DIVIDEND-INCOME> 9,773,529
<INTEREST-INCOME> 402,866
<OTHER-INCOME> 0
<EXPENSES-NET> 3,396,856
<NET-INVESTMENT-INCOME> 6,779,539
<REALIZED-GAINS-CURRENT> 12,213,368
<APPREC-INCREASE-CURRENT> 15,571,021
<NET-CHANGE-FROM-OPS> 34,563,928
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,005,632
<DISTRIBUTIONS-OF-GAINS> 12,877,750
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,029,254
<NUMBER-OF-SHARES-REDEEMED> 882,294
<SHARES-REINVESTED> 909,604
<NET-CHANGE-IN-ASSETS> 120,109,597
<ACCUMULATED-NII-PRIOR> 6,006,162
<ACCUMULATED-GAINS-PRIOR> 12,838,168
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,270,973
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,396,856
<AVERAGE-NET-ASSETS> 505,161,726
<PER-SHARE-NAV-BEGIN> 18.94
<PER-SHARE-NII> 00.27
<PER-SHARE-GAIN-APPREC> 01.38
<PER-SHARE-DIVIDEND> 00.24
<PER-SHARE-DISTRIBUTIONS> 00.52
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.83
<EXPENSE-RATIO> 00.67
[NAME] TRAVELER SERIES FUND INC.
[SERIES]
[NUMBER] 2
[NAME] ALLIANCE GROWTH PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 870,276,462
[INVESTMENTS-AT-VALUE] 1,174,252,963
[RECEIVABLES] 6,946,644
[ASSETS-OTHER] 166,543
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,181,366,150
[PAYABLE-FOR-SECURITIES] 13,233,914
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,218,297
[TOTAL-LIABILITIES] 15,452,211
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 756,103,032
[SHARES-COMMON-STOCK] 41,126,607
[SHARES-COMMON-PRIOR] 34,997,005
[ACCUMULATED-NII-CURRENT] 1,549,118
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 104,272,524
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 303,989,265
[NET-ASSETS] 1,165,913,939
[DIVIDEND-INCOME] 7,636,281
[INTEREST-INCOME] 2,071,286
[OTHER-INCOME] 0
[EXPENSES-NET] 8,307,813
[NET-INVESTMENT-INCOME] 1,399,754
[REALIZED-GAINS-CURRENT] 104,629,375
[APPREC-INCREASE-CURRENT] 180,413,425
[NET-CHANGE-FROM-OPS] 286,442,554
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 5,587,187
[DISTRIBUTIONS-OF-GAINS] 54,556,034
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 5,046,095
[NUMBER-OF-SHARES-REDEEMED] 1,109,900
[SHARES-REINVESTED] 2,193,407
[NET-CHANGE-IN-ASSETS] 390,971,302
[ACCUMULATED-NII-PRIOR] 5,844,057
[ACCUMULATED-GAINS-PRIOR] 54,091,677
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 8,113,794
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 8,307,813
[AVERAGE-NET-ASSETS] 1,018,758,498
[PER-SHARE-NAV-BEGIN] 22.14
[PER-SHARE-NII] 00.02
[PER-SHARE-GAIN-APPREC] 07.79
[PER-SHARE-DIVIDEND] 00.15
[PER-SHARE-DISTRIBUTIONS] 01.45
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 28.35
[EXPENSE-RATIO] 00.82
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 3
[NAME] VAN KAMPEN AMERICAN CAPITAL ENTERPRISE PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 239,565,212
[INVESTMENTS-AT-VALUE] 311,618,866
[RECEIVABLES] 7,129,939
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 318,748,805
[PAYABLE-FOR-SECURITIES] 4,743,962
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 595,337
[TOTAL-LIABILITIES] 5,339,299
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 197,534,209
[SHARES-COMMON-STOCK] 12,279,654
[SHARES-COMMON-PRIOR] 12,115,076
[ACCUMULATED-NII-CURRENT] 15,787
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 43,805,856
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 72,053,654
[NET-ASSETS] 313,409,506
[DIVIDEND-INCOME] 1,693,574
[INTEREST-INCOME] 493,719
[OTHER-INCOME] 0
[EXPENSES-NET] 2,171,416
[NET-INVESTMENT-INCOME] 15,877
[REALIZED-GAINS-CURRENT] 44,456,119
[APPREC-INCREASE-CURRENT] 22,046,033
[NET-CHANGE-FROM-OPS] 66,518,029
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 845,726
[DISTRIBUTIONS-OF-GAINS] 4,790,402
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 844,070
[NUMBER-OF-SHARES-REDEEMED] 412,198
[SHARES-REINVESTED] 232,706
[NET-CHANGE-IN-ASSETS] 64,358,927
[ACCUMULATED-NII-PRIOR] 845,636
[ACCUMULATED-GAINS-PRIOR] 4,140,139
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,079,152
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,171,416
[AVERAGE-NET-ASSETS] 298,150,098
[PER-SHARE-NAV-BEGIN] 20.56
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 05.42
[PER-SHARE-DIVIDEND] 00.07
[PER-SHARE-DISTRIBUTIONS] 00.39
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 25.52
[EXPENSE-RATIO] 00.73
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 4
[NAME] SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 188,378,914
[INVESTMENTS-AT-VALUE] 303,764,631
[RECEIVABLES] 4,234,836
[ASSETS-OTHER] 19,932,150
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 327,931,617
[PAYABLE-FOR-SECURITIES] 239,165
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 18,817,543
[TOTAL-LIABILITIES] 19,056,708
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 209,507,052
[SHARES-COMMON-STOCK] 18,251,663
[SHARES-COMMON-PRIOR] 17,796,849
[ACCUMULATED-NII-CURRENT] 1,862,808
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (17,884,307)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 115,389,356
[NET-ASSETS] 308,874,909
[DIVIDEND-INCOME] 2,530,828
[INTEREST-INCOME] 752,376
[OTHER-INCOME] 0
[EXPENSES-NET] 2,857,408
[NET-INVESTMENT-INCOME] 425,796
[REALIZED-GAINS-CURRENT] (4,842,818)
[APPREC-INCREASE-CURRENT] 87,298,498
[NET-CHANGE-FROM-OPS] 82,881,476
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 882,111
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 37,523,494
[SHARES-REINVESTED] 37,128,444
[NET-CHANGE-IN-ASSETS] 59,764
[ACCUMULATED-NII-PRIOR] 84,667,913
[ACCUMULATED-GAINS-PRIOR] 882,524
[OVERDISTRIB-NII-PRIOR] (11,604,477)
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,342,323
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,857,408
[AVERAGE-NET-ASSETS] 261,303,602
[PER-SHARE-NAV-BEGIN] 12.60
[PER-SHARE-NII] 00.02
[PER-SHARE-GAIN-APPREC] 04.35
[PER-SHARE-DIVIDEND] 00.05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 16.92
[EXPENSE-RATIO] 01.00
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 5
[NAME] SMITH BARNEY PACIFIC BASIN PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 16,127,261
[INVESTMENTS-AT-VALUE] 25,297,947
[RECEIVABLES] 35,280
[ASSETS-OTHER] 1,715,477
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 27,048,704
[PAYABLE-FOR-SECURITIES] 10,492
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,609,690
[TOTAL-LIABILITIES] 1,620,182
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 21,324,378
[SHARES-COMMON-STOCK] 2,159,857
[SHARES-COMMON-PRIOR] 1,867,801
[ACCUMULATED-NII-CURRENT] (383,437)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (4,674,661)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 9,162,242
[NET-ASSETS] 25,428,522
[DIVIDEND-INCOME] 163,640
[INTEREST-INCOME] 23,980
[OTHER-INCOME] 0
[EXPENSES-NET] 235,760
[NET-INVESTMENT-INCOME] (48,140)
[REALIZED-GAINS-CURRENT] 1,613,727
[APPREC-INCREASE-CURRENT] 7,974,805
[NET-CHANGE-FROM-OPS] 9,540,392
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,264,030
[NUMBER-OF-SHARES-REDEEMED] 1,971,974
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 12,700,218
[ACCUMULATED-NII-PRIOR] (119,780)
[ACCUMULATED-GAINS-PRIOR] (6,503,905)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 148,272
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 235,760
[AVERAGE-NET-ASSETS] 16,613,873
[PER-SHARE-NAV-BEGIN] 06.81
[PER-SHARE-NII] (0.14)
[PER-SHARE-GAIN-APPREC] 05.10
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.77
[EXPENSE-RATIO] 01.30
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 6
[NAME] TRAVELERS MANAGED HIGH INCOME PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 112,252,593
[INVESTMENTS-AT-VALUE] 111,190,594
[RECEIVABLES] 2,005,623
[ASSETS-OTHER] 885
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 113,197,102
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 156,288
[TOTAL-LIABILITIES] 156,288
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 112,105,575
[SHARES-COMMON-STOCK] 9,387,825
[SHARES-COMMON-PRIOR] 4,941,272
[ACCUMULATED-NII-CURRENT] 4,865,481
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2,868,243)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1,061,999)
[NET-ASSETS] 113,040,814
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 5,507,757
[OTHER-INCOME] 0
[EXPENSES-NET] 658,059
[NET-INVESTMENT-INCOME] 4,849,698
[REALIZED-GAINS-CURRENT] (2,852,152)
[APPREC-INCREASE-CURRENT] (506,464)
[NET-CHANGE-FROM-OPS] 1,491,082
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2,440,976
[DISTRIBUTIONS-OF-GAINS] 606,387
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 5,013,814
[NUMBER-OF-SHARES-REDEEMED] 386,700
[SHARES-REINVESTED] 269,439
[NET-CHANGE-IN-ASSETS] 55,485,118
[ACCUMULATED-NII-PRIOR] 2,440,668
[ACCUMULATED-GAINS-PRIOR] 606,387
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 563,189
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 658,059
[AVERAGE-NET-ASSETS] 87,117,794
[PER-SHARE-NAV-BEGIN] 11.65
[PER-SHARE-NII] 00.65
[PER-SHARE-GAIN-APPREC] (0.45)
[PER-SHARE-DIVIDEND] 00.29
[PER-SHARE-DISTRIBUTIONS] 00.07
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.49
[EXPENSE-RATIO] 00.76
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 7
[NAME] PUTNAM DIVERSIFIED INCOME PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 163,298,213
[INVESTMENTS-AT-VALUE] 152,841,033
[RECEIVABLES] 4,281,271
[ASSETS-OTHER] 23,500
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 157,145,804
[PAYABLE-FOR-SECURITIES] 347,955
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 961,168
[TOTAL-LIABILITIES] 1,039,123
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 161,436,368
[SHARES-COMMON-STOCK] 13,895,033
[SHARES-COMMON-PRIOR] 13,412,724
[ACCUMULATED-NII-CURRENT] 12,807,689
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (7,591,418)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (10,545,958)
[NET-ASSETS] 156,106,681
[DIVIDEND-INCOME] 379,309
[INTEREST-INCOME] 13,542,692
[OTHER-INCOME] 0
[EXPENSES-NET] 1,333,748
[NET-INVESTMENT-INCOME] 12,588,253
[REALIZED-GAINS-CURRENT] (5,339,115)
[APPREC-INCREASE-CURRENT] (4,393,324)
[NET-CHANGE-FROM-OPS] 2,855,814
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 8,971,238
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,352,553
[NUMBER-OF-SHARES-REDEEMED] 1,668,397
[SHARES-REINVESTED] 798,153
[NET-CHANGE-IN-ASSETS] (787,934)
[ACCUMULATED-NII-PRIOR] 9,261,510
[ACCUMULATED-GAINS-PRIOR] (2,323,139)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,201,897
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,333,748
[AVERAGE-NET-ASSETS] 160,698,769
[PER-SHARE-NAV-BEGIN] 11.70
[PER-SHARE-NII] 00.91
[PER-SHARE-GAIN-APPREC] (0.70)
[PER-SHARE-DIVIDEND] 00.67
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.24
[EXPENSE-RATIO] 00.83
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 8
[NAME] GT GLOBAL STRATEGIC INCOME PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 24,000,892
[INVESTMENTS-AT-VALUE] 21,996,739
[RECEIVABLES] 726,907
[ASSETS-OTHER] 5,572,028
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 28,295,674
[PAYABLE-FOR-SECURITIES] 228,175
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 4,776,746
[TOTAL-LIABILITIES] 5,004,921
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 25,851,379
[SHARES-COMMON-STOCK] 2,279,254
[SHARES-COMMON-PRIOR] 2,565,305
[ACCUMULATED-NII-CURRENT] 1,545,396
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2,101,900)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (2,004,122)
[NET-ASSETS] 23,290,753
[DIVIDEND-INCOME] 785
[INTEREST-INCOME] 1,976,534
[OTHER-INCOME] 0
[EXPENSES-NET] 304,301
[NET-INVESTMENT-INCOME] 1,672,918
[REALIZED-GAINS-CURRENT] (1,261,434)
[APPREC-INCREASE-CURRENT] (594,822)
[NET-CHANGE-FROM-OPS] (183,338)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1,482,668
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 132,083
[NUMBER-OF-SHARES-REDEEMED] 562,926
[SHARES-REINVESTED] 144,792
[NET-CHANGE-IN-ASSETS] (4,839,777)
[ACCUMULATED-NII-PRIOR] 1,482,634
[ACCUMULATED-GAINS-PRIOR] (967,954)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 207,594
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 304,301
[AVERAGE-NET-ASSETS] 26,001,602
[PER-SHARE-NAV-BEGIN] 10.97
[PER-SHARE-NII] 00.75
[PER-SHARE-GAIN-APPREC] (0.85)
[PER-SHARE-DIVIDEND] 00.65
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.22
[EXPENSE-RATIO] 01.13
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 9
[NAME] SMITH BARNEY HIGH INCOME PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 207,754,116
[INVESTMENTS-AT-VALUE] 196,579,649
[RECEIVABLES] 4,514,239
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 201,093,888
[PAYABLE-FOR-SECURITIES] 1,267,170
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 822,327
[TOTAL-LIABILITIES] 2,089,497
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 207,494,965
[SHARES-COMMON-STOCK] 16,972,702
[SHARES-COMMON-PRIOR] 13,392,387
[ACCUMULATED-NII-CURRENT] 18,142,914
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (15,396,295)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (11,237,193)
[NET-ASSETS] 199,004,391
[DIVIDEND-INCOME] 135,204
[INTEREST-INCOME] 19,018,280
[OTHER-INCOME] 0
[EXPENSES-NET] 1,248,034
[NET-INVESTMENT-INCOME] 17,905,450
[REALIZED-GAINS-CURRENT] (12,233,359)
[APPREC-INCREASE-CURRENT] 2,768,731
[NET-CHANGE-FROM-OPS] 8,440,822
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 13,646,737
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3,430,771
[NUMBER-OF-SHARES-REDEEMED] 1,009,907
[SHARES-REINVESTED] 1,159,451
[NET-CHANGE-IN-ASSETS] 38,745,763
[ACCUMULATED-NII-PRIOR] 13,909,654
[ACCUMULATED-GAINS-PRIOR] (3,188,389)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,133,695
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,248,034
[AVERAGE-NET-ASSETS] 189,654,656
[PER-SHARE-NAV-BEGIN] 11.97
[PER-SHARE-NII] 00.92
[PER-SHARE-GAIN-APPREC] (0.28)
[PER-SHARE-DIVIDEND] 00.89
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.72
[EXPENSE-RATIO] 00.66
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 10
[NAME] MFS TOTAL RETURN PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 627,105,792
[INVESTMENTS-AT-VALUE] 642,669,951
[RECEIVABLES] 6,406,058
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 649,076,009
[PAYABLE-FOR-SECURITIES] 26,321,626
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 926,002
[TOTAL-LIABILITIES] 27,247,628
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 567,361,219
[SHARES-COMMON-STOCK] 38,345,904
[SHARES-COMMON-PRIOR] 28,475,906
[ACCUMULATED-NII-CURRENT] 17,561,649
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 21,311,252
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 15,594,261
[NET-ASSETS] 621,828,381
[DIVIDEND-INCOME] 6,244,763
[INTEREST-INCOME] 15,944,306
[OTHER-INCOME] 0
[EXPENSES-NET] 4,709,401
[NET-INVESTMENT-INCOME] 17,479,668
[REALIZED-GAINS-CURRENT] 21,518,408
[APPREC-INCREASE-CURRENT] (1,626,169)
[NET-CHANGE-FROM-OPS] 37,371,907
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 12,662,011
[DISTRIBUTIONS-OF-GAINS] 29,755,229
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 7,783,928
[NUMBER-OF-SHARES-REDEEMED] 514,619
[SHARES-REINVESTED] 2,600,689
[NET-CHANGE-IN-ASSETS] 159,554,603
[ACCUMULATED-NII-PRIOR] 12,670,197
[ACCUMULATED-GAINS-PRIOR] 29,621,868
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,481,086
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4,709,401
[AVERAGE-NET-ASSETS] 562,389,168
[PER-SHARE-NAV-BEGIN] 16.23
[PER-SHARE-NII] 00.52
[PER-SHARE-GAIN-APPREC] 00.72
[PER-SHARE-DIVIDEND] 00.37
[PER-SHARE-DISTRIBUTIONS] 00.88
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 16.22
[EXPENSE-RATIO] 00.84
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 11
[NAME] SMITH BARNEY MONEY MARKET PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 277,065,076
[INVESTMENTS-AT-VALUE] 277,065,076
[RECEIVABLES] 194,669
[ASSETS-OTHER] 668
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 277,260,413
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 561,374
[TOTAL-LIABILITIES] 561,374
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 276,699,039
[SHARES-COMMON-STOCK] 276,699,039
[SHARES-COMMON-PRIOR] 164,677,444
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 276,699,039
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,900,800
[OTHER-INCOME] 0
[EXPENSES-NET] 1,154,407
[NET-INVESTMENT-INCOME] 9,746,393
[REALIZED-GAINS-CURRENT] 994
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 9,747,387
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 9,746,393
[DISTRIBUTIONS-OF-GAINS] 994
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,748,940,316
[NUMBER-OF-SHARES-REDEEMED] 1,646,638,975
[SHARES-REINVESTED] 9,720,254
[NET-CHANGE-IN-ASSETS] 112,021,595
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,038,520
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,154,407
[AVERAGE-NET-ASSETS] 212,665,786
[PER-SHARE-NAV-BEGIN] 1.000
[PER-SHARE-NII] 0.046
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.046
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.000
[EXPENSE-RATIO] 0.540
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 12
[NAME] AIM CAPITAL APPRECIATION PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 208,837,279
[INVESTMENTS-AT-VALUE] 296,551,436
[RECEIVABLES] 4,997,057
[ASSETS-OTHER] 6,506
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 301,554,999
[PAYABLE-FOR-SECURITIES] 1,336,985
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 698,408
[TOTAL-LIABILITIES] 2,035,393
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 201,747,310
[SHARES-COMMON-STOCK] 18,376,228
[SHARES-COMMON-PRIOR] 18,346,306
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 10,058,139
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 87,714,157
[NET-ASSETS] 299,519,606
[DIVIDEND-INCOME] 761,812
[INTEREST-INCOME] 1,004,473
[OTHER-INCOME] 0
[EXPENSES-NET] 2,235,246
[NET-INVESTMENT-INCOME] (468,961)
[REALIZED-GAINS-CURRENT] 19,826,015
[APPREC-INCREASE-CURRENT] 53,711,210
[NET-CHANGE-FROM-OPS] 73,068,264
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 8,702,220
[NUMBER-OF-SHARES-REDEEMED] 8,672,298
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 73,657,455
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (9,767,876)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,130,329
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,235,246
[AVERAGE-NET-ASSETS] 267,349,644
[PER-SHARE-NAV-BEGIN] 12.31
[PER-SHARE-NII] (0.03)
[PER-SHARE-GAIN-APPREC] 04.02
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 16.30
[EXPENSE-RATIO] 00.84
[NAME] TRAVELERS SERIES FUND INC.
[SERIES]
[NUMBER] 13
[NAME] SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 147,326,999
[INVESTMENTS-AT-VALUE] 171,929,857
[RECEIVABLES] 189,846
[ASSETS-OTHER] 623
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 172,120,326
[PAYABLE-FOR-SECURITIES] 3,456,999
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 383,016
[TOTAL-LIABILITIES] 3,840,015
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 143,596,651
[SHARES-COMMON-STOCK] 11,577,964
[SHARES-COMMON-PRIOR] 2,100,720
[ACCUMULATED-NII-CURRENT] 39,724
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 41,078
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 24,602,858
[NET-ASSETS] 168,280,311
[DIVIDEND-INCOME] 728,154
[INTEREST-INCOME] 165,490
[OTHER-INCOME] 0
[EXPENSES-NET] 826,116
[NET-INVESTMENT-INCOME] 67,528
[REALIZED-GAINS-CURRENT] 60,716
[APPREC-INCREASE-CURRENT] 23,699,765
[NET-CHANGE-FROM-OPS] 23,828,009
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 45,401
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 9,661,334
[NUMBER-OF-SHARES-REDEEMED] 187,705
[SHARES-REINVESTED] 3,615
[NET-CHANGE-IN-ASSETS] 147,493,388
[ACCUMULATED-NII-PRIOR] 17,597
[ACCUMULATED-GAINS-PRIOR] (19,638)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 716,521
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 826,116
[AVERAGE-NET-ASSETS] 96,250,096
[PER-SHARE-NAV-BEGIN] 09.90
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 04.64
[PER-SHARE-DIVIDEND] 00.01
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.53
[EXPENSE-RATIO] 00.86
</TABLE>
