Smith Barney
Investment Series
Seven World Trade Center
New York, New York 10048
800 451-2010

Statement of Additional Information


February 28, 2001

This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectuses of Smith Barney
Investment Series (the "Company"), for Smith Barney Large Cap Core Fund
("Large Cap Fund"); Smith Barney Growth and Income Fund ("Growth and
Income Fund"); and Smith Barney International Aggressive Growth
("International Fund") each dated February 28, 2001, and should be read in
conjunction with the Company's Prospectuses.  The Company issues a
Prospectus for each of the funds offered by the Company (the "Funds").
The Company's Prospectuses may be obtained by contacting your Service
Agent, by calling the Fund's sub-transfer agents (PFS Shareholder Services
at 1-800-544-5445 or PFPC Global Fund Services at 1-800-451-2010), or by
writing to the fund at Smith Barney Mutual funds, Seven World Trade
Center, 39th Floor, New York, New York 10048.  This Statement of Additional
Information, although not in itself a prospectus, is incorporated by
reference in its entirety into each Fund's Prospectus.

CONTENTS

Management of the Company	1
Investment Objectives and Management Policies	5
Risk Factors	21
Investment Restrictions	26
Brokerage	31
Portfolio Turnover	34
Distributors	35
Determination of Net Asset Value	39
Purchase and Redemption of Shares	40
Exchange Privilege	52
Redemption of Shares	53
Distributions and Federal Taxes	57
Other Information	61
Financial Statements	67
Appendix	A-1

MANAGEMENT OF THE COMPANY

Trustees and Executive Officers

The names of the Trustees and executive officers of the Company,
together with information as to their principal business occupations
during the past five years, are shown below.  Each Trustee who is an
"interested person" of the Company, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), is indicated by an
asterisk.  Unless otherwise noted below, the address of each Trustee or
officer is Seven World Trade Center, New York, New York  10048.

Donald M. Carlton (age 63), Trustee.   Director, American Electric
Power (Electric Utility) (since 2000); Director, Valero Energy
(Petroleum Refining) (since 1999); Consultant, URS Corporation
(Engineering) (since 1999); Director, National Instruments Corp.
(Technology) (since 1994); former Chief Executive Officer, Radian
Corporation (Engineering) (from 1969 to 1996); former Chief Executive
Officer Radian International L.L.C. (Engineering) (from 1996 to 1998).

A. Benton Cocanougher (age 62), Trustee.  Dean and Professor of
Marketing, College and Graduate School of Business of Texas A & M
University (since 1987); former Director, Randall's Food Markets, Inc.
(from 1990 to September 1999); Director, First American Bank and First
American Savings Bank (from 1994 to October 1999).

Stephen Randolph Gross (age 53), Trustee.  Director, Hotpalm.com, Inc.
(Wireless Applications) (since May 2000); Partner, Capital Investment
Advisory Partners (Consulting) (since January 2000); Director, United
Telesis, Inc. (Telecommunications) (since January 1999); Managing
Director, Fountainhead Ventures, L.L.C. (Consulting) (since March
1998); Director, ebank.com, Inc. (since January 1998); Director, Ikon
Ventures, Inc. (since January 1998); Chairman, Gross, Collins & Cress,
P.C. (Accounting Firm) (since 1979).

Heath B. McLendon* (age 66), Trustee and President.   Chairman,
President and Chief Executive Officer, SSB Citi Fund Management LLC
("SSB Citi" or the "Manager") (since March 1996); Managing Director,
Salomon Smith Barney Inc. ("Salomon Smith Barney") (since 1993);
President, Travelers Investment Adviser, Inc.; Chairman or Co-Chairman
of the Board, Trustee or Director of seventy-seven investment companies
associated with Citigroup Inc. ("Citigroup").

Alan G. Merten (age 59), Trustee.  Director, Re-route.com (Information
Technology) (since 2000); Director, BTG, Inc. (Information Technology)
(since 1997); President, George Mason University (since 1996);
Director, Comshare, Inc. (Information Technology) (since 1985); former
Director, Indus (Information Technology) (from 1995 to 1999); former
Dean, Johnson Graduate School of Management of Cornell University (from
1989 to 1996).

R. Richardson Pettit (age 58), Trustee.  Professor of Finance,
University of Houston (since 1977); former Managing Director,
Windermere Investments (Financial Consulting) (from January 1997 to
June 1997).

James E. Conroy (age 49), Vice President and Investment Officer.
Managing Director of Salomon Smith Barney; Mr. Conroy serves as
Investment Officer of four Smith Barney Mutual Funds.

Michael Kagan (age 41), Vice President and Investment Officer.
Director of Salomon Smith Barney; Mr. Kagan is Vice President and
Investment Officer of three other Smith Barney Mutual Funds.

Jeffrey Russell (age 43), Vice President and Investment Officer.
Managing Director of Salomon Smith Barney; Mr. Russell is Vice
President and Investment Officer of six other Smith Barney Mutual
Funds.

Larry Weissman (age 39), Vice President and Investment Officer.
Managing Director of Salomon Smith Barney; prior to October 1997,
Portfolio Manager of Neuberger & Berman LLC; prior to 1995, Portfolio
Manager of College Retirement Equities Fund.

Lewis E. Daidone (age 42), Senior Vice President and Treasurer.
Managing Director, Salomon Smith Barney; Chief Financial Officer, Smith
Barney Mutual Funds; Director and Senior Vice President, SSB Citi and
Travelers Investment Adviser, Inc; Treasurer and Senior Vice President
or Executive Vice President of eighty-three investment companies
associated with Citigroup.

Irving David (age 39), Controller.  Director, Salomon Smith Barney;
former Assistant Treasurer, First Investment Management Company;
Controller or Assistant Treasurer of fifty-three investment companies
associated with Citigroup.

Frances Guggino (age 42), Assistant Controller.  Vice President,
Citibank (since 1991).

Paul Brook (age 46), Assistant Controller.  Director, Salomon Smith
Barney; Managing Director, AMT Investors Capital Services Inc. (from
1997 to 1998); Partner, Ernst & Young LLP (from 1990 to 1997);
Controller or Assistant Treasurer of forty-three investment companies
associated with Citigroup (from 1997 to 1998).

Anthony Pace (age 35), Assistant Treasurer.  Vice President, Mutual
Fund Administration for Salomon Smith Barney Inc. (since 1986).

Marianne Motley (age 41), Assistant Treasurer.  Director, Mutual Fund
Administration for Salomon Smith Barney Inc. (since 1994).

Robert I. Frenkel (age 45), Secretary.  Managing Director and General
Counsel, Global Mutual Funds for SSB Citi Asset Management Group (since
1994); Secretary of seventeen investment companies associated with
Citigroup.

Thomas C. Mandia (age 38), Assistant Secretary.  Director and Deputy
General Counsel, SSB Citi Asset Management Group (since 1992);
Assistant Secretary of seventeen investment companies associated with
Citigroup.

Rosemary D. Emmens (age 31), Assistant Secretary.  Vice President and
Associate General Counsel, SSB Citi Asset Management Group (since
1998); Assistant Secretary of seventeen investment companies associated
with Citigroup; Counsel, The Dreyfus Corporation (from 1995 to 1998).

Harris Goldblat (age 31), Assistant Secretary.  Associate General
Counsel, SSB Citi Asset Management Group (since 2000); Assistant
Secretary of seventeen investment companies associated with Citigroup;
Associate, Stroock & Stroock & Lavan LLP (from 1997 to 2000);
Associate, Sills Cummis Radin Tischman Epstein & Gross (from 1996 to
1997); Clerk to the Honorable James M. Havey, P.J.A.D. (from 1995 to
1996).

As of February 12, 2001, the Trustees and officers of the Company, as a
group, owned less than 1.00% of any class of the outstanding shares of a
Fund.

As of February 12, 2001 to the best knowledge of the Funds and the Board
of Trustees, no single shareholder or group (as the term is used in
Section 13(d) of the Securities Act of 1934) beneficially owned more than
5% of any class of the outstanding shares of a Fund.

No officer, Trustee or employee of Salomon Smith Barney or any parent or
subsidiary receives any compensation from the Company for serving as an
officer or Trustee of the Company.  The Company pays each Trustee who is
not an officer, director or employee of Salomon Smith Barney or any of its
affiliates a fee of $48,000 per annum plus $2,000 per each Board of
Trustees meeting attended, $1000 for each Committee meeting attended (each
Committee chairman is paid an additional $300 for each Committee meeting
attended), $1000 for each telephonic Board meeting in which participated
(unless such meeting is for information purposes only in which case $100
is paid).  In addition, the Funds will reimburse Trustees for travel and
out-of-pocket expenses incurred in connection with Board of Trustees
meetings.  During the fiscal year ended October 31, 2000 such expenses
totaled $41,964.  Each of the Trustees serves on the Board of other
investment companies in the Smith Barney Fund Complex.  For the fiscal
year ended October 31, 2000, the Trustees of the Company were paid the
following compensation:

COMPENSATION TABLE


Name of Person
Retirement
Benefits
Accrued as
Part of
Fund
Expenses
Compensatio
n from
Company
Paid to
Trustees
Compensatio
n from
Complex
Paid to
Trustees
Number of
Funds for
Which
Director
Serves
Within Fund
Complex
Donald Carlton
(1)
61,000
61,000
2
A. Benton
Cocanougher
(1)
62,000
62,000
2
Stephen Randolph
Gross
(1)


61,100
61,000
2
Heath B.
McLendon*
(1)
0
0
77
Alan G. Merten
(1)
61,100
61,100
2
R. Richardson
Pettit
(1)
61,700


61,700
2
*Designates an "Interested Person" of the Company, as defined under the
1940 Act.

(1) The Trustees instituted a retirement plan effective April 1, 1996.
For the Current Trustees who are not "interested persons" of the Company,
the retirement benefits payable thereunder are payable for a ten year
period following retirement, with the annual payment to be based upon the
highest total annual compensation received in any of the three calendar
years preceding retirement. Trustees with more than five but less than ten
years of service at retirement will receive a prorated benefit.  Total
aggregate retirement benefits accrued under the plan for the 2000 fiscal
year were $1,570,818.  The amount of benefits to be paid upon retirement
is therefore not currently determinable for any current Trustee.


Investment Adviser and Administrator
SSB Citi serves as investment adviser to the Company pursuant to separate
advisory agreements for each of the Funds (the "Advisory Agreements").
SSB Citi is a wholly owned subsidiary of Salomon Smith Barney Holdings
Inc. ("Holdings") (formerly Smith Barney Holdings).  Holdings is a wholly
owned subsidiary of Citigroup. As of January 31, 2001 SSB Citi had
aggregate assets under management in excess of $146 billion. The Advisory
Agreements were most recently approved by the Board of Trustees, including
a majority of the Trustees who are not "interested persons" of the Company
or the investment advisers (the "Independent Trustees"), on June 12, 2000.
 SSB Citi bears all expenses in connection with the performance of its
services. Under the Advisory Agreements, the Company retains the manager
to manage the investment of its assets and to place orders for the
purchase and sale of its portfolio securities.  The manager is responsible
for obtaining and evaluating economic, statistical, and financial data and
for formulating and implementing investment programs in furtherance of
each Company's investment objectives.  The manager also furnishes at no
cost to the Company (except as noted herein) the services of sufficient
executive and clerical personnel for the Company as are necessary to
prepare registration statements, prospectuses, shareholder reports, and
notices and proxy solicitation materials.  In addition, the manager
furnishes at no cost to the Company the services of a President of the
Company, one or more Vice Presidents as needed, and a Secretary.  SSB Citi
provides investment advisory and management services to investment
companies affiliated with Salomon Smith Barney.
As compensation for investment advisory services rendered to Large Cap and
Growth and Income Funds (calculated separately for each fund), each Fund
pays SSB Citi a fee computed daily and paid monthly at the following
annual rates of average daily net assets:  0.65% up to $1 billion; 0.60%
on the next $1 billion; 0.55% on the next $1 billion; 0.50% on the next $1
billion; and 0.45% on net assets thereafter.

As compensation for investment advisory services rendered to International
Fund, the Fund pays SSB Citi a fee computed daily and paid monthly at
1.00% annually of average daily net assets.

For the fiscal years ended October 31, 1998, 1999 and 2000, the Funds
accrued advisory fees as follows:

Fund
1998
1999
2000



Large Cap Fund
$ 23,343,634
$26,462,719
$31,264,546


Growth and Income Fund
8,627,108
9,381,462
9,663,674


International Fund
376,585
545,582
1,924,573


For the period from November 1, 1997 to December 31, 1997, amounts paid by
the Funds under the relevant investment advisory agreements were paid to
Van Kampen American Capital Asset Management Inc. ("VKAC").  VKAC served
as the Company's investment adviser until December 31, 1997, when SSB Citi
replaced VKAC as the manager of each Fund.  Prior to December 31, 1997,
SSB Citi acted as the Sub-Adviser to International Fund.

Code of Ethics
Pursuant to Rule 17j-1 of the 1940 Act, the Funds, the Manager and
principal underwriters 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 a Fund.  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.

A copy of the Funds' code of ethics is on file with the SEC.

Independent Auditors
KPMG LLP, 757 Third Avenue, New York, New York 10017, has been selected as
the Funds' independent auditors to examine and report on the Funds'
financial statements and highlights for the fiscal year ending October 31,
2001.

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

The Prospectuses discuss the investment objectives of each Fund and the
policies they employ to achieve such objectives.  The following discussion
supplements the description of the Funds' investment objectives and
management policies contained in the Prospectuses.  The Funds may engage
in these and any other practices not prohibited by their investment
restrictions. Investment objectives and management policies may be changed
by the Trustees without shareholder approval.  For further information
regarding the risks associated with these practices, see "Risk Factors"
below.

GENERAL

International Fund

International Fund seeks total return on its assets from growth of capital
and income.  The Fund seeks to achieve its goal by investing at least 65%
of its assets in a diversified portfolio of equity securities of non-
United States issuers.

In seeking to achieve its goal, the Fund presently expects to invest at
least 65% of its assets in common stocks of non-United States 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 35% 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).  When the manager believes that the return on
debt securities will equal or exceed the return on common stocks, the Fund
may, in seeking its goal of total return, substantially increase its
holdings (up to a maximum of 35% of its assets) in such debt securities.
 In determining whether the Fund will be invested for capital appreciation
or for income or any combination of both, the manager regularly analyzes
a broad range of international equity and fixed income markets in order to
assess the degree of risk and level of return that could be expected from
each market.

The Fund generally invests its assets broadly among countries and normally
has represented in the portfolio business activities in not less than
three foreign countries.  The Fund normally invests at least 65% 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., Hungary, Poland, The Czech Republic and certain countries of the
former Soviet Union), Central and South America (e.g., Mexico, Chile and
Venezuela), Australia, Canada and such other areas and countries as the
manager may determine from time to time.  Allocation of the Fund's
investments will depend upon the relative attractiveness of the
international markets and particular issuers.  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 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. To the extent that the Fund's assets are not
otherwise invested as described above, the assets may be held in cash, in
any currency, or invested in United States as well as foreign high quality
money market instruments and equivalents.

Large Cap Fund

Large Cap Fund seeks capital appreciation through investments in common
stocks and options on common stocks.  Any income realized on its
investments will be purely incidental to its goal of capital appreciation.

The Fund also may hold a portion of its assets in high grade short-term
debt securities and high grade corporate or government bonds in order to
provide liquidity.  The amount of assets the Fund may hold for liquidity
purposes is based on market conditions and the need to meet redemption
requests.  A description of the ratings of commercial paper and bonds is
contained in the Appendix. Short term investments may include repurchase
agreements with banks or broker-dealers.

Certain policies of the Fund, such as purchasing and selling options on
stocks, purchasing options on stock indices and purchasing stock index
futures contracts and options thereon involve inherently greater
investment risk and could result in more volatile price fluctuations.  The
Fund may also invest up to 20% of its total assets in securities of
foreign issuers and in investment companies.  Since the Fund may take
substantial risks in seeking its goal of capital appreciation, it is not
suitable for investors unable or unwilling to assume such risks.

Growth and Income Fund

Growth and Income Fund seeks reasonable growth and income through
investments in equity securities that provide dividend or interest income,
including common and preferred stocks and securities convertible into
common and preferred stocks.

Convertible securities rank senior to common stocks in a corporation's
capital structure.  They are consequently of higher quality and entail
less risk than the corporation's common stock, although the extent to
which such risk is reduced depends in large measure upon the degree to
which the convertible security sells above its value as a fixed income
security.  The Fund may purchase convertible securities rated Ba or lower
by Moody's Investors Service, Inc.  ("Moody's") or BB or lower by Standard
& Poor's Ratings Group ("S&P") and may also purchase non-rated securities
considered by the manager to be of comparable quality.  Although the Fund
selects these securities primarily on the basis of their equity
characteristics, investors should be aware that debt securities rated in
these categories are considered high risk securities; the rating agencies
consider them speculative, and payment of interest and principal is not
considered well assured.  To the extent that such convertible securities
are acquired by the Fund, there is a greater risk as to the timely payment
of the principal of, and timely payment of interest or dividends on, such
securities than in the case of higher rated convertible securities.

Although the portfolio turnover rate will not be considered a limiting
factor, the Fund does not intend to engage in trading directed at
realizing short-term profits.  Nevertheless, changes in the portfolio will
be made promptly when determined to be advisable by reason of developments
not foreseen at the time of the investment decision, and usually without
reference to the length of time the security has been held.

The Fund may hold a portion of its assets in high grade short-term debt
securities and high grade corporate or government bonds in order to
provide liquidity.  The amount of assets the Fund may hold for liquidity
purposes is based on market conditions and the need to meet redemption
requests.  Short-term investments may include repurchase agreements with
banks or broker-dealers.  The Fund may also invest up to 20% of its total
assets in securities of foreign issuers and in investment companies.  The
Fund may engage in portfolio management strategies and techniques
involving options, futures contracts and options on futures.


EQUITY SECURITIES (All Funds except as otherwise noted)

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.

Preferred Stocks and Convertible Securities Convertible debt securities
and preferred stock entitle the holder to acquire the issuer's stock by
exchange or purchase for a predetermined rate.  Convertible securities are
subject both to the credit and interest rate risks associated with fixed
income securities and to the stock market risk associated with equity
securities.

Warrants Warrants acquired by a Fund entitle it to buy common stock from
the issuer at a specified price and time.  Warrants are subject to the
same market risks as stocks, but may be more volatile in price.  A Fund's
investment in warrants will not entitle it to receive dividends or
exercise voting rights and will become worthless if the warrants cannot be
profitably exercised before the expiration dates.

REITs Real estate investment trusts ("REITs") are pooled investment
vehicles that invest in real estate or real estate loans or interests.
Investing in REITs involves risks similar to those associated with
investing in equity securities of small capitalization companies.  REITs
are dependent upon management skills, are not diversified, and are subject
to risks of project financing, default by borrowers, self-liquidation, and
the possibility of failing to qualify for the exemption from taxation on
distributed amounts under the Internal Revenue Code of 1986, as amended
(the "Code").

FIXED INCOME SECURITIES (All Fund except as otherwise noted)

Corporate Debt Obligations 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
factors 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 The U.S. Government securities in which the
Funds may invest include bills, certificates of indebtedness, and notes
and bonds issued by the U.S. Treasury or by agencies or instrumentalities
of the U.S. Government. Some U.S. Government securities, such as U.S.
Treasury bills and bonds, are supported by the full faith and credit of
the U.S. Treasury; others are supported by the right of the issuer to
borrow from the U.S. Treasury; others are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations;
still others are supported only by the credit of the instrumentality.

Short-Term Investments  In certain circumstances the Funds may invest
without limitation in all types of short-term money market instruments,
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. To the extent a Fund is investing in short-term
investments as a temporary defensive posture, the applicable Fund's
investment objective may not be achieved.

Commercial Paper    Commercial paper consists of short-term (usually 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, such as one of the Funds 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 therefore, may only invest in a master demand note
to the extent that the investment would not violate the Fund's limits on
restricted and illiquid securities.

Commercial Bank Obligations (International Fund)  For the purposes of the
International Fund's investment policies with respect to bank obligations,
obligations of foreign branches of U.S. banks and of foreign banks may be
general obligations of the parent bank in addition to the issuing bank, or
may be limited by the terms of a specific obligation and by government
regulation.  As with investment in foreign securities in general,
investments in the obligations of foreign branches of U.S. banks and of
foreign banks may subject the International Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers.  Although the 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 International 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.

DERIVATIVE CONTRACTS (All Funds except otherwise noted)

Writing Covered Call Options    These Funds may write (sell) covered call
options for hedging purposes.  Covered call options will generally be
written on securities and currencies which, in the opinion of the Manager,
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.

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.  The Manager and the Company believe that writing covered call
options is less risky than writing uncovered or "naked" options, which the
Funds will not do.

Portfolio securities or currencies on which call options may be written
will be purchased solely on the basis of investment considerations
consistent with each 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 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 implied 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, the Manager 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,
which will be calculated as described in "Determination of Net Asset
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 or to
limit losses 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 at
market risk with respect to the security or currency.

Transaction costs relating to options activity are normally higher than
those applicable to purchases and sales of portfolio securities.

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, a 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.  A
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 Put Options     These Funds 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 the Manager
deems it desirable to continue to hold the security or currency because of
tax considerations.  The premium paid for the put option and any
transaction costs may reduce any capital gain or, in the case of currency,
ordinary income 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, as calculated
by the Fund.  The asset will be extinguished upon expiration of the option
or the delivery of the underlying security or currency upon the exercise
of the option.  The asset with respect to a listed option will also be
extinguished upon the writing of an identical option in a closing
transaction.

Purchasing Call Options     Each 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 a 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.

Each 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.  A call option would be purchased for this
purpose where tax considerations make it inadvisable to realize such gains
through a closing purchase transaction.  Call options may also be
purchased at times to avoid realizing losses that would result in a
reduction of the Fund's current return.

Options on Stock Indexes    Options on stock indices are similar to
options on stock, but the delivery requirements are different.  Instead of
giving the right to take or make delivery of stock at a specified price,
an option on a stock index gives the holder the right to receive an amount
of cash upon exercise of the option. Receipt of this cash amount will
depend upon the closing level of the stock index upon which the option is
based being greater than (in the case of a call) or less than (in the case
of a put) the exercise price of the option. The amount of cash received
will be the difference between the closing price of the index and the
exercise price of the option, multiplied by a specified dollar multiple.
 The writer of the option is obligated, in return for the premium
received, to make delivery of this amount.  Some stock index options are
based on a broad market index such as the Standard & Poor's 500 or the New
York Stock Exchange Composite Index, or a narrower index such as the
Standard & Poor's 100.  Indexes are also based on an industry or market
segment such as the AMEX Oil and Gas Index or the Computer and Business
Equipment Index.  Options are currently traded on The Chicago Board
Options Exchange, the New York Stock Exchange, the American Stock Exchange
and other exchanges.  Gain or loss to a Fund on transactions in stock
index options will depend on price movements in the stock market generally
(or in a particular industry or segment of the market) rather than price
movements of individual securities.  As with stock options, the Fund may
offset its position in stock index options prior to expiration by entering
into a closing transaction on an Exchange, or it may let the option expire
unexercised.

Futures Contracts  Each Fund may enter into interest rate or currency
Futures Contracts ("Futures"  or "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.

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.  The Company intends to enter into
Futures transactions only on exchanges or boards of trade where there
appears to be a liquid secondary market.  However, there can be no
assurance that such a market will exist for a particular contract at a
particular time.

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 normally 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 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.  The International Fund may,
however, enter into Futures transactions for non-hedging purposes, subject
to applicable law.

"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   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 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.

New options and Futures Contracts and various combinations thereof
continue to be developed and the International Fund may invest in any such
options and contracts as may be developed to the extent consistent with
its investment objectives and regulatory requirements applicable to
investment companies.

Forward Currency Contracts, Options on Currency and Currency Swaps
(International Fund) A forward currency contract is an obligation to
purchase or sell a currency against another currency at a future date and
price as agreed upon by the parties. The Fund may either accept or make
delivery of the currency at the maturity of the forward contract or, prior
to maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract.  The International Fund engages in forward
currency transactions in anticipation of, or to protect itself against,
fluctuations in exchange rates.  The Fund might sell a particular foreign
currency forward, for example, when it holds bonds denominated in that
currency but anticipates, and seeks to be protected against, decline in
the currency against the U.S. dollar.  Similarly, the Fund might sell the
U.S. dollar forward when it holds bonds denominated in U.S. dollars but
anticipates, and seeks to be protected against, a decline in the U.S.
dollar relative to other currencies.  Further, the Fund might purchase a
currency forward to "lock in" the price of securities denominated in that
currency which it anticipates purchasing.

The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise.  In addition, the 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.  The International Fund,
however, may enter into forward contracts with deposit requirements or
commissions.

The Fund may purchase put and call options on foreign currencies to reduce
the risk of currency exchange fluctuation.  Premiums paid for such put and
call options will be limited to no more than 5% of the Fund's net assets
at any given time.  Options on foreign currencies operate similarly to
options on securities, and are traded primarily in the over-the-counter
market, although certain options on foreign currencies are traded on
United States and foreign exchanges.  Exchange-traded options are expected
to be purchased by the Fund from time to time and over-the-counter options
may also be purchased, but only when the manager believes that a liquid
secondary market exists for such options, although there can be no
assurance that a liquid secondary market will exist for a particular
option at any specific time. Options on foreign currencies are affected by
all those factors which influence foreign exchange rates and investment
generally.

A put option 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.  A 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.

The value of a foreign currency option is dependent upon the value of the
underlying foreign currency relative to the U.S. dollar.  As a result, the
price of the option position may vary with changes in the value of either
or both currencies and has no relationship to the investment merits of a
foreign security.  Because foreign currency transactions occurring in the
interbank market (conducted directly between currency traders, usually
large commercial banks, and their customers) involve substantially larger
amounts than those that may be involved in the use of foreign currency
options, investors may be disadvantaged by having to deal in an odd lot
market (generally consisting of transactions of less than $1 million) for
the underlying foreign currencies at prices that are less favorable than
for round lots.

There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations
available through dealers or other market sources be firm or revised on a
timely basis.  Quotation information available is generally representative
of very large transactions in the interbank market and thus may not
reflect relatively smaller transactions (i.e., less than $1 million) where
rates may be less favorable.  The interbank market in foreign currencies
is a global, around-the-clock market.  To the extent that the U.S. options
markets are closed while the markets for the underlying currencies remain
open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options markets.

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.  The staff of the Securities and
Exchange Commission ("SEC") has taken the position that, in general,
purchased OTC options and the underlying securities used to cover written
OTC options are illiquid securities. However, the Fund may treat as liquid
the underlying securities used to cover written OTC options, provided it
has arrangements with certain qualified dealers who agree that the Fund
may repurchase any option it writes for a maximum price to be calculated
by a predetermined formula.  In these cases, the OTC option itself would
only be considered illiquid to the extent that the maximum repurchase
price under the formula exceeds the intrinsic value of the option.

The Fund may also enter into currency swaps.  A currency swap is an
arrangement whereby 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.  Forward foreign currency contracts and currency
swaps are established in the interbank market conducted directly between
currency traders (usually large commercial banks or other financial
institutions) on behalf of their customers.

Interest Rate Swaps, Caps and Floors (International Fund) Among the
hedging transactions into which the International Fund may enter are
interest rate swaps and the purchase or sale of interest rate caps and
floors. The 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.  The Fund intends to use
these transactions as a hedge and not as a speculative investment.  The
Fund will not sell interest rate caps or floors that it does not own.
Interest rate swaps involve the exchange by the Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange
of floating rate payments for fixed rate payments.  The purchase of an
interest rate cap entitles the purchaser, to the extent that a specified
index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such
interest rate cap.  The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate floor.

The Fund may enter into interest rate 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, the Manager and the Fund believes such
obligations do not constitute senior securities and, accordingly will not
treat them as being subject to their borrowing restrictions.  The net
amount of the excess, if any, of the 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 a custodian that satisfies the requirements of the
1940 Act.  The Fund will not enter into any interest rate swap, cap or
floor 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.  If there is a default by the other party
to such a transaction, the Fund will have contractual remedies pursuant to
the agreements related to the transaction.  Certain swap agreements may be
considered illiquid for purposes of a Fund's investment restriction
relating to illiquid securities.

Use of Segregated and Other Special Accounts Use of many hedging and other
strategic transactions including currency and market index transactions by
the Fund will require, among other things, that the Fund segregate cash,
liquid securities or other assets with its Custodian, or a designated sub-
custodian, to the extent the Fund's obligations are not otherwise
"covered" through ownership of the underlying security, financial
instrument or currency.  In general, either the full amount of any
obligation by the Fund to pay or deliver securities or assets must be
covered at all times by the securities, instruments or currency required
to be delivered, or, subject to any regulatory restrictions, appropriate
securities as required by the 1940 Act at least equal to the current
amount of the obligation must be segregated with the custodian or sub-
custodian.  The segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer
necessary to segregate them.  A call option on securities written by the
Fund, for example, will require the Fund to hold the securities subject to
the call (or securities convertible into the needed securities without
additional consideration)  or to segregate liquid securities sufficient to
purchase and deliver the securities if the call is exercised.  A call
option by the Fund on an index will require the Fund to own portfolio
securities that correlate with the index or to segregate liquid securities
equal to the excess of the index value over the exercise price on a
current basis.  A put option on securities written by the Fund will
require the Fund to segregate liquid securities equal to the exercise
price.  Except when the Fund enters into a forward contract in connection
with the purchase or sale of a security denominated in a foreign currency
or for other non-speculative purposes, which requires no segregation, a
currency contract that obligates the Fund to buy or sell a foreign
currency will generally require the Fund to hold an amount of that
currency, liquid securities denominated in that currency equal to the
Fund's obligations or to segregate liquid securities equal to the amount
of the Fund's obligations.

OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices, and OCC-issued and exchange-
listed index options will generally provide for cash settlement, although
the Fund will not be required to do so.  As a result, when the Fund sells
these instruments it will segregate an amount of assets equal to its
obligations under the options.  OCC-issued and exchange-listed options
sold by the Fund other than those described above generally settle with
physical delivery, and the Fund will segregate an amount of assets equal
to the full value of the option.  OTC options settling with physical
delivery or with an election of either physical delivery or cash
settlement will be treated the same as other options settling with
physical delivery.

In the case of a futures contract or an option on a futures contract, the
Fund must deposit initial margin and, in some instances, daily variation
margin in addition to segregating assets sufficient to meet its
obligations to purchase or provide securities or currencies, or to pay the
amount owed at the expiration of an index-based futures contract.  These
assets may consist of cash, cash equivalents, liquid securities or other
acceptable assets. The Fund will accrue the net amount of the excess, if
any, of its obligations relating to swaps over its entitlements with
respect to each swap on a daily basis and will segregate with its
custodian, or designated sub-custodian, an amount of cash or liquid
securities having an aggregate value equal to at least the accrued excess.
Caps, floors and collars require segregation of assets with a value equal
to the Fund's net obligation, if any.

Hedging and other strategic transactions may be covered by means other
than those described above when consistent with applicable regulatory
policies.  The Fund may also enter into offsetting transactions so that
its combined position, coupled with any segregated assets, equals its net
outstanding obligation in related options and hedging and other strategic
transactions.  The Fund could purchase a put option, for example, if the
strike price of that option is the same or higher than the strike price of
a put option sold by the Fund.  Moreover, instead of segregating assets if
it holds a futures contract or forward contract, the Fund could purchase
a put option on the same futures contract or forward contract with a
strike price as high or higher than the price of the contract held.  Other
hedging and other strategic transactions may also be offset in
combinations. If the offsetting transaction terminates at the time of or
after the primary transaction, no segregation is required, but if it
terminates prior to that time, assets equal to any remaining obligation
would need to be segregated.

OTHER PRACTICES

Securities of Foreign Issuers (All Funds) The Large Cap and Growth and
Income Funds may invest up to 20% of their assets in securities of foreign
issuers, and the International Fund normally invests at least 65% of its
assets in a diversified portfolio of equity securities of foreign issuers.
 Investments in securities of foreign entities and securities denominated
in foreign currencies involve risks not typically involved in domestic
investment, including fluctuations in foreign exchange rates, future
foreign political and economic developments, and the possible imposition
of exchange controls or other foreign or United States governmental laws
or restrictions applicable to such investments. Since each Fund may invest
in securities denominated or quoted in currencies other than the U.S.
dollar, changes in foreign currency exchange rates may affect the value of
investments in the portfolio and the accrued income and unrealized
appreciation or depreciation of investments. Changes in foreign currency
rates relative to the U.S. dollar will affect the U.S. dollar value of the
Fund's assets denominated in that currency and the Fund's yield on such
assets.

Each Fund may also purchase foreign securities in the form of American
Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs") or
other securities representing underlying shares of foreign companies. ADRs
are publicly traded on exchanges or over-the-counter in the United States
and are issued through "sponsored" or "unsponsored" arrangements. In a
sponsored ADR arrangement, the foreign issuer assumes the obligation to
pay some or all of the depositary's transaction fees, whereas under an
unsponsored arrangement, the foreign issuer assumes no obligation and the
depositary's transaction fees are paid by the ADR holders. In addition,
less information is available in the United States about an unsponsored
ADR than about a sponsored ADR, and the financial information about a
company may not be as reliable for an unsponsored ADR as it is for a
sponsored ADR. Each Fund may invest in ADRs through both sponsored and
unsponsored arrangements.

With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could affect investment in
those countries. There may be less publicly available information about a
foreign security than about a United States security, and foreign entities
may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those of United States entities.
In addition, certain foreign investments made by the Fund may be subject
to foreign withholding taxes, which would reduce the Fund's total return
on such investments and the amounts available for distributions by the
Fund to its shareholders.  Foreign financial markets, while growing in
volume, have, for the most part, substantially less volume than United
States markets, and securities of many foreign companies are less liquid
and their prices more volatile than securities of comparable domestic
companies.

The foreign markets also have different clearance and settlement
procedures, and 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. Delays in settlement
could result in temporary periods when assets of a Fund are not invested
and no return is earned thereon. The inability of each Fund to make
intended security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result either in
losses to the 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. Costs associated with
transactions in foreign securities, including custodial costs and foreign
brokerage commissions, are generally higher than with transactions in
United States securities. In addition, each Fund will incur cost in
connection with conversions between various currencies. There is generally
less government supervision and regulation of exchanges, financial
institutions and issuers in foreign countries than there are in the United
States. These risks may be intensified in the case of investments in
developing or emerging markets. In many developing markets, there is less
government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States.
The foreign securities markets of many of the countries in which a Fund
may invest may also be smaller, less liquid, and subject to greater price
volatility than those in the United States.  Finally, in the event of a
default on any such foreign debt obligations, it may be more difficult for
a Fund to obtain or to enforce a judgment against the issuers of such
securities.

A developing country generally is considered to be a country that is in
the initial stages of its industrialization cycle. Investing in the equity
and fixed-income markets of developing countries involves exposure to
economic structures that are generally less diverse and mature, and to
political systems that can be expected to have less stability, than those
of developed countries. Historical experience indicates that the markets
of developing countries have been more volatile than the markets of the
more mature economics of developed countries; however, such markets often
have provided higher rates of return to investors.  For more information
regarding the risks of investing in securities of emerging markets, see
"Risk Factors - Securities of Developing/Emerging Markets Countries"
below.

Illiquid and Restricted Securities (All Funds)  The Funds may invest in
restricted securities. As used herein, restricted securities are those
that have been sold in the United States without registration under the
Securities Act of 1933 and are thus subject to restrictions on resale.
Excluded from the limitation, however, are any restricted securities which
are eligible for resale pursuant to Rule 144A under the Securities Act of
1933 and which have been determined to be liquid by the Trustees or by the
Manager pursuant to board-approved guidelines. The determination of
liquidity is based on the volume of reported trading in the institutional
secondary market for each security. This investment practice could have
the effect of increasing the level of illiquidity in each Fund to the
extent qualified institutional buyers become for a time uninterested in
purchasing these restricted securities. These difficulties and delays
could result in a Fund's inability to realize a favorable price upon
disposition of restricted securities, and in some cases might make
disposition of such securities at the time desired by the Fund impossible.
Since market quotations are not readily available for restricted
securities, such securities will be valued by a method that the Trustees
believe accurately reflects fair value.

Repurchase Agreements (All Funds)  Each Fund may enter into repurchase
agreements with broker-dealers or domestic banks. A repurchase agreement
is a short-term investment in which the purchaser (i.e., the Fund)
acquires ownership of a debt security and the seller agrees to repurchase
the obligation at a future time and set price, usually not more than seven
days from the date of purchase, thereby determining the yield during the
purchaser's holding period.  Repurchase agreements are collateralized by
the underlying debt securities and may be considered to be loans under the
1940 Act.  The Fund will make payment for such securities only upon
physical delivery or evidence of book entry transfer to the account of a
custodian or bank acting as agent.  The seller under a repurchase
agreement is required to maintain the value of the underlying securities
marked to market daily at not less than the repurchase price.  The
underlying securities (normally securities of the U.S. Government, or its
agencies and instrumentalities), may have maturity dates exceeding one
year.  The Fund does not bear the risk of a decline in value of the
underlying security unless the seller defaults under its repurchase
obligation.  In the event of a bankruptcy or other default of a seller of
a repurchase agreement, the Fund could experience both delays in
liquidating the underlying securities and loss including: (a) possible
decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto, (b) possible lack of access
to income on the underlying security during this period, and (c) expenses
of enforcing its rights.

For the purpose of investing in repurchase agreements, the Manager may
aggregate the cash that certain funds advised or subadvised by the Manager
or its affiliates would otherwise invest separately into a joint account.
The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the
net revenue generated. The Manager believes that the joint account
produces efficiencies and economies of scale that may contribute to
reduced transaction costs, higher returns, higher quality investments and
greater diversity of investments for a Fund than would be available to a
Fund investing separately. The manner in which the joint account is
managed is subject to conditions set forth in an SEC exemptive order
authorizing this practice, which conditions are designed to ensure the
fair administration of the joint account and to protect the amounts in
that account.

Reverse Repurchase Agreements (International Fund) The Fund may enter into
reverse repurchase agreements with broker/dealers and other financial
institutions.  Such agreements involve the sale of portfolio securities
with an agreement to repurchase the securities at an agreed-upon price,
date and interest payment and are considered to be borrowings by the Fund
and are subject to the borrowing limitations set forth under "Investment
Restrictions." Since the proceeds of 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
portfolio securities involved during the term of the reverse repurchase
agreement, while in many cases it will be able to keep some of the
interest income associated with those securities.  Such transactions are
only advantageous if the 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 the Manager 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 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.

Short Sales Against the Box (All Funds)  Each Fund may from time to time
make short sales of securities it owns or has the right to acquire through
conversion or exchange of other securities it owns. A short sale is
"against the box" to the extent that the Fund contemporaneously owns or
has the right to obtain at no added cost securities identical to those
sold short. In a short sale, the Fund does not immediately deliver the
securities sold and does not receive the proceeds from the sale. The Fund
is said to have a short position in the securities sold until it delivers
the securities sold, at which time it receives the proceeds of the sale.
The Fund may not make short sales or maintain a short position if to do so
would cause more than 25% of its total assets, taken at market value, to
be held as collateral for such sales.

To secure its obligation to deliver the securities sold short, the Fund
will deposit in escrow in a separate account with its custodian an equal
amount of the securities sold short or securities convertible into or
exchangeable for such securities. The Fund may close out a short position
by purchasing and delivering an equal amount of the securities sold short,
rather than by delivering securities already held by the Fund, because the
Fund may want to continue to receive interest and dividend payments on
securities in its portfolio that are convertible into the securities sold
short. However, the Fund will not purchase and deliver new securities to
satisfy its short order if such purchase and sale would cause the Fund to
derive more than 30% of its gross income from the sale of securities held
for less than three months.

Leverage (International Fund)  The Fund may borrow from banks, on a
secured or unsecured basis, up to 25% of the value of its assets. 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."  Leverage creates an opportunity for increased returns to
shareholders of the Fund but, at the same time, creates special risk
considerations. For example, leverage may exaggerate changes in the net
asset value of the Fund's shares and in the Fund's yield. Although the
principal or stated value of such borrowings will be fixed, the Fund's
assets may change in value during the time the borrowing is outstanding.
Leverage will create interest or dividend expenses for the 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 exceed
the interest or dividends 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 the Fund. The
Fund is required to maintain continuous asset coverage of 300% with
respect to such borrowings, and to sell (within three days) sufficient
portfolio holdings to restore such coverage, if it should decline to less
than 300% due to market fluctuations or otherwise, even if disadvantageous
from an investment standpoint.

Lending Portfolio Securities (All Funds)  Consistent with applicable
regulatory requirements each Fund has the ability to lend securities from
its portfolio to brokers, dealers and other financial organizations.  A
Fund will not lend its portfolio securities to Salomon Smith Barney or its
affiliates unless it has applied for and received specific authority to do
so from the SEC.  Loans of portfolio securities will be collateralized by
cash, letters of credit or U.S. government securities in an amount at
least equal to the current market value of the loaned securities.  From
time to time, a Fund may return a part of the interest earned from the
investment of collateral received for securities loaned to the borrower
and/or a third party, which is unaffiliated with the Fund or with Salomon
Smith Barney, and which is acting as a "finder".

In lending its securities, a Fund can increase its income by continuing to
receive interest on the loaned securities as well as by either investing
the cash collateral in short-term instruments or obtaining yield in the
form of interest paid by the borrower when U.S. government securities are
used as collateral.  Requirements of the SEC, which may be subject to
further modifications, currently provide that the following conditions
must be met whenever a Fund's portfolio securities are loaned: (a) the
Fund must receive at least 100% cash collateral or equivalent securities
from the borrower; (b) the borrower must increase such collateral whenever
the market value of the securities loaned rises above the level of such
collateral; (c) the Fund must be able to terminate the loan at any time;
(d) the Fund must receive reasonable interest on the loan, as well as an
amount equal to dividends, interest or other distributions on the loaned
securities, and any increase in market value; (e) the Fund may pay only
reasonable custodian fees in connection with the loan; and (f) voting
rights on the loaned securities may pass to the borrower; provided,
however, that if a material event adversely affecting the investment in
the loaned securities occurs, the Board of Trustees must terminate the
loan and regain the right to vote the securities.  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 be made to firms deemed by  to be
of good standing and will not be made unless, in the judgment of the
Manager the consideration to be earned from such loans would justify the
risk.

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 fluctuations in the market value of its portfolio
positions.

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.

Lower Rated and Below Investment Grade Fixed Income Securities  Securities
which are rated BBB by S&P or Baa by Moody's are generally regarded as
having adequate capacity to pay interest and repay principal, but may have
some speculative characteristics.  Securities rated below Baa by Moody's
or BBB by S&P may have speculative characteristics, including the
possibility of default or bankruptcy of the issuers of such securities,
market price volatility based upon interest rate sensitivity, questionable
creditworthiness and relative liquidity of the secondary trading market.
 Because high yield bonds have been found to be more sensitive to adverse
economic changes or individual corporate developments and less sensitive
to interest rate changes than higher-rated investments, an economic
downturn could disrupt the market for high yield bonds and adversely
affect the value of outstanding bonds and the ability of issuers to repay
principal and interest.  In addition, in a declining interest rate market,
issuers of high yield bonds may exercise redemption or call provisions,
which may force a Fund, to the extent it owns such securities, to replace
those securities with lower yielding securities.  This could result in a
decreased return.

Subsequent to its purchase by a Fund, an issue of securities may cease to
be rated or its rating may be reduced below the minimum required for
purchase by the Fund.  In addition, it is possible that Moody's, S&P and
other ratings agencies might not timely change their ratings of a
particular issue to reflect subsequent events.

Foreign Securities  Investments in securities of foreign issuers involve
certain risks not ordinarily associated with investments in securities of
domestic issuers.  Such risks include fluctuations in foreign exchange
rates, future political and economic developments, and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions.  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.  In
addition, with respect to certain countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect
investments in those countries.

There may be less publicly available information about a foreign company
than about a U.S. company, and foreign companies may not be subject to
accounting, auditing, and financial reporting standards and requirements
comparable to or as uniform as those of U.S. companies.  Foreign
securities markets, while growing in volume, have, for the most part,
substantially less volume than U.S. markets, and securities of many
foreign companies are less liquid and their price more volatile than
securities of comparable U.S. companies.  Transaction costs on foreign
securities markets are generally higher than in the U.S.  There is
generally less government supervision and regulation of exchanges, brokers
and issuers than there is in the U.S. A Fund might have greater difficulty
taking appropriate legal action in foreign courts. Dividend and interest
income from foreign securities will generally be subject to withholding
taxes by the country in which the issuer is located and may not be
recoverable by the Fund or the investors.  Capital gains are also subject
to taxation in some foreign countries.

Currency Risks  The U.S. dollar value of securities denominated in a
foreign currency will vary with changes in currency exchange rates, which
can be volatile.  Accordingly, changes in the value of the currency in
which a Fund's investments are denominated relative to the U.S. dollar
will affect the Fund's net asset value.  Exchange rates are generally
affected by the forces of supply and demand in the international currency
markets, the relative merits of investing in different countries and the
intervention or failure to intervene of U.S. or foreign governments and
central banks.  However, currency exchange rates may fluctuate based on
factors intrinsic to a country's economy.  Some emerging market countries
also may have managed currencies, which are not free floating against the
U.S. dollar.  In addition, emerging markets are subject to the risk of
restrictions upon the free conversion of their currencies into other
currencies.  Any devaluations relative to the U.S. dollar in the
currencies in which a Fund's securities are quoted would reduce the Fund's
net asset value per share.

Special Risks of Countries in the Asia Pacific Region  Certain of the
risks associated with international investments are heightened for
investments in these countries. For example, some of the currencies of
these countries have experienced devaluations relative to the U.S. dollar,
and adjustments have been made periodically in certain of such currencies.
 Certain countries, such as Indonesia, face serious exchange constraints.
 Jurisdictional disputes also exist, for example, between South Korea and
North Korea.  In addition, Hong Kong reverted to Chinese administration on
July 1, 1997.  The long-term effects of this reversion are not known at
this time.

Securities of Developing/Emerging Markets Countries.   A developing or
emerging markets country generally is considered to be a country that is
in the initial stages of its industrialization cycle. Investing in the
equity markets of developing countries involves exposure to economic
structures that are generally less diverse and mature, and to political
systems that can be expected to have less stability, than those of
developed countries. Historical experience indicates that the markets of
developing countries have been more volatile than the markets of the more
mature economies of developed countries; however, such markets often have
provided higher rates of return to investors.

One or more of the risks discussed above could affect adversely the
economy of a developing market or a Fund's investments in such a market.
 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 of governments may remain unsettled.  There
can be no assurance that any investments that a Fund might make in such
emerging markets would not be expropriated, nationalized or otherwise
confiscated at some time in the future.  In such an event, the Fund could
lose its entire investment in the market involved.  Moreover, changes in
the leadership or policies of such markets could halt the expansion or
reverse the liberalization of foreign investment policies now occurring in
certain of these markets and adversely affect existing investment
opportunities.

Many of a Fund's investments in the securities of emerging markets may be
unrated or rated below investment grade. Securities rated below investment
grade (and comparable unrated securities) are the equivalent of high
yield, high risk bonds, commonly known as "junk bonds." 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 business,
financial, economic, or political conditions.

Derivative Instruments  In accordance with its investment policies, each
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.  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.  Transactions in derivative
instruments can be, but are not necessarily, riskier than investments in
conventional stocks, bonds and money market instruments.

The following are the principal risks associated with derivative
instruments.

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:  Certain types of derivatives are subject to the risk that
the counterparty may fail to honor contract terms.

Liquidity and valuation risk:  Many derivative instruments are traded in
institutional markets rather than on an exchange.  Certain derivative
instruments 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 such instrument in relation to 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 Risks of Using Futures Contracts and Options on Futures Contracts
 The prices of Futures Contracts are volatile and are influenced by, among
other things, 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 or 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.  A 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.  Where
a Fund enters into Futures transactions for non-hedging purposes, it will
be subject to greater risks and could sustain losses which are not offset
by gains on other Fund assets.

In order to be certain that each Fund has sufficient assets to satisfy its
obligations under a Futures Contract, the Fund segregates and commits to
back the Futures Contract an amount of cash and liquid securities equal in
value to the current value of the underlying instrument less the margin
deposit.

Most U.S. 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.
As with options on debt securities, the holder of an option may terminate
his position by selling an option of the same series.  There is no
guarantee that such closing transactions can be effected.  The Fund will
be required to deposit initial margin and maintenance margin with respect
to put and call options on Futures Contracts described above, and, in
addition, net option premiums received will be included as initial margin
deposits.

In addition to the risks which apply to all option transactions, there are
several special risks relating to options on Futures Contracts.  The
ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market.
 It is not certain that this market will develop. The Fund will not
purchase options on Futures Contracts on any exchange unless and until, in
the Manager's opinion, the market for such options had developed
sufficiently that the risks in connection with options on Futures
Contracts are not greater than the risks in connection with Futures
Contracts.  Compared to the use of Futures Contracts, the purchase of
options on Futures Contracts involves less potential risk to the Fund
because the maximum amount of risk is the premium paid for the options
(plus transaction costs).  Writing an option on a Futures Contract
involves risks similar to those arising in the sale of Futures Contracts,
as described above.

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
fund's portfolio; (iv) there is uncertainty concerning the fluctuation of
the Euro relative to non-Euro currencies; 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 a Fund.

Portfolio Turnover  Each Fund may purchase or sell securities without
regard to the length of time the security has been held and thus may
experience a high rate of portfolio turnover. A 100% turnover rate would
occur, for example, if all the securities in a portfolio were replaced in
a period of one year. Under certain market conditions a Fund may
experience a high rate of portfolio turnover.  The rate of portfolio
turnover is not a limiting factor when the Manager deems it desirable to
purchase or sell securities or to engage in options transactions.  High
portfolio turnover involves correspondingly greater transaction costs,
including any brokerage commissions, which are borne directly by the
respective Fund and may increase the recognition of short-term, rather
than long-term, capital gains if securities are held for one year or less
and may be subject to applicable income taxes.  (For further information
see "Portfolio Turnover" below).

Other Risks.  In the event of a shortage of the underlying securities
deliverable on exercise of an option, the Options Clearing Corporation has
the authority to permit other, generally comparable securities to be
delivered in fulfillment of option exercise obligations.  If the Options
Clearing Corporation exercises its discretionary authority to allow such
other securities to be delivered it may also adjust the exercise prices of
the affected options by setting different prices at which otherwise
ineligible securities may be delivered.  As an alternative to permitting
such substitute deliveries, the Options Clearing Corporation may impose
special exercise settlement procedures.

The hours of trading for options on U.S. government securities may not
conform to the hours during which the underlying securities are traded.
 To the extent that the options markets close before the markets for the
underlying securities, significant price and rate movements can take place
in the underlying markets that cannot be reflected in the options markets.

Options are traded on exchanges on only a limited number of U.S.
government securities, and exchange regulations limit the maximum number
of options which may be written or purchased by a single investor or a
group of investors acting in concert.  The Company and other clients
advised by affiliates of Salomon Smith Barney may be deemed to constitute
a group for these purposes.  In light of these limits, the Board of
Trustees may determine at any time to restrict or terminate the public
offering of the Fund's shares (including through exchanges from the other
Funds).

Exchange markets in options on U.S. government securities are a relatively
new and untested concept.  It is impossible to predict the amount of
trading interest that may exist in such options, and there can be no
assurance that viable exchange markets will develop or continue.

INVESTMENT RESTRICTIONS

Each Fund has adopted the following restrictions which may not be changed
with respect to any Fund without approval by the vote of a majority of
such Fund's outstanding voting shares, which is defined by the 1940 Act as
the lesser of (i) 67% or more of the voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy; or (ii) more
than 50% of the Fund's outstanding voting securities.  The percentage
limitations need only be met at the time the investment is made or after
relevant action is taken.

The following restrictions apply to all Funds

A Fund shall not:

1.  Lend money except by the purchase of bonds or other debt obligations
of types commonly offered publicly or privately and purchased by financial
institutions, including investments in repurchase agreements.  A Fund will
not invest in repurchase agreements maturing in more than seven days
(unless subject to a demand feature) if any such investment, together with
any illiquid securities (including securities which are subject to legal
or contractual restrictions on resale) held by the Fund, exceeds 10% of
the market or other fair value of its total net assets (15% in the case of
International Fund); provided, however, that illiquid securities shall
exclude shares of other open-end investment companies owned by the Fund
but include the Fund's pro rata portion of the securities and other assets
owned by any such company.  See "Repurchase Agreements";

2.  Underwrite securities of other companies, except insofar as a Fund
might be deemed to be an underwriter for purposes of the Securities Act of
1933 (the "1933 Act") in the resale of any securities owned by the Fund;

3.  Lend its portfolio securities in excess of 10% (15% in the case of
International Fund) of its total assets, both taken at market value,
provided that any loans shall be in accordance with the guidelines
established for such loans by the Trustees as described under "Loans of
Portfolio Securities," including the maintenance of collateral from the
borrower equal at all times to the current market value of the securities
loaned;

4.  With respect to 75% of its assets, invest more than 5% of its assets
in the securities of any one issuer (except obligations of the
U.S. Government, its agencies or instrumentalities and repurchase
agreements secured thereby) or purchase more than 10% of the outstanding
voting securities of any one issuer.  Neither limitation shall apply to
the acquisition of shares of other open-end investment companies to the
extent permitted by rule or order of the SEC exempting them from the
limitations imposed by Section 12(d)(1) of the 1940 Act;

5.  Invest more than 25% of the value of its total assets in securities of
issuers in any particular industry; provided, however, this limitation
shall exclude shares of other open-end investment companies owned by the
Fund but include the Fund's pro rata portion of the securities and other
assets owned by any such company.  (This does not restrict any of the
Funds from investing in obligations of the U.S. Government and repurchase
agreements secured thereby); and

6.  With respect to all Funds other than International Fund, borrow in
excess of 10% of the market or other fair value of its total assets, or
pledge its assets to an extent greater than 5% of the market or other fair
value of its total assets, provided that so long as any borrowing exceeds
5% of the value of the Fund's total assets, the Fund shall not purchase
portfolio securities.  Any such borrowings shall be from banks and shall
be undertaken only as a temporary measure for extraordinary or emergency
purposes.  With respect to International Fund, borrow money from banks on
a secured or unsecured basis, in excess of 25% of the value of its total
assets.  Deposits in escrow in connection with the writing of covered call
or secured put options, or in connection with the purchase or sale of
forward contracts, futures contracts, foreign currency futures and related
options, are not deemed to be a pledge or other encumbrance.  This
restriction shall not prevent International Fund from entering into
reverse repurchase agreements, provided that reverse repurchase agreements
and any transactions constituting borrowing by the Fund may not exceed
33 1/3% of the Fund's net assets. International Fund may not mortgage or
pledge its assets except to secure borrowings permitted under this
restriction.



The following restrictions apply to Large Cap Fund and Growth and Income
Fund

Each of these Funds shall not:

1.  Make any investment in real estate, commodities or commodities
contracts, or warrants except that the Funds may engage in transactions in
futures and related options, and Large Cap Fund may acquire warrants or
other rights to subscribe to securities of companies issuing such warrants
or rights, or of parents or subsidiaries of such companies, although Large
Cap Fund may not invest more than 5% of its net assets in such securities
valued at the lower of cost or market, nor more than 2% of its net assets
in such securities (valued on such basis) which are not listed on the New
York or American Stock Exchanges (warrants and rights represent options,
usually for a specified period of time, to purchase a particular security
at a specified price from the issuer).  Warrants or rights acquired in
units or attached to other securities are not subject to the foregoing
limitations;

2.  Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities.  The deposit or payment by a Fund of an initial or
variation margin in connection with futures contracts or related option
transactions is not considered the purchase of a security on margin;

3.  Invest in securities of any company if any officer or trustee of the
Company or of the Manager owns more than 1/2 of 1% of the outstanding
securities of such company, and such officers and trustees own more than
5% of the outstanding securities of such issuer;

4.  Invest in oil or other mineral leases, rights or royalty contracts or
exploration or development programs, except that Large Cap Fund and Growth
and Income Fund, may invest in the securities of companies which invest in
or sponsor such programs;

5.  Invest in companies for the purpose of acquiring control or management
thereof;

6.  Invest in the securities of other open-end investment companies, or
invest in the securities of closed-end investment companies except through
purchase in the open market in a transaction involving no commission or
profit to a sponsor or dealer (other than the customary brokers
commission) or as part of a merger, consolidation or other acquisition,
except that Large Cap Fund and Growth and Income Fund may acquire shares
of other open-end investment companies to the extent permitted by rule or
order of the SEC exempting them from the limitations imposed by
Section 12(d)(1) of the 1940 Act;

7.  Purchase a restricted security or a security for which market
quotations are not readily available if as a result of such purchase more
than 5% of the Fund's assets would be invested in such securities;
provided, however, that with respect to Large Cap Fund and Growth and
Income Fund, this limitation shall exclude shares of other open-end
investment companies owned by the Fund but include the Fund's pro rata
portion of the securities and other assets owned by any such company.
Illiquid securities include securities subject to legal or contractual
restrictions on resale, which include repurchase agreements which have a
maturity of longer than seven days.  This policy does not apply to
restricted securities eligible for resale pursuant to Rule 144A under the
1933 Act which the Trustees or the manager under Board approved guidelines
may determine are liquid nor does it apply to other securities for which,
notwithstanding legal or contractual restrictions on resale, a liquid
market exists;

8.  Invest more than 5% of its assets in companies having a record
together with predecessors, of less than three years' continuous
operation, except that Large Cap Fund and Growth and Income Fund may
acquire shares of other open-end investment companies to the extent
permitted by rule or order of the SEC exempting them from the limitations
imposed by Section 12(d)(1) of the 1940 Act;

9.  Engage in option writing for speculative purposes or purchase call or
put options on securities if, as a result, more than 5% of its net assets
of the Fund would be invested in premiums on such options; and

10.  Purchase any security issued by any company deriving more than 25% of
its gross revenues from the manufacture of alcohol or tobacco.

The Company has adopted additional investment restrictions, with respect
to the above referenced Funds, which may be changed by the Trustees
without a vote of shareholders, as follows:

The Company shall not make short sales of securities unless at the time of
sale a Fund owns or has the right to acquire at no additional cost
securities identical to those sold short; provided that this prohibition
does not apply to the writing of options or the sale of forward contracts,
futures, foreign currency futures or related options.

Foreign Investments.  Large Cap Fund and Growth and Income Fund may not
invest in the securities of a foreign issuer if, at the time of
acquisition, more than 20% of the value of the Fund's total assets would
be invested in such securities.

Futures Contracts and Options.   In addition, Large Cap Fund and Growth
and Income Fund may not write, purchase or sell puts, calls or
combinations thereof, except that each Fund may (a) write covered call
options with respect to any part or all of its portfolio securities, write
secured put options, or enter into closing purchase transactions with
respect to such options, (b) purchase and sell put options to the extent
that the premiums paid for all such options do not exceed 10% of its total
assets and only if the Fund owns the securities covered by the put option
at the time of purchase, and (c) engage in futures contracts and related
options transactions as described herein.  Large Cap Fund and Growth and
Income Fund may purchase put and call options which are purchased on an
exchange in other markets, or currencies and, as developed from time to
time, various futures contracts on market indices and other instruments.
 Purchasing options may increase investment flexibility and improve total
return, but also risks loss of the option premium if an asset the Fund has
the option to buy declines in value.

The following restrictions apply to International Fund:

The Fund shall not:

1.  Make any investment in real estate, commodities or commodities
contracts, except that each Fund may engage in transactions in forward
commitments, currency transactions, futures contracts, foreign currency
futures and related options and may purchase or sell securities which are
secured by real estate or interests therein; and

2. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Fund from (i) making and
collateralizing any permitted borrowings, (ii) making any permitted loans
of its portfolio securities, or (iii) entering into repurchase agreements,
utilizing options, futures contracts and foreign currency futures and
options thereon, forward contracts, forward commitments and other
investment strategies and instruments that would be considered "senior
securities" but for the maintenance by the Fund of a segregated account
with its custodian or some other form of "cover."

The Company has adopted additional investment restrictions with respect to
International Fund, which may be changed by the Trustees without a vote of
shareholders.  These restrictions provide that the Fund shall not:

1.  Purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities.  The deposit or payment by the Fund of an initial or
variation margin in connection with forward contracts, futures contracts,
foreign currency futures or related option transactions is not considered
the purchase of a security on margin;

2.  Invest in securities of any company if any officer or trustee of the
Company or of the manager owns more than  1/2 of 1% of the outstanding
securities of such company, and such officers and trustees own more than
5% of the outstanding securities of such issuer;

3.  Invest in oil or other mineral leases, rights or royalty contracts or
exploration or development programs, except that International Fund may
invest in the securities of companies which invest in or sponsor such
programs;

4.  Invest in companies for the purpose of acquiring control or management
thereof;

5.  Invest in the securities of other open-end investment companies, or
invest in the securities of closed-end investment companies except through
purchase in the open market in a transaction involving no commission or
profit to a sponsor or dealer (other than the customary brokers
commission) or as part of a merger, consolidation or other acquisition,
except that International Fund, may acquire shares of other open-end
investment companies to the extent permitted by rule or order of the SEC
exempting them from the limitations imposed by Section 12(d)(1) of the
1940 Act;

6.  Purchase an illiquid security if, as a result of such purchase, more
than 15% of the Fund's net assets would be invested in such securities;
provided, however, that with respect to International Fund, this
limitation shall exclude shares of other open-end investment companies
owned by the Fund but include the Fund's pro rata portion of the
securities and other assets owned by any such company.  Illiquid
securities include securities subject to legal or contractual restrictions
on resale, which include repurchase agreements which have a maturity of
longer than seven days.  This policy does not apply to restricted
securities eligible for resale pursuant to Rule 144A under the 1933 Act
which the Trustees or the manager or Subadviser under Board-approved
guidelines, may determine are liquid nor does it apply to other securities
for which, notwithstanding legal or contractual restrictions on resale, a
liquid market exists;

7.  Make short sales of securities, unless at the time of sale the Fund
owns or has the right to acquire at no additional cost securities
identical to those sold short; provided that this prohibition does not
apply to the writing of options or the sale of forward contracts, futures,
foreign currency futures or related options; and

8.  Invest more than 5% of its net assets in warrants or rights valued at
the lower of cost or market, nor 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.

Futures Contracts and Options.   In addition,  International Fund may
purchase put and call options which are purchased on an exchange in other
markets, or currencies and, as developed from time to time, various
futures contracts on market indices and other instruments.  Purchasing
options may increase investment flexibility and improve total return, but
also risks loss of the option premium if an asset the Fund has the option
to buy declines in value.

BROKERAGE

The manager is responsible for decisions to buy and sell securities for
the Company and for the placement of its portfolio business and the
negotiation of any commissions paid on such transactions.  It is the
policy of the Manager to seek the best security price available with
respect to each transaction.  In over-the-counter transactions, orders are
placed directly with a principal market maker unless it is believed that
a better price and execution can be obtained by using a broker.  Except to
the extent that the Company may pay higher brokerage commissions for
brokerage and research services (as described below) on a portion of its
transactions executed on securities exchanges, the manager seeks the best
security price at the most favorable commission rate.  From time to time,
the Fund may place brokerage transactions with affiliated persons of the
manager.  In selecting broker/dealers and in negotiating commissions, the
manager considers the firm's reliability, the quality of its execution
services on a continuing basis and its financial condition.  When more
than one firm is believed to meet these criteria, preference may be given
to firms that also provide research services to the Company or the
manager.

Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an
account to pay a broker or dealer who supplies brokerage and research
services a commission for effecting a securities transaction in excess of
the amount of commission another broker or dealer would have charged for
effecting the transaction.  Brokerage and research services include
(a) furnishing advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities, (b) furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and the performance of accounts,
(c) effecting securities transactions and performing functions incidental
thereto (such as clearance, settlement and custody), and (d) furnishing
other products or services that assist the manager in fulfilling its
investment-decision making responsibilities.

Pursuant to provisions of the relevant Advisory Agreement, the Trustees
have authorized the manager to cause the Company to incur brokerage
commissions in an amount higher than the lowest available rate in return
for research services provided to the manager.  The manager is of the
opinion that the continued receipt of supplemental investment research
services from dealers is essential to its provision of high quality
portfolio management services to the Company. The manager undertakes that
such higher commissions will not be paid by the Company unless (a) the
manager determines in good faith that the amount is reasonable in relation
to the services in terms of the particular transaction or in terms of the
manager's overall responsibilities with respect to the accounts as to
which it exercises investment discretion, (b) such payment is made in
compliance with the provisions of Section 28(e) and other applicable state
and federal laws, and (c) in the opinion of the manager, the total
commissions paid by the Company are reasonable in relation to the expected
benefits to the Company over the long term.  The investment advisory fees
paid by the Company under the Advisory Agreements are not reduced as a
result of the manager's receipt of research services.  During the fiscal
year ended October 31, 2000, the Company directed the payment of $333,911
in brokerage commissions to brokers because of research services provided.


To the extent consistent with the NASD Rules, and subject to seeking best
execution and such other policies as the Trustees may determine, the
manager may consider sales of shares of the Company as a factor in the
selection of firms to execute portfolio transactions for the Company.

The manager places portfolio transactions for other advisory accounts
including other investment companies.  Research services furnished by
firms through which the Funds effect their securities transactions may be
used by the manager in servicing all of its accounts; not all of such
services may be used by the manager in connection with the Funds.  In the
opinion of the manager, the benefits from research services to the Funds
of the Company and to the accounts managed by the manager cannot be
measured separately.  Because the volume and nature of the trading
activities of the accounts are not uniform, the amount of commissions in
excess of the lowest available rate paid by each account for brokerage and
research services will vary.  However, in the opinion of the manager, such
costs to the Funds will not be disproportionate to the benefits received
by the Funds on a continuing basis.

The manager will seek to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities by
the Funds and other accounts that the manager may establish in the future.
 In some cases, this procedure could have an adverse effect on the price
or the amount of securities available to the Funds.  In making such
allocations among the Company and other advisory accounts, the main
factors considered by the manager are the respective investment
objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, and the
size of investment commitments generally held.


The following table summarizes for each Fund the total brokerage
commissions paid.

Fiscal
Year
Ended
10/31
Internationa
l

Large Cap

Growth &
Income

2000
$520,019
$3,212,61
9
$4,394,666
1999
$163,053
$2,767,64
8
$587,368
1998
$142,261
$8,191,23
7
$1,123,715

The Funds may from time to time place brokerage transactions with the
Funds' distributors, Salomon Smith Barney, or through other brokers that
may be considered affiliated persons of the manager or a distributor.
Such affiliated persons currently include  Robinson Humphrey, Inc.
("Robinson Humphrey").  The Board of Trustees has adopted procedures
designed to ensure that commissions paid to an affiliated broker on any
transaction would be comparable to that payable to a non-affiliated broker
in a similar transaction.

The Funds paid the following commissions to affiliated brokers during the
periods shown:


							Salomon
					Robinson	Smith
Fiscal 2000 Commissions		Humphrey	Barney

International           			--		$34,568
Large Cap Core				$13,591	$144,948
Growth & Income			--		$35,310


Fiscal 2000 Percentage

International                       		n/a		6.65%
Large Cap		         		0.42%		4.51%
Growth & Income			n/a		0.80%


Percentage of Transactions with
Affiliates to Total Transactions			Salomon
					Robinson	Smith
					Humphrey	Barney

International 				n/a		8.32%
Large Cap				0.38%		2.88%
Growth & Income			n/a		1.13%







							Salomon
					Robinson	Smith
Fiscal 1999 Commissions		Humphrey	Barney

International           			-		$6,872
Large Cap Growth			$3,000		$120,692
Growth & Income			-		$42,940





							Salomon
					Robinson	Smith
Fiscal 1998 Commissions		Humphrey	Barney

International          			      -0-		    9,442
Large Cap 		  		34,230		363,234
Growth & Income			  3,300		  99,771


PORTFOLIO TURNOVER

For reporting purposes, a Fund's portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities for the
fiscal year by the monthly average of the value of the portfolio
securities owned by the Fund during the fiscal year.  In determining such
portfolio turnover, all securities whose maturities at the time of
acquisition were one year or less are excluded.  A 100% portfolio turnover
rate would occur, for example, if all of the securities in the Fund's
investment portfolio (other than short-term money market securities) were
replaced once during the fiscal year.  Portfolio turnover will not be a
limiting factor should SSB Citi deem it advisable to purchase or sell
securities.

For the fiscal years ended October 31, 1998, 1999 and 2000, the portfolio
turnover rates were as follows:



    Fund
1998
1999
2000


Large Cap Fund
113%
37%
34%


Growth and Income Fund
34%
53%
63%


International Fund
63%
50%
27%



Increased portfolio turnover necessarily results in correspondingly
greater brokerage commissions which must be paid by the Fund.  To the
extent portfolio trading results in realization of net short-term capital
gains, shareholders will be taxed on such gains at ordinary tax rates
(except shareholders who invest through IRAs and other retirement plans
which are not taxed currently on accumulations in their accounts).

SSB Citi manages a number of private investment accounts on a
discretionary basis and it is not bound by the recommendations of the
Salomon Smith Barney research department in managing the Funds.  Although
investment decisions are made individually for each client, at times
decisions may be made to purchase or sell the same securities for one or
more of the Funds and/or for one or more of the other accounts managed by
SSB Citi.  When two or more such accounts simultaneously are engaged in
the purchase or sale of the same security, transactions are allocated in
a manner considered equitable to each, with emphasis on purchasing or
selling entire orders wherever possible.  In some cases, this procedure
may adversely affect the price paid or received by the Fund or the size of
the position obtained or disposed of by the Fund.


DISTRIBUTORS

Effective June 5, 2000, Salomon Smith Barney, Inc., located at 388
Greenwich Street , New York, New York, 10013 and PFS Distributors, Inc.,
located at 3120 Breckinridge Blvd., Duluth, Georgia 30099 ("PFS
Distributors" and, collectively with Salomon Smith Barney, the
"Distributors"), serve as the Funds' co-distributors pursuant to a
written agreement dated June 5, 2000 (the "Distribution Agreement")
which was approved by the Funds' Board of Trustees, including a majority
of the independent Trustees, on April 17, 2000.  Prior to and up to June
5, 2000, CFBDS, Inc. acted as a Distributor.

A Distributor may be deemed to be an underwriter for purposes of the
Securities Act of 1933.  From time to time, a Distributor, or any Other
Service Agent (collectively, "Service Agents"), or any of their
affiliates, may also pay for certain non-cash sales incentives provided
to PFS Investments registered representatives or, as applicable, other
financial professionals (collectively, "Financial Professionals").  Such
incentives do not have any effect on the net amount invested.  In
addition to the reallowances from the applicable public offering price
described above, Service Agents may, from time to time, pay or allow
additional reallowances or promotional incentives, in the form of cash
or other compensation to Financial Professionals that sell shares of
each Fund.

A Distributor may make payments for distribution and/or shareholder
servicing activities out of its past profits and other available
sources.  A Distributor may also make payments for marketing,
promotional or related expenses to dealers.  The amount of these
payments is determined by the distributor and may vary.  Citigroup and
its affiliates may make similar payments under similar arrangements.

A Distributor's obligation is an agency or "best efforts" arrangement
under which the Distributor is required to take and pay only for such
shares of each Fund as may be sold to the public.  A Distributor is not
obligated to sell any stated number of shares.  The Distribution
Agreement is renewable from year to year if approved (a) by the Trustees
or by a vote of a majority of the Company's outstanding voting
securities, and (b) by the affirmative vote of a majority of Trustees
who are not parties to the Agreement or interested persons of any party
by votes cast in person at a meeting called for such purpose.  The
Distribution Agreement provides that it will terminate if assigned, and
that it may be terminated without penalty by either party on 60 days'
written notice.

Initial Sales Charges - Class 1,Class A and Class L.

The following table shows commissions paid as initial sales charges on
Class 1, Class A and Class L shares, amounts retained by the Distributor
and amounts received by PFS Investments during the periods ended
October 31, 2000, 1999 and 1998.  For the period from October 8, 1998 to
June 5, 2000, CFBDS, Inc. served as distributor to the Funds.




Internationa
l

Large Cap

Growth & Income

October 31, 2000



Total Underwriting
Commissions*
$1,937,257
$14,939,00
0
$4,137,000
Amount Retained By
Distributor
290,598
2,240,850
620,550
Amount Received By PFS
Investments, Inc.
1,646,668
12,698,150
3,516,450




October 31, 1999



Total Underwriting
Commissions**
$221,113
$13,988,68
0
$4,069,851
Amount Retained By
Distributor
16,578
2,082,115
509,045
Amount Received By PFS
Investments, Inc.
204,535
11,906,565
3,560,805




October 31, 1998



Total Underwriting
Commissions***
$228,945
$11,625,88
6
$4,604,451
Amount Retained By
Distributor
21,062
2,349,255
656,152
Amount Received By PFS
Investments, Inc.
207,883
12,276,631
3,948,259

* Of these totals, the following amounts were paid to PFS Distributors:
 $1,150,730; $8,963,391, and $2,482,200, for the above listed funds,
respectively.

** Of these totals, the following amounts were paid to PFS Distributors:
 $199,002; $12,589,812, and $3,662,866, for the above listed funds,
respectively.

***For the period November 1, 1997 through October 7, 1998 and for the
period October 8, 1998 through October 31, 1998, the commissions were as
follows:


Name of Fund
11/01/97
through
10/07/98+
10/08/98
through
10/31/98++
Large Cap
$16,442,770
$1,032,664
Growth & Income
$6,490,528
$279,461
International
$471,895
$18,132

 +The entire amount was paid to PFS Distributors.
 ++ The following amounts were paid to PFS Distributors: $102,101;
$16,319, and $34,874 for the above listed funds, respectively.

DISTRIBUTION PLANS

Rule 12b-1 adopted by the SEC under the 1940 Act permits an investment
company to directly or indirectly pay expenses associated with the
distribution of its shares (''distribution expenses'') and servicing its
shareholders in accordance with a plan adopted by the investment
company's board of directors and approved by its shareholders. Pursuant
to such Rule, each Fund has adopted a Distribution Plan for its Class A
shares, Class L Shares and Class B shares.  In addition, the Growth and
Income Fund has adopted a Distribution Plan for its Class O and P
shares.  The Rules of Conduct of the National Association of Securities
Dealers, Inc. (''NASD Rules'') limit the annual distribution costs and
service fees that a mutual fund may impose on a class of shares. The
NASD Rules also limit the aggregate amount which a Fund may pay for such
distribution costs.

Under the Class A Plan each Fund pays PFS Distributors, Inc. and Salomon
Smith Barney, as administrative agents for PFS Accounts and Other
Accounts, respectively (the "Administrative Agents") 0.25% per annum of
its average daily net assets attributable to such class of shares as a
service fee. The service fee is intended to cover shareholder and
account maintenance services provided to Class A shareholders of each
Fund by Financial Professionals.

Under the Class B Plan and Class L Plan, Class B and Class L,
respectively, shares of each Fund are subject to a combined annual
distribution fee and service fee at the rate of 1.00% of a Fund's
aggregate average daily net assets attributable to such class of shares,
which fees are paid to the Administrative Agents.  Payments are made by
each Fund under the Plans of 0.25% per annum, and distribution fee
payments of 0.75% per annum, of the aggregate average daily net assets
attributable to the shares.  Under the Distribution Plan of the Class O
shares of the Growth and Income Fund, Class O shares of the Fund are
subject to a service fee of 0.25% and a distribution fee of 0.45% of the
Fund's average daily net assets attributable to Class O shares.  Under
the Distribution Plan of the Class P shares of the Growth and Income
Fund, Class P shares of the Fund are subject to a service fee of 0.25%
and a distribution fee of 0.45% of the Fund's average daily net assets
attributable to Class P shares.  The distribution fee payments are used
as compensation for sales and promotional activities and marketing of
the shares.  The expenditures under the Plans may consist of sales
commissions to Financial Professionals for selling shares, compensation,
sales incentives and payments to sales and marketing personnel, and the
payment of expenses incurred in its sales and promotional activities,
including advertising expenditures related to the shares of a Fund and
the costs of preparing and distributing promotional materials with
respect to such shares.

The Distributor is entitled to receive the proceeds of the initial sales
charge, if any, paid upon the purchase of Class A shares, and said
amount is paid to Financial Professionals.  PFS and Salomon Smith Barney
are entitled to receive the contingent deferred sales charge paid upon
certain redemptions of Class B and L shares directly from the Fund, for
PFS Accounts and other Accounts, respectively, for any of the
distribution and service expenses described above.

During the period they are in effect, the Plans obligate each Fund to
pay fees as compensation for service (and for the Class B, L, O, and P
Plans, distribution) activities, not as reimbursement for specific
expenses incurred.  Thus, even if such expenses exceed service or
distribution fees paid by any Fund, the Fund will not be obligated to
pay more than those fees and, if expenses are less than such fees, the
Administrative Agents may retain the full fees and realize a profit.
Each Fund will pay the applicable service fees and distribution fees
until either the applicable Plan is terminated or not renewed. In that
event, expenses in excess of service fees and distribution fees received
or accrued through the termination date will be the sole responsibility
of and not obligations of a Fund.  In their annual consideration of the
continuation of each Fund's Plans, the Trustees will review each Plan
and the corresponding expenses for each class separately.

Actual distribution expenditures incurred by the Administrative Agents
and Service Agents under the Class B Plan for any given year are
expected to exceed the fees received by them form the Funds pursuant to
the Class B Plan and pursuant to contingent deferred sales charges. Such
excess will not be carried forward in future years.  If the Class B Plan
is terminated or is not continued, the Fund would not be contractually
obligated and has no liability to pay for any expenses incurred that
have not previously reimbursed by the Fund or recovered through
contingent deferred sales charges.

In reporting amounts expended under the Plans to the Trustees, expenses
attributable to the sale of both Class A and Class B shares will be
allocated to each class based on the ratio of sales of Class A and
Class B shares to the sales of both classes of shares.  The service fees
paid by the Class A shares will not be used to subsidize the sale of
Class B shares; similarly, the service fees, if any, and distribution
fees paid by the Class B shares will not be used to subsidize the sale
of Class A shares.

As required by Rule 12b-1 under the 1940 Act, each Plan and the forms of
related service agreements were approved by the Board of Trustees,
including a majority of the Trustees who are not interested persons (as
defined in the 1940 Act) of the Company and who have no direct or
indirect financial interest in the operation of the Plans or in any
agreements related to each Plan ("Independent Trustees").  In doing so,
the Board of Trustees determined that there is a reasonable likelihood
that each Plan will benefit the Company and its shareholders.

Each Plan requires that the Trustees be provided at least quarterly with
a written report of the amounts expended pursuant to each Plan and the
purposes for which such expenditures were made.  Unless sooner
terminated in accordance with its terms, the Plans continue in effect so
long as such continuance is specifically approved at least annually by
the Trustees, including a majority of Independent Trustees.

Each Plan may be terminated by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting shares of
the relevant class, for any Fund.  Any change in any of the Plans that
would materially increase the distribution or service expenses borne by
a class of a Fund requires shareholder approval by the relevant class;
otherwise, it may be amended by a majority of the Trustees, including a
majority of the Independent Trustees, by vote cast in person at a
meeting called for the purpose of voting upon such amendment.  So long
as a Plan is in effect, the selection or nomination of any additional
Independent Trustees is committed to the discretion of the Independent
Trustees.

For the fiscal year ended October 31, 2000, the aggregate expenses for
the International Fund under the Fund's Class A Plan were $197,704 or
0.25%, respectively, of the Class A shares' average net assets; under
the Class B Plan were $1,053,300 or 1.00% of the Class B shares' average
net assets; and under the Class L Plan were $171 or 1.00% of the Class L
shares' average net assets.

For the fiscal year ended October 31, 2000, the aggregate expenses for
the Large Cap Fund under the Class A Plan were $1,133,782 or 0.25%,
respectively, of the Class A shares' average net assets; under the
Class B Plan were $4,732,100 or 1.00% of the Class B shares' average net
assets; and under the Class L Plan were $78 or 1.00% of the Class L
shares' average net assets.

For the fiscal year ended October 31, 2000, the aggregate expenses for
the Growth and Income Fund under the Fund's Class A Plan were $511,442
or 0.25%, respectively, of the Class A shares' average net assets; under
the Class B Plan were $2,288,164 or 1.00% of the Class B shares' average
net assets; and under the Class L Plan were $83 or 1.00% of the Class L
shares' average net assets.

The Distributor and/or Service Agents bear the cost of printing (but not
typesetting) prospectuses used in connection with this offering and the
cost and expense of supplemental sales literature, promotion and
advertising.  The Company pays all expenses attributable to the
registrations of its shares under federal and state blue sky laws,
including registration and filing fees, the cost of preparation of the
prospectuses, related legal and auditing expenses, and the cost of
printing prospectuses for current shareholders.

For the fiscal year ended October 31, 2000, the Distributor and/or Service
Agents incurred the following distribution expenses for the funds:





Fund Name





Advertis
ing



Printing
and
Mailing
of
Prospectu
ses




Support
Service
s




Financial
Profession
als




Interes
t
Expense





Total
Internatio
nal
$257
$9,631
-
$381,496
$126,46
7
$517,851
Large Cap
$1,812
$76,433
-
$1,636,407
$821,64
4
$2,536,2
96
Growth and
Income

$798

$35,055

-

$723,008

$495,14
9

$1,254,0
10


The Distributor and/or Service Agents will pay for the printing, at
printer's overrun cost, of prospectuses and periodic reports after they
have been prepared, set in type and mailed to shareholders, and will also
pay the cost of distributing such copies used in connection with the
offering to prospective investors and will also pay for supplementary
sales literature and other promotional costs.  Such expenses incurred by
the Distributor and/or Service Agents are distribution expenses within the
meaning of the Plans and may be paid from amounts received by the
Distributor and/or Service Agents from the Company under the Plans.

DETERMINATION OF NET ASSET VALUE

The assets attributable to the shares of each Fund reflect the value of
separate interests in a single portfolio of securities.  The net asset
value of each class will be determined separately by subtracting the
expenses and liabilities allocated to that class. The net asset value of
the shares of each Fund is determined at 4:00 p.m., New York time (or at
the close of the New York Stock Exchange (the "Exchange"), if earlier,
on each business day on which the Exchange is open.  The Exchange is
closed on the following holidays:  New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas.

The value of equity securities is computed by (i) valuing listed or
unlisted securities for which market quotations are readily available at
the prices reported by an independent pricing service, or as supplied by
the National Association of Securities Dealers Automated Quotations
(NASDAQ) or by broker-dealers, and (ii) valuing any securities for which
market quotations are not readily available and any other assets at fair
value as determined in good faith by the Board of Trustees.  Options on
stocks, options on stock indexes and stock index futures contracts and
options thereon, which are traded on exchanges, are valued (at their
last sales or settlement price as of the close of such exchanges, or, if
no sales are reported, at the mean between the last reported bid and
asked prices).

Foreign securities trading may not take place on all days on which the
Exchange is open.  Further, trading takes place in various foreign
markets on days on which the Exchange is not open.  Events affecting the
values of investments that occur between the time their prices are
determined and 4:00 p.m. Eastern time on each day that the Exchange is
open will not be reflected in a Fund's net asset value unless the
manager, under the supervision of the Board of Trustees, determines that
the particular event would materially affect 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 the Funds.

U.S. Government securities are traded in the over-the-counter market and
valuations are based on quotations of one of more dealers that make
markets in the securities as obtained from such dealers or from a
pricing service.  Options and interest rate futures contracts and
options thereon, which are traded on exchanges, are valued at their last
sales or settlement price as of the close of such exchanges, or, if no
sales are reported, at the mean between the last reported bid and asked
prices.   Debt securities having a remaining maturity of 60 days or less
are valued on an amortized cost basis to the extent this approximates
market value.

When, in the judgment of the service, quoted bid prices for investments
are readily available and are representative of the bid side of the
market, these investments are valued at such quoted bid prices (as
obtained by the service from dealers in such securities).  Other
investments are carried at fair value as determined by the service,
based on methods which include consideration of: yields or prices of
municipal bonds of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions.
The service may employ electronic data processing techniques and/or a
matrix system to determine valuations.  Any assets which are not valued
by the Service would be valued at fair value using methods determined in
good faith by the Trustees.

PURCHASE AND REDEMPTION OF SHARES

Alternative Purchase Arrangements.  Each Fund offers two Classes of
shares to investors purchasing through PFS Accounts and four classes
through Other Accounts.  Class A shares are sold to investors with an
initial sales charge and Class B shares are sold without an initial
sales charge but are subject to a contingent deferred sales charge
("CDSC") payable upon certain redemptions.  In addition, the Funds offer
Class 1 shares only to Eligible Class 1 Purchasers through PFS Accounts
and Class O and Class P shares to Eligible Class O and P Purchasers,
respectively, through Other Accounts.

In deciding which Class of Fund shares to purchase, investors should
consider the following factors, as well as any other relevant facts and
circumstances:

Intended Holding Period.  The decision as to which Class of shares is
more beneficial to an investor depends on the amount and intended
duration of his or her investment.  Shareholders who are planning to
establish a program of regular investment may wish to consider Class A
shares; as the investment accumulates shareholders may qualify for
reduced sales charges and the shares are subject to lower ongoing
expenses over the term of the investment.  As an alternative, Class B
shares are sold without any initial sales charge so the entire purchase
price is immediately invested in a Fund.  Any investment return on these
additional invested amounts may partially or wholly offset the higher
annual expenses of this Class.  Because a Fund's future return cannot be
predicted, however, there can be no assurance that this would be the
case.

Reduced or No Initial Sales Charge.  The initial sales charge on Class A
shares may be waived for certain eligible purchasers, and the entire
purchase price will be immediately invested in a Fund.  In addition,
Class A share purchases of $500,000 or more will be made at net asset
value with no initial sales charge, but will be subject to a CDSC of
1.00% on redemptions made within 12 months of purchase.  The $500,000
investment may be met by adding the purchase to the net asset value of
all Class A shares offered with a sales charge held in funds listed
below under "Exchange Privilege."  Class A share purchases also may be
eligible for a reduced initial sales charge.  Because the ongoing
expenses of Class A shares may be lower than those for Class B shares,
purchasers eligible to purchase Class A shares at net asset value or at
a reduced sales charge should consider doing so.

Financial Professionals may receive different compensation for selling
different Classes of shares.  Investors should understand that the
purpose of the CDSC on the Class B shares is the same as that of the
initial sales charge on the Class A shares.

How to Purchase Shares.  The procedures for purchasing shares varies
according to whether you purchase through a PFS Account or Other
Account:

PFS ACCOUNTS

Initial purchases of shares of each Fund must be made through a PFS
Investments Registered Representative by completing the appropriate
application. The completed application should be forwarded to the Sub-
Transfer Agent, 3100 Breckinridge Blvd., Bldg. 200, Duluth, Georgia
30099-0062. Checks drawn on foreign banks must be payable in U.S.
dollars and have the routing number of the U.S. bank encoded on the
check. Subsequent investments may be sent directly to the Sub-Transfer
Agent.  In processing applications and investments, the Sub-Transfer
Agent acts as agent for the investor and for PFS Investments and also as
agent for the Distributor, in accordance with the terms of the
Prospectus.  If the Sub-Transfer Agent ceases to act as such, a
successor company named by the Company will act in the same capacity so
long as the account remains open.

Shares purchased will be held in the shareholder's account by the Sub-
Transfer Agent. Share certificates are issued only upon a shareholder's
written request to the Sub-Transfer Agent. A shareholder who has
insufficient funds to complete any purchase, will be charged a fee of
$30 per returned purchase by PFS or the Sub-Transfer Agent.

Investors in Class A and Class B shares may open an account by making an
initial investment of at least $1,000 for each account in each Class
(except for Systematic Investment Plan accounts), or $250 for an IRA or
a Self-Employed Retirement Plan in a Fund. Subsequent investments of at
least $50 may be made for each Class. For participants in retirement
plans qualified under Section 403(b)(7) or Section 401(a) of the Code,
the minimum initial investment requirement for Class A and Class B
shares and the subsequent investment requirement for each Class in a
Fund is $25. For each Fund's Systematic Investment Plan, the minimum
initial investment requirement for Class A and Class B shares and the
subsequent investment requirement for each Class is $25. There are no
minimum investment requirements in Class A shares for employees of
Citigroup and its subsidiaries, including Salomon Smith Barney,
Directors or Trustees of any of the Smith Barney Mutual Funds, and their
spouses and children. The Company reserves the right to waive or change
minimums, to decline any order to purchase its shares and to suspend the
offering of shares from time to time.  Purchase orders received by the
Sub-Transfer Agent prior to the close of regular trading on the NYSE, on
any day a Fund calculates its net asset value, are priced according to
the net asset value determined on that day.

Upon completion of certain automated systems, initial purchases of Fund
shares may be made by wire.  The minimum investment that can be made by
wire is $10,000. Before sending the wire, the PFS Investments Inc.
Registered Representative must contact the Sub-Transfer Agent at (800)
665-8677 to obtain proper wire instructions.  Once an account is open, a
shareholder may make additional investments by wire.  The shareholder
should contact the Sub-Transfer Agent at (800) 544-5445 to obtain proper
wire instructions.

Upon completion of certain automated systems, shareholders who establish
telephone transaction authority on their account and supply bank account
information may make additions to their accounts at any time.
Shareholders should contact the Sub-Transfer Agent at (800) 544-5445
between 9:00 a.m. and 6:00 p.m. eastern time any day that the NYSE is
open.  If a shareholder does not wish to allow telephone subsequent
investments by any person in his account, he should decline the
telephone transaction option on the account application.  The minimum
telephone subsequent investment is $250 and can be up to a maximum of
$10,000.  By requesting a subsequent purchase by telephone, you
authorize the Sub-Transfer agent to transfer funds from the bank account
provided for the amount of the purchase.  A shareholder who has
insufficient funds to complete the transfer will be charged a fee of up
to $30 by PFS or the Sub-Transfer Agent.  A shareholder who places a
stop payment on a transfer or the transfer is returned because the
account has been closed, will also be charged a fee of up to $30 by PFS
or the Sub-Transfer Agent.  Subsequent investments by telephone may not
be available if the shareholder cannot reach the Sub-Transfer Agent
whether because all telephone lines are busy or for any other reason; in
such case, a shareholder would have to use the Fund's regular subsequent
investment procedure described above.

OTHER ACCOUNTS

Each Service Agent has agreed to transmit to its customers who are
shareholders of the Fund appropriate prior written disclosure of any
fees that it may charge them directly.  Each Service Agent is
responsible for transmitting promptly orders of its customers.  Your
Service agent is the shareholder of record for the shares of the Fund
you own.

Investors may be able to establish new accounts in a Fund under one of
several tax-sheltered plans.  Such plans include IRAs, Keogh or
Corporate Profit-Sharing and Money-Purchase Plans, 403(b) Custodian
Accounts, and certain other qualified pension and profit-sharing plans.
 Investors should consult with their Service Agent and their tax and
retirement advisers.

Systematic Investment Plan.  Shareholders may make additions to their
accounts at any time by purchasing shares through a service known as the
Systematic Investment Plan. Under the Systematic Investment Plan, the
Sub-Transfer Agent or Service Agent is authorized through preauthorized
transfers of $25 or more to charge the regular bank account or other
financial institution indicated by the shareholder on a monthly basis to
provide systematic additions to the shareholder's Fund account.  For PFS
Accounts, a shareholder who has insufficient funds to complete the
transfer will be charged a fee of up to $25, and a shareholder who
places a stop payment on a transfer or the transfer is returned because
the account has been closed, will also be charged a fee of $25.

Initial Sales Charge Alternative - Class A Shares.  The sales charges
applicable to purchases of Class A shares of the Funds are as follows:




               Sales Charge




Amount of
Investment


% of
Offering Price

% of Net
Amount Invested
Broker Dealer
Commission  as
% of
Offering Price




Less than  $ 25,000
5.00%
5.26%
4.50%
$ 25,000 -  49,999
4.25
4.44
3.83
50,000 -  99,999
3.75
3.90
3.38
100,000 - 249,999
3.25
3.36
2.93
250,000 - 499,999
2.75
2.83
2.48
500,000 - 999,999
2.00
2.04
1.80
$1,000,000 or more
-0-
-0-
Up to 1.00*


*Purchases of Class A shares of $1,000,000 or more will be made at net
asset value without any initial sales charge, but will be subject to a
CDSC of 1.00% on redemptions made within 12 months of purchase.

Members of the selling group may receive up to 90% of the sales charge
and may be deemed to be underwriters of a Fund as defined in the
Securities Act of 1933, as amended.  The reduced sales charges shown
above apply to the aggregate of purchases of Class A Shares of a Fund
made at one time by ''any person'', which includes an individual and his
or her immediate family, or a trustee or other fiduciary of a single
trust estate or single fiduciary account.

Initial Sales Charge Waivers.  The initial sales charge does not apply
to Class A shares acquired through the reinvestment of dividends and
capital gains distributions.

PFS ACCOUNTS

Purchases of Class A shares through PFS Accounts may be made at net
asset value without a sales charge in the following circumstances:

(a) sales to Board Members and employees of Citigroup and its
subsidiaries;
(b) sales to Board Members of the Smith Barney Mutual Funds or any other
mutual funds for which members of Citigroup act as investment
advisor, administrator or service agent (including retired Board
Members); the immediate families of such persons (including the
surviving spouse of a deceased Board Member); and to a pension,
profit-sharing or other benefit plan for such persons;
(c) sales to employees of member firms of the National Association of
Securities Dealers, Inc., provided such sales are made upon the
assurance of the purchaser that the purchase is made for investment
purposes and that the securities will not be resold except through
redemption or repurchase;
(d) issuance to any other investment company to effect the combination of
such company with the Fund by merger, acquisition of assets or
otherwise;
(e) purchases by shareholders who have redeemed Class A shares in a Fund
(or Class A shares of another fund of the Smith Barney Mutual Funds
that are sold with a maximum sales charge equal to or greater than
the maximum sales charge of the Fund) and who wish to reinvest their
redemption proceeds in the Fund, provided the reinvestment is made
within 60 calendar days of the redemption;
(f) purchases by accounts managed by registered investment advisory
subsidiaries of Citigroup;
(g) sales through Financial Professionals of Service Agents where the
amounts invested represent the redemption proceeds from other
investment companies, on the condition that (i) the redemption has
occurred no more than 60 days prior to the purchase of the shares,
(ii) the shareholder paid an initial sales charge on such redeemed
shares and (iii) the shares redeemed were not subject to a deferred
sales charge;
(h) direct rollovers by plan participants of distributions from a 401(k)
plan enrolled in the Salomon Smith Barney 401(k) Program (note:
subsequent investments will be subject to the applicable sales
charge);
(i) purchases by separate accounts used to fund certain unregistered
variable annuity contracts; and
(j) purchases by investors participating in a Salomon Smith Barney fee
based arrangement.

PFS may pay its Registered Representatives an amount equal to 0.40% of
the amount invested if the purchase represents redemption proceeds from
an investment company distributed by an entity other than PFS
Investments. In order to obtain such discounts, the purchaser must
provide sufficient information at the time of purchase to permit
verification that the purchase would qualify for the elimination of the
sales charge.

In addition, Class A shares of the Funds may be purchased at net asset
value by the PFS Primerica Corporation Savings and Retirement Plan (the
''Primerica Plan'') for its participants, subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended
(''ERISA''). Class A shares so purchased are purchased for investment
purposes and may not be resold except by redemption or repurchase by or
on behalf of the Primerica Plan. Class A shares are also offered at net
asset value to accounts opened for shareholders by PFS Investments
Registered Representatives where the amounts invested represent the
redemption proceeds from investment companies distributed by an entity
other than PFS, if such redemption has occurred no more than 60 days
prior to the purchase of shares of the Company, and the shareholder paid
an initial sales charge and was not subject to a deferred sales charge
on the redeemed account. Class A shares are offered at net asset value
to such persons because of anticipated economies in sales efforts and
sales related expenses. The Company may terminate, or amend the terms
of, offering shares of the Company at net asset value to such persons at
any time.  Contact the Sub-Transfer Agent at (800) 544-5445 for further
information and appropriate forms.

OTHER ACCOUNTS

In certain circumstances, the initial sales charge imposed on purchases
of Class A shares through Other Accounts, and the CDSC imposed upon
sales of Class A or Class B shares through Other Accounts, are waived.
Waivers are generally instituted in order to promote good will with
persons or entities with which a Distributor or its affiliates have
business relationships, or because the sales effort, if any, involved in
making such sales is negligible, or, in the case of certain CDSC
waivers, because the circumstances surrounding the sale of Fund shares
were not foreseeable or voluntary. These sales charge waivers may be
modified or discontinued at any time.

Class A shares may be purchased through Other Accounts without a sales
charge by:

(a) tax exempt organizations under Section 501(c)(3-13) of the Internal
Revenue Code;
(b) trust accounts for which Citibank, N.A., an affiliate of the manager,
or any subsidiary or affiliate of Citibank acts as trustee and
exercises discretionary investment management authority;
(c) accounts for which Citibank or any subsidiary or affiliate of
Citibank performs investment advisory services or charges fees for
acting as custodian;
(d) directors or trustees (and their immediate families), and retired
directors and trustees (and their immediate families), of any
investment company for which Citibank or any subsidiary or affiliate
of Citibank serves as the investment adviser or as a service agent;
(e) employees of Citibank and its affiliates, or any Service Agent and
its affiliates (including immediate families of any of the
foregoing), and retired employees of Citibank and its affiliates or
(including immediate families of the foregoing);
(f) investors participating in a fee-based or promotional arrangement
sponsored or advised by Citibank or its affiliates;
(g) investors participating in a rewards program that offers Fund shares
as an investment option based on an investor's balances in selected
Citigroup Inc. products and services;
(h) employees of members of the National Association of Securities
Dealers, Inc., provided that such sales are made upon the assurance
of the purchaser that the purchase is made for investment purposes
and that the securities will not be resold except through redemption
or repurchase;
(i) separate accounts used to fund certain unregistered variable annuity
contracts;
(j) direct rollovers by plan participants from a 401(k) plan offered to
Citigroup employees;
(k) shareholder accounts established through a reorganization or similar
form of business combination approved by a Fund's Board of Trustees
the terms of which entitle those shareholders to purchase shares of a
Fund at net asset value without a sales charge;
(l) employee benefit plans qualified under Section 401 of the Internal
Revenue Code, including salary reduction plans qualified under
Section 401(k) of the Code, subject to minimum requirements as may be
established by  a distributor with respect to the amount of purchase;
(m) accounts associated with Copeland Retirement Programs;
(n) investors purchasing $1,000,000 or more of Class A shares; in
determining whether a contingent deferred sales charge on Class A
shares is payable, see "Deferred Sales Charge Alternatives" below in
this section;
(o) subject to appropriate documentation, investors where the amount
invested represents redemption proceeds from a mutual fund if:

- the redeemed shares were subject to an initial sales charge or a
deferred sales charge (whether or not actually imposed), and

- the redemption has occurred no more than 60 days prior to the
purchase of Class A shares of the Fund;

(p) an investor who has a business relationship with an investment
consultant or other registered representative who joined a broker-
dealer which has a sales agreement with a distributor from another
investment firm within six months prior to the date of purchase by
the investor, if:

- the investor redeems shares of another mutual fund sold through
the investment firm that previously employed that investment
consultant or other registered representative, and either paid an
initial sales charge or was at some time subject to, but did not
actually pay, a deferred sales charge or redemption fee with
respect to the redemption proceeds

- the redemption is made within 60 days prior to the investment in
a Fund, and

- the net asset value of the shares of the Fund sold to that
investor without a sales charge does not exceed the proceeds of
the redemption.

Volume Discounts.  The "Amount of Investment'' referred to in the sales
charge table set forth above under "Initial Sales Charge Alternative-
Class A Shares'' includes the purchase of Class A shares in a Fund and,
in the case of PFS Accounts, of certain other Smith Barney mutual funds.
 A person eligible for a volume discount includes: an individual;
members of a family unit comprising a husband, wife and minor children;
a trustee or other fiduciary purchasing for a single fiduciary account
including pension, profit-sharing and other employee benefit trusts
qualified under Section 401(a) of the Code; or multiple custodial
accounts where more than one beneficiary is involved if purchases are
made by salary reduction and/or payroll deduction for qualified and
nonqualified accounts and transmitted by a common employer entity.
Employer entity for payroll deduction accounts may include trade and
craft associations and any other similar organizations.

PFS ACCOUNTS

Cumulative Purchase Discount.  The reduced sales load reflected in the
sales charge tables applies to purchases of Class A and Class 1 shares
of the various Funds.  An aggregate investment includes all shares of
all of the Funds (and any other eligible funds, as described above),
plus the shares being purchased.  The current offering price is used to
determine the value of all such shares.  The same reduction is
applicable to purchases under a Letter of Intent as described below.
PFS Investments must notify the Distributor at the time an order is
placed for a purchase which would qualify for the reduced charge on the
basis of previous purchases.  Similar notification must be given in
writing when such an order is placed by mail.  The reduced sales charge
will not be applied if such notification is not furnished at the time of
the order.  The reduced sales charge will also not be applied unless the
records of the Distributor or the Sub-Transfer Agent confirm the
investor's representations concerning his holdings.

OTHER ACCOUNTS

Reduced Sales Charge Plan.  A qualified group may purchase shares as a
single purchaser under the reduced sales charge plan. The purchases by
the group are lumped together and the sales charge is based on the lump
sum. A qualified group must:

(a) have been in existence for more than six months;
(b) have a purpose other than acquiring Fund shares at a discount;
(c) satisfy uniform criteria that enable a distributor to realize
economies of scale in its costs of distributing shares;
(d) have more than ten members;
(e) be available to arrange for group meetings between representatives of
the Funds and the members;
(f) agree to include sales and other materials related to the Funds in
its publications and mailings to members at reduced or no cost to the
distributor; and
(g) seek to arrange for payroll deduction or other bulk transmission of
investments to the Funds.

Letter of Intent.   A Letter of Intent to purchase Class A shares for an
amount of $25,000 or more or a Letter of Intent to purchase Class 1
shares for an amount of $10,000 or more, provides an opportunity for an
investor to obtain a reduced sales charge by aggregating investments
over a 13-month period, provided that the investor refers to such Letter
when placing orders. For purposes of a Letter of Intent, the ''Amount of
Investment'' as referred to in the preceding sales charge table includes
purchases of all Class A shares of each Fund and, in the case of PFS
Accounts, other Smith Barney Mutual Funds, offered with a sales charge
over a 13-month period based on the total amount of intended purchases
plus all Class A and Class 1 shares previously purchased and still
owned. An alternative is to compute the 13-month period starting up to
90 days before the date of execution of a Letter of Intent. Each
investment made during the period receives the reduced sales charge
applicable to the total amount of the investment goal. If the goal is
not achieved within the period, the investor must pay the difference
between the sales charges applicable to the purchases made and the
charges previously paid, or an appropriate number of escrowed shares
will be redeemed. Please contact your Service Agent to obtain a Letter
of Intent application.

PFS ACCOUNTS

A Letter of Intent applies to purchases of Class A shares of all Funds
and Class 1 shares of all Funds.  When an investor submits a Letter of
Intent to attain an investment goal within a 13-month period, the Sub-
Transfer Agent escrows shares totaling 5% of the dollar amount of the
Letter of Intent in the name of the investor.  The Letter of Intent does
not obligate the investor to purchase the indicated amount.  In the
event the Letter of Intent goal is not achieved within the 13-month
period, the investor is required to pay the difference between the sales
charge otherwise applicable to the purchases made during this period and
the sales charge actually paid.  Such payment may be made directly to
the Service Agent or, if not paid, the Service Agent will liquidate
sufficient escrow shares to obtain such difference.  If the goal is
exceeded in an amount which qualifies for a lower sales charge, a price
adjustment is made at the end of the 13-month period by refunding to the
investor the amount of excess sales commissions, if any, paid during the
13-month period.

OTHER ACCOUNTS

Subject to acceptance by a Distributor, and the conditions mentioned
below, each purchase under a letter of intent will be made at a public
offering price applicable to a single transaction of the dollar amount
specified in the letter of intent.

(a) The shareholder or, if the shareholder is a customer of a Service
Agent, his or her Service Agent must inform a distributor that the
letter of intent is in effect each time shares are purchased;
(b) The shareholder makes no commitment to purchase additional shares,
but if his or her purchases within 13 months plus the value of shares
credited toward completion of the letter of intent do not total the
sum specified, an increased sales charge will apply as described
below;
(c) A purchase not originally made pursuant to a letter of intent may be
included under a subsequent letter of intent executed within 90 days
of the purchase if a distributor is informed in writing of this
intent within the 90-day period;
(d) The value of shares of a Fund presently held, at cost or maximum
offering price (whichever is higher), on the date of the first
purchase under the letter of intent, may be included as a credit
toward the completion of the letter, but the reduced sales charge
applicable to the amount covered by the letter is applied only to new
purchases;
(e) Instructions for issuance of shares in the name of a person other
than the person signing the letter of intent must be accompanied by a
written statement from the Sub-Transfer Agent or a Service Agent
stating that the shares were paid for by the person signing the
letter;
(f) Neither income dividends nor capital gains distributions taken in
additional shares will apply toward the completion of the letter of
intent; and
(g) The value of any shares redeemed or otherwise disposed of by the
purchaser prior to termination or completion of the letter of intent
are deducted from the total purchases made under the letter of
intent.

If the investment specified in the letter of intent is not completed
(either prior to or by the end of the 13-month period), the Sub-Transfer
Agent will redeem, within 20 days of the expiration of the letter of
intent, an appropriate number of the shares in order to realize the
difference between the reduced sales charge that would apply if the
investment under the letter of intent had been completed and the sales
charge that would normally apply to the number of shares actually
purchased. By completing and signing the letter of intent, the
shareholder irrevocably grants a power of attorney to the Sub-Transfer
Agent to redeem any or all shares purchased under the letter of intent,
with full power of substitution.

Deferred Sales Charge Alternatives.  CDSC Shares are sold at net asset
value next determined without an initial sales charge so that the full
amount of an investor's purchase payment may be immediately invested in
a Fund. A CDSC, however, may be imposed on certain redemptions of these
shares.  "CDSC Shares" are: (i) Class B shares; (ii) Class L shares;
(iii) Class O shares of the Growth and Income Fund; (iv) Class P shares
of the Growth and Income Fund; and (v) Class A shares that were
purchased without an initial sales charge but subject to a CDSC.  Any
applicable CDSC will be assessed on an amount equal to the lesser of the
original cost of the shares being redeemed or their net asset value at
the time of redemption. CDSC Shares that are redeemed will not be
subject to a CDSC to the extent that the value of such shares
represents: (a) capital appreciation of Fund assets; (b) reinvestment of
dividends or capital gain distributions; (c) with respect to Class B
shares and Class P shares, shares redeemed more than five years after
their purchase; or (d) with respect to Class L shares, Class O shares,
or Class A shares that are CDSC Shares, shares redeemed more than 12
months after their purchase.

Class L Shares, Class O shares, and Class A shares that are CDSC Shares
are subject to a 1.00% CDSC if redeemed within 12 months of purchase. In
circumstances in which the CDSC is imposed on Class B shares (or Class P
shares of the Growth and Income Fund), the amount of the charge will
depend on the number of years since the shareholder made the purchase
payment from which the amount is being redeemed. Solely for purposes of
determining the number of years since a purchase payment, all purchase
payments made during a month will be aggregated and deemed to have been
made on the last day of the preceding statement month. The following
table sets forth the rates of the charge for redemptions of Class B
shares (and Class P shares of the Growth and Income Fund) by
shareholders.




Years Since Purchase
Payment Was Made




          CDSC
Applicable


First
5.00%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth and thereafter
0.00

Class B Conversion Feature.  Class B shares, and Class P shares of the
Growth and Income Fund, will convert automatically to Class A shares
eight years after the date on which they were purchased and thereafter
will no longer be subject to any distribution fees. There will also be
converted at that time such proportion of Class B shares or Class P
shares acquired through the reinvestment of dividends and distributions
("Dividend Shares") owned by the shareholder as the total number of his
or her Class B or Class P shares converting at the time bears to the
total number of outstanding Class B or Class P shares (other than
Dividend Shares) owned by the shareholder.  Because the per share net
asset value of the Class A shares may be higher than that of the Class B
and Class P shares at the time of conversion, a shareholder may receive
fewer Class A shares than the number of Class B or Class P shares
converted, although the dollar value will be the same.

Class B shares of a Fund purchased in PFS Accounts prior to December 31,
1997 and subsequently redeemed will remain subject to the CDSC at the
rates applicable at the time of purchase.

In determining the applicability of any CDSC or the conversion feature
described above, it will be assumed that a redemption is made first of
shares representing capital appreciation, next of shares representing
the reinvestment of dividends and capital gain distributions and finally
of other shares held by the shareholder for the longest period of time.
The length of time that CDSC Shares acquired through an exchange have
been held will be calculated from the date that the shares exchanged
were initially acquired, and Fund shares being redeemed will be
considered to represent, as applicable, capital appreciation or dividend
and capital gain distribution reinvestments in such other funds. For
Federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount realized on
redemption.

To provide an example, assume an investor purchased 100 Class B shares
at $10 per share for a cost of $1,000. Subsequently, the investor
acquired 5 additional shares through dividend reinvestment. During the
fifteenth month after the purchase, the investor decided to redeem $500
of his or her investment. Assuming at the time of the redemption the net
asset value had appreciated to $12 per share, the value of the
investor's shares would be $1,260 (105 shares at $12 per share). The
CDSC would not be applied to the amount that represents appreciation
($200) and the value of the reinvested dividend shares ($60). Therefore,
$240 of the $500 redemption proceeds ($500 minus $260) would be charged
at a rate of 4.00% (the applicable rate for Class B shares) for a total
deferred sales charge of $9.60.

For the year ended October 31, 2000, CDSCs paid for Class B shares were
approximately:


Fund			CDSC

Large Cap Core		$1,250,000
Growth and Income	$732,000
International		$141,750


Waiver of CDSC.

PFS ACCOUNTS

For PFS Accounts, the CDSC generally is waived on exchanges and on
redemptions of Class A and Class B shares in the circumstances described
below:

(a)  Redemption Upon Disability or Death

The Company may waive the CDSC on redemptions following the death or
disability of a Class A or Class B shareholder.  An individual will be
considered disabled for this purpose if he or she meets the definition
thereof in Section 72(m)(7) of the Code, which in pertinent part defines
a person as disabled if such person "is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or to be of long-continued and indefinite duration." While the Company
does not specifically adopt the balance of the Code's definition which
pertains to furnishing the Secretary of Treasury with such proof as he
or she may require, the Sub-Transfer Agent will require satisfactory
proof of death or disability before it determines to waive the CDSC.

In cases of disability or death, the CDSC may be waived where the
decedent or disabled person is either an individual shareholder or owns
the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the
redemption is made within one year of the death or initial determination
of disability.  This waiver of the CDSC applies to a total or partial
redemption, but only to redemptions of shares held at the time of the
death or initial determination of disability.

(b)  Redemption in Connection with Certain Distributions from Retirement
Plans

The Company may waive the CDSC when a total or partial redemption is
made in connection with certain distributions from Retirement Plans.
The charge may be waived upon the tax-free rollover or transfer of
assets to another Retirement Plan invested in one or more of the Funds;
in such event, as described below, the Fund will "tack" the period for
which the original shares were held on to the holding period of the
shares acquired in the transfer or rollover for purposes of determining
what, if any, CDSC is applicable in the event that such acquired shares
are redeemed following the transfer or rollover.  The charge also may be
waived on any redemption which results from the return of an excess
contribution pursuant to Section 408(d)(4) or (5) of the Code, the
return of excess deferral amounts pursuant to Code Section 401(k)(8) or
402(g)(2), or from the death or disability of the employee (see Code
Section 72(m)(7) and 72(t)(2)(A)(ii)).  In addition, the charge may be
waived on any minimum distribution required to be distributed in
accordance with Code Section 401(a)(9).

The Company does not intend to waive the CDSC for any distributions from
IRAs or other Retirement Plans not specifically described above.

(c)  Redemption Pursuant to the Company's Systematic Withdrawal Plan

A shareholder may elect to participate in a systematic withdrawal plan
("Plan") with respect to the shareholder's investment in a Fund.  Under
the Plan, a dollar amount of a participating shareholder's investment in
the Fund will be redeemed systematically by the Fund on a periodic
basis, and the proceeds mailed to the shareholder.  The amount to be
redeemed and frequency of the systematic withdrawals will be specified
by the shareholder upon his or her election to participate in the Plan.
 The CDSC may be waived on redemptions made under the Plan.

The amount of the shareholder's investment in a Fund at the time the
election to participate in the Plan is made with respect to the Fund is
hereinafter referred to as the "initial account balance." The amount to
be systematically redeemed from such Fund without the imposition of a
CDSC may not exceed a maximum of 12% annually of the shareholder's
initial account balance.  The Company reserves the right to change the
terms and conditions of the Plan and the ability to offer the Plan.

(d)  Involuntary Redemptions of Shares in Accounts that Do Not Have the
Required Minimum Balance

The Company reserves the right to redeem shareholder accounts with
balances of less than a specified dollar amount as set forth in the
Prospectus.  Prior to such redemptions, shareholders will be notified in
writing and allowed a specified period of time to purchase additional
shares to bring the account up to the required minimum balance.  Any
involuntary redemption may only occur if the shareholder account is less
than the amount specified in the Prospectus due to shareholder
redemptions.  The Company may waive the CDSC upon such involuntary
redemption.

(e)  Redemption by manager

The Company may waive the CDSC when a total or partial redemption is
made by the manager with respect to its investments in a Fund.

OTHER ACCOUNTS

See "Initial Sales Charge Waivers-Other Accounts".  There is no CDSC on
shares representing capital appreciation or on shares acquired through
reinvestment of dividends or capital gains distributions.

The CDSC will be waived for Other Accounts in connection with:

(a) a total or partial redemption made within one year of the death of
the shareholder; this waiver is available where the deceased
shareholder is either the sole shareholder or owns the shares with
his or her spouse as a joint tenant with right of survivorship, and
applies only to redemption of shares held at the time of death;
(b) a lump sum or other distribution in the case of an Individual
Retirement Account (IRA), a self-employed individual retirement plan
(Keogh Plan) or a custodian account under Section 403(b) of the
Internal Revenue Code, in each case following attainment of age 59 1/2;
(c) a total or partial redemption resulting from any distribution
following retirement in the case of a tax-qualified retirement plan;
(d) a redemption resulting from a tax-free return of an excess
contribution to an IRA; and
(e) redemptions made under a Fund's Systematic Withdrawal Plan.



Purchases of Class 1 Shares.   Class 1 shares are offered only through
PFS Accounts, and only to Eligible Class 1 Purchasers, at the next
determined net asset value plus a sales charge, as set forth below.



Size of Investment

As % of
Net Amount
Invested


As % of
Offering
Price
Reallowed to
PFS (as a %
of Offering
Price)*
Less than $10,000
9.29%
8.50%
7.00%
$     10,000 but less than
$25,000
8.40%
7.75%
6.25%
$     25,000 but less than
$50,000
6.38%
6.00%
5.00%
$     50,000 but less than
$100,000
4.71%
4.50%
3.75%
$   100,000 but less than
$250,000
3.63%
3.50%
3.00%
$   250,000 but less than
$400,000
2.56%
2.50%
2.00%
$   400,000 but less than
$600,000
2.04%
2.00%
1.60%
$   600,000 but less than
$5,000,000
1.01%
1.00%
0.75%
$5,000,000 or more
0.25%
0.25%
0.20%



*	Additionally, PFS Distributors, Inc. pays to PFS Investments a
promotional fee calculated as a percentage of the sales charge reallowed
to PFS.  The percentage used in the calculation is 3%.

The Distributor may be deemed to be an underwriter for purposes of the
Securities Act of 1933. From time to time, Service Agents or their
affiliates may also pay for certain non-cash sales incentives provided
to financial professionals. Such incentives do not have any effect on
the net amount invested. In addition to the reallowances from the
applicable public offering price described above, Service Agents may,
from time to time, pay or allow additional reallowances or promotional
incentives, in the form of cash or other compensation to financial
professionals that sell shares of the Company.

Class 1 shares may be purchased at net asset value by the Primerica Plan
for Eligible Class 1 Purchasers participating in the Primerica Plan,
subject to the provisions of ERISA. Shares so purchased are purchased
for investment purposes and may not be resold except by redemption or
repurchase by or on behalf of the Primerica Plan. Class 1 Shares are
also offered at net asset value to accounts opened for shareholders by
PFS Investments Registered Representatives where the amounts invested
represent the redemption proceeds from investment companies distributed
by an entity other than the Distributor, if such redemption has occurred
no more than 60 days prior to the purchase of shares of the Company and
the shareholder paid an initial sales charge and was not subject to a
deferred sales charge on the redeemed account. Shares are offered at net
asset value to such persons because of anticipated economies in sales
efforts and sales related expenses. The Company may terminate, or amend
the terms of, offering shares of the Company at net asset value to such
persons at any time. PFS may pay PFS Investment Registered
Representatives through whom purchases are made at net asset value an
amount equal to 0.40% of the amount invested if the purchase represents
redemption proceeds from an investment company distributed by an entity
other than the Distributor. Contact the Sub-Transfer Agent at (800) 544-
5445 for further information and appropriate forms.

Investors purchasing Class 1 shares may under certain circumstances be
entitled to reduced sales charges. The circumstances under which such
investors may pay reduced sales charges are the same as those described
above under ''Purchases of Shares-''Volume Discounts'' and ''Letter of
Intent.''

Class L Shares Class L shares are sold with an initial sales charge of
1.00% (which is equal to 1.01% of the amount invested) and are subject
to a deferred sales charge payable upon certain redemptions.  See
"Deferred Sales Charge Alternatives" above.

Class Y Shares Class Y shares are sold without an initial sales charge
or deferred sales charge and are available only to investors investing a
minimum of $15,000,000.

Class O and Class P Shares Class O and Class P shares are only offered
by the Growth and Income Fund and may only be purchased by investors who
currently hold Class O and Class P shares, respectively. The various
features of Class O and Class P shares are identical to Class L and
Class B shares, respectively, except that Class O and Class P shares are
subject to lower distribution and service (12b-1) fees.  See the
prospectus of the Growth and Income Fund under "Choosing a class of
shares to buy" and "Sales charges" for further information.

EXCHANGE PRIVILEGE

Exchange privilege - General.

Class A Exchanges.  Class A shareholders of each Fund who wish to
exchange all or a portion of their shares for Class A shares in any
funds eligible for the exchange privilege may do so without imposition
of any charge.

Class B Exchanges.  In the event a Class B shareholder wishes to
exchange all or a portion of his or her shares into any of the funds
imposing a higher CDSC than that imposed by the Fund then owned, the
exchanged Class B shares will be subject to the higher applicable CDSC.
Upon an exchange, the new Class B shares will be deemed to have been
purchased on the same date as the Class B shares of the Fund that have
been exchanged.


PFS ACCOUNTS

For PFS Accounts, shares of each class of a Fund may be exchanged at the
net asset value next determined for shares of the same class in the
other Funds of the Company and certain other Smith Barney mutual funds,
to the extent shares are offered for sale in the shareholder's state of
residence.  Exchanges are subject to minimum investment requirements and
all shares are subject to the other requirements of the fund into which
exchanges are made.

Shareholders who establish telephone transaction authorization on their
account may request an exchange by telephone.  If a shareholder does not
wish to allow telephone exchanges by any person in his account, he
should decline the telephone transaction option on the account
application. Redemption procedures discussed below are also applicable
for exchanging shares, and exchanges will be made upon receipt of all
supporting documents in proper form.  Exchanges between funds involving
exact registrations do not require a signature guarantee.

OTHER ACCOUNTS

For Other Accounts, Class A and Class B shares of a Fund may be
exchanged for shares of the same class in any other Fund of the Company,
or for shares certain other Smith Barney mutual funds.



Additional Information Regarding Exchanges.  The Funds are not designed
to provide investors with a means of speculation on short-term market
movements.  A pattern of frequent exchanges by investors can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to a Fund and its shareholders.  Accordingly, if
management of the Funds in its sole discretion determines that an
investor is
engaged in excessive trading, a Fund, with or without prior notice,
may temporarily or permanently terminate the availability to that
investor of Fund exchanges, or reject in whole or part any purchase or
exchange request with respect to such investor's account.  Such
investors also may be barred from purchases and exchanges involving
other funds in the Smith Barney Mutual Fund family.   Accounts under
common ownership or control will be considered as one account for
purposes of determining a pattern of excessive trading. A Fund may
notify an investor of rejection of a purchase or exchange order after
the day the order is placed.  If an exchange request is rejected, the
Fund will take no other action with respect to the shares until it
receives further instructions from the investor.  The Funds' policy on
excessive trading applies to investors who invest in a Fund directly
or through Service Agents, but does not apply to any systematic
investment  plans described in the prospectus.

During times of drastic economic or market conditions, a Fund
may suspend the Exchange Privilege temporarily without notice and treat
exchange requests based on their separate components - redemption
orders with a simultaneous request to purchase the other fund's shares.
In such a case, the redemption request would be processed at the Fund's
next determined net asset value but the purchase order would be
effective only at the net asset value next determined after the fund
being purchased formally accepts the order, which may result in the
purchase being delayed.

REDEMPTION OF SHARES

Redemption-General.  In all cases, the redemption price is the net asset
value per share of the Fund next determined after the request for
redemption is received in proper form by the Sub-Transfer Agent (in the
case of PFS Accounts, the Sub-Transfer Agent).  Payment for shares
redeemed will be made by check mailed within three days after acceptance
by the Sub-Transfer Agent (in the case of PFS Accounts, the Sub-Transfer
Agent) of the request and any other necessary documents in proper order.
 Such payment may be postponed or the right of redemption suspended as
provided by the rules of the SEC.  If the shares to be redeemed have
been recently purchased by check or draft, the Sub-Transfer Agent (in
the case of PFS Accounts, the Sub-Transfer Agent) may hold the payment
of the proceeds until the purchase check or draft has cleared, usually a
period of up to 15 days.  A redemption of shares is a taxable
transaction for the shareholder.

The Company may suspend the right of redemption or postpone the date of
payment for shares of a Fund more than seven days during any period when
(a) trading in the markets a Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC exists
making disposal of the Fund's investments or determination of its net
asset value not reasonably practicable; (b) the New York Stock Exchange
is closed (other than customary weekend and holiday closings); or (c)
the SEC has by order permitted such suspension.


PFS ACCOUNTS

Shareholders may redeem for cash some or all of their shares of a Fund
at any time by sending a written request in proper form directly to the
Sub-Transfer Agent, PFS Shareholder Services, at 3100 Breckinridge Blvd,
Bldg. 200, Duluth, Georgia 30099-0062. If you should have any questions
concerning how to redeem your account after reviewing the information
below, please contact the Sub-Transfer Agent at (800) 544-5445, Spanish-
speaking representatives (800) 544-7278 or TDD Line for the Hearing
Impaired (800) 824-1721.

The request for redemption must be signed by all persons in whose names
the shares are registered. Signatures must conform exactly to the
account registration. If the proceeds of the redemption exceed $50,000,
or if the proceeds are not paid to the record owner(s) at the record
address, if the shareholder(s) has had an address change in the past 45
days, or if the shareholder(s) is a corporation, sole proprietor,
partnership, Company or fiduciary, signature(s) must be guaranteed by
one of the following: a bank or trust company; a broker-dealer; a credit
union; a national securities exchange, registered securities association
or clearing agency; a savings and loan association; or a federal savings
bank.

Generally, a properly completed redemption form with any required
signature guarantee is all that is required for a redemption. In some
cases, however, other documents may be necessary. For example, in the
case of shareholders holding certificates, the certificates for the
shares being redeemed must accompany the redemption request. Additional
documentary evidence of authority is also required by the Sub-Transfer
Agent in the event redemption is requested by a corporation,
partnership, trust, fiduciary, executor or administrator. Additionally,
if a shareholder requests a redemption from a Retirement Plan account
(IRA, SEP or 403(b)(7)), such request must state whether or not federal
income tax is to be withheld from the proceeds of the redemption check.

A shareholder may utilize the Sub-Transfer Agent's Telephone Redemption
service to redeem his or her account as long as they have authorized the
telephone redemption option.  If a shareholder does not wish to allow
telephone redemptions by any person in his account, he should decline
the telephone transaction option on the account application.  The
telephone redemption option can be used only if: (a) the redemption
proceeds are to be mailed to the address of record and there has been no
change of address of record within the preceding 45 days; (b) the shares
to be redeemed are not in certificate form; (c); the person requesting
the redemption can provide proper identification information; and (d)
the proceeds of the redemption do not exceed $50,000.  403(b)(7)
accounts and accounts not registered in the name of individual(s) are
not eligible for the telephone redemption option.  Telephone redemption
requests can be made by contacting the Sub-Transfer Agent at (800) 544-
5445 between 9:00 a.m. and 6:00 p.m. eastern time any day that the NYSE
is open.  Telephone redemption may not be available if the shareholder
cannot reach the Sub-Transfer Agent whether because all telephone lines
are busy or for any other reason; in such case, a shareholder would have
to use the Fund's regular redemption procedure described above.

A shareholder may utilize the Sub-Transfer Agent's FAX to redeem the
shareholder's account as long as a signature guarantee or other
documentary evidence is not required. Redemption requests should be
properly signed by all owners of the account and faxed to the Sub-
Transfer Agent at (800) 554-2374. Facsimile redemptions may not be
available if the shareholder cannot reach the Sub-Transfer Agent by FAX,
whether because all telephone lines are busy or for any other reason; in
such case, a shareholder would have to use the Fund's regular redemption
procedure described above. Facsimile redemptions received by the Sub-
Transfer Agent prior to 4:00 p.m. Eastern time on a regular business day
will be processed at the net asset value per share determined that day.

After following the redemption guidelines stated in the Prospectus and
SAI, a shareholder may elect to have the redemption proceeds transferred
via Wire or Automated Clearing House (ACH) directly to the shareholder's
bank account of record (defined as a currently established pre-
authorized draft on the shareholder's account included with the
application or with no changes within the previous 30 days) as long as
the bank account is registered in the same name(s) as the account with
the Fund.  Redemption proceeds can be sent by check to the address of
record or by wire transfer to a bank account designated on the
application.  A shareholder will be charged a $25 service fee for wire
transfers and a nominal service fee for transfers made directly to the
shareholder's bank by ACH.  If the proceeds are not to be transferred to
the bank account of record or mailed to the registered owner, the
request must be submitted in writing and a signature guarantee will be
required from all shareholders.  Redemption proceeds will normally be
sent to the designated bank account on the next business day following
the redemption, and should ordinarily be credited to the shareholder's
bank account by his/her bank within 48 to 72 hours for wire transfers
and 72 to 96 hours for ACH transfers.

OTHER ACCOUNTS

Each Service Agent has agreed to transmit to its customers who are
shareholders of the Fund appropriate prior written disclosure of any
fees that it may charge them directly.  Each Service Agent is
responsible for transmitting promptly orders for its customers.

Shareholders may redeem or exchange Fund shares by telephone, if their
account applications so permit, by calling the Sub-Transfer Agent or, if
they are customers of a Service Agent, their Service Agent. During
periods of drastic economic or market changes or severe weather or other
emergencies, shareholders may experience difficulties implementing a
telephone exchange or redemption. In such an event, another method of
instruction, such as a written request sent via an overnight delivery
service, should be considered. The Fund, the sub-transfer agent and each
Service Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These procedures may
include recording of the telephone instructions and verification of a
caller's identity by asking for his or her name, address, telephone,
Social Security number, and account number. If these or other reasonable
procedures are not followed, the Fund, the sub-transfer agent or the
Service Agent may be liable for any losses to a shareholder due to
unauthorized or fraudulent instructions. Otherwise, the shareholder will
bear all risk of loss relating to a redemption or exchange by telephone.

Automatic Cash Withdrawal Plan.   Each Fund offers shareholders an
automatic cash withdrawal plan, under which shareholders who own shares
with a value of at least $10,000 may elect to receive cash payments of a
specified amount.

PFS ACCOUNTS

For PFS Accounts, the amount of each withdrawal must be at least $50
monthly or quarterly. Retirement plan accounts are eligible for
automatic cash withdrawal plans only where the shareholder is eligible
to receive qualified distributions and has an account value of at least
$5,000. The withdrawal plan will be carried over on exchanges between
funds or classes of a Fund. The Company reserves the right to
involuntarily liquidate any shareholder's account in a Fund if the
aggregate net asset value of the shares held in that Fund account is
less than $500. (If a shareholder has more than one account in a Fund,
each account must satisfy the minimum account size.) The Company,
however, will not redeem shares based solely on market reductions in net
asset value. Before the Company exercises such right, shareholders will
receive written notice and will be permitted 60 days to bring accounts
up to the minimum to avoid involuntary liquidation.  Any applicable CDSC
will not be waived on amounts withdrawn by a shareholder that exceed
1.00% per month of the value of the shareholder's shares subject to the
CDSC at the time the withdrawal plan commences. For further information
regarding the automatic cash withdrawal plan, shareholders should
contact the Sub-Transfer Agent.

OTHER ACCOUNTS

For shareholders who hold shares through Other Accounts, there is a
limit of one withdrawal per month under the plan.

If you redeem Class A or Class B shares under the plan that are subject
to a CDSC, you are not subject to any CDSC applicable to the shares
redeemed, but the maximum amount that you can redeem under the Plan in
any year is limited to 10% of the average daily balance in your account.
 You may receive your withdrawals by check, or have the monies
transferred directly into your bank account. Or you may direct that
payments be made directly to a third party.  To participate in the plan,
you must complete the appropriate forms provided by your Service Agent.

Additional Purchase and Sale Information.

PFS ACCOUNTS

Neither the Series or its agents will be liable for following
instructions communicated by telephone that are reasonably believed to
be genuine.  The Series reserves the right to suspend, modify or
discontinue the telephone redemption and exchange program or to impose a
charge for this service at any time following at least seven (7) days
prior notice to shareholders.

OTHER ACCOUNTS

Each Service Agent has agreed to transmit to its customers who are
shareholders of a Fund appropriate prior written disclosure of any fees
that it may charge them directly. Each Service Agent is responsible for
transmitting promptly orders of its customers.

Investors may be able to establish new accounts in the Funds under one
of several tax-sheltered plans.  Such plans include IRAs, Keogh or
Corporate Profit-Sharing and Money-Purchase Plans, 403(b) Custodian
Accounts, and certain other qualified pension and profit-sharing plans.
Investors should consult with their Service Agent and their tax and
retirement advisers.

Shareholders may redeem or exchange Fund shares by telephone, if their
account applications so permit, by calling the sub-transfer agent or, if
they are customers of a Service Agent, their Service Agent. During
periods of drastic economic or market changes or severe weather or other
emergencies, shareholders may experience difficulties implementing a
telephone exchange or redemption. In such an event, another method of
instruction, such as a written request sent via an overnight delivery
service, should be considered. The Funds, the sub-transfer agent and
each Service Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These procedures may
include recording of the telephone instructions and verification of a
caller's identity by asking for his or her name, address, telephone,
Social Security number, and account number. If these or other reasonable
procedures are not followed, the Funds, the sub-transfer agent or the
Service Agent may be liable for any losses to a shareholder due to
unauthorized or fraudulent instructions.  Otherwise, the shareholder
will bear all risk of loss relating to a redemption or exchange by
telephone.

DISTRIBUTIONS AND FEDERAL TAXES

International Fund and Large Cap Fund distribute dividends and capital
gains annually; Growth and Income Fund declares and pays dividends
quarterly.  The per share dividends on each class will differ depending
on the differences in distribution and service fees, if any, applicable
to the classes.  Each Fund intends similarly to distribute to
shareholders any taxable net realized capital gains (the excess of net
long-term capital gain over net short-term capital loss).  Taxable net
realized capital gains are the excess, if any, of the Fund's total
profits on the sale of securities and certain other transactions during
the year over its total losses on such sales and transactions,
including capital losses carried forward from prior years in accordance
with the tax laws.  Such capital gains, if any, are distributed at
least once a year.  All income dividends and capital gains
distributions are reinvested in shares of a Fund at net asset value
without sales charge on the record date, except that any shareholder
may otherwise instruct the shareholder service agent in writing and
receive cash.  Shareholders are informed as to the sources of
distributions at the time of payment.

Taxation of Fund.  Each Fund intends to qualify as a "regulated
investment company" under Subchapter M of the Code by complying with
certain requirements regarding the sources and distribution of its
income and the diversification of its assets. By so qualifying, a Fund
will not be subject to federal income tax on amounts paid by it as
dividends and distributions to shareholders in compliance with the
Code's timing and other requirements. If any Fund were to fail to
qualify as a regulated investment company under the Code, all of its
income (without deduction for income dividends or capital gain
distributions paid to shareholders) would be subject to tax at
corporate rates. A Fund will be subject to a nondeductible, 4% federal
excise tax if it fails to meet certain distribution requirements with
respect to each calendar year, generally applicable to its ordinary
(taxable) income for that year and the excess of its capital gains over
its capital losses for the one-year period ended on October 31 of that
year. The Funds intend generally to make distributions sufficient to
avoid or minimize any liability for the excise tax. Each Fund expects
to be treated as a separate entity for purposes of determining its
federal tax treatment.

Dividends or other income (including, in some cases, capital gains)
received by a Fund from sources within foreign countries may be subject
to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce
or eliminate such taxes in some cases.

Taxation of Shareholders.  Dividends from net investment income and any
excess of net short-term capital gain over net long-term capital loss
are taxable to shareholders as ordinary income.  A portion of dividends
taxable as ordinary income paid by a Fund may qualify for the 70%
dividends received deduction for corporations. Qualifying dividends
include only dividends attributable to dividends a Fund receives from
U.S. domestic corporations with respect to stock for which the Fund
satisfies applicable holding period requirements.

The portion of the dividends received from a Fund which qualifies for
the dividends-received deduction for corporations will be reduced to
the extent that the Fund holds dividend-paying stock for less than 46
days (91 days for certain preferred stock). The Fund's holding period
requirement must be satisfied separately for each dividend during a
prescribed period before and after the ex-dividend date and will not
include any period during which the Fund has reduced its risk of loss
from holding the stock by purchasing an option to sell, granting an
option to buy, or entering into a short sale of substantially identical
stock or securities, such as securities convertible into the stock. The
holding period for stock may also be reduced if the Fund diminishes its
risk of loss by holding one or more positions in substantially similar
or related property. The dividends-received deduction will be allowed
only with respect to dividends on Fund shares for which a corporate
shareholder satisfies the same holding period rules applicable to the
Fund.

Receipt of dividends that qualify for the dividends-received reduction
may increase a corporate shareholder's liability, if any, for the
alternative minimum tax.  Such a shareholder should also consult its
tax adviser regarding the possibility that its federal tax basis in its
Fund shares may be reduced by the receipt of "extraordinary dividends"
from the Fund and, to the extent such basis would be reduced below
zero, current recognition of income would be required.

For federal income tax purposes, dividends declared by a Fund in
October, November or December as of a record date in such a month and
which are actually paid in January of the following year will be
treated as if they were paid on December 31 of the year in which they
are declared. These dividends will be taxable to shareholders as if
actually received on December 31 rather than in the year in which
shareholders actually receive the dividends.

A capital gain dividend (i.e., a dividend from the excess of a Fund's
net long-term capital gain over its net short-term capital loss)
received after the purchase of the shares of any of the Funds reduces
the net asset value of the shares by the amount of the distribution and
will nevertheless be subject to income taxes. The same is true of
dividends treated as ordinary income, as described above.  Investors
may therefore wish to avoid purchasing Fund shares shortly before an
anticipated dividend or capital gain dividend in order to avoid being
taxed on a distribution that is economically a return of a portion of
the purchase price. These capital gain dividends are taxable to
shareholders as long-term capital gains, regardless of how long the
shareholder has held Fund shares. Any loss on the sale of Fund shares
held for six months or less is treated as a long-term capital loss to
the extent of any capital gain dividend paid on such shares. All
dividends and distributions are taxable to the shareholder in the same
manner whether or not reinvested in shares.  Shareholders are notified
annually by the Fund as to the federal tax status of dividends and
distributions paid by the Fund.

If shares of a Fund purchased subject to a sales charge are sold or
exchanged within 90 days of acquisition, and shares of the same or
another Fund acquired at a reduced (or no) sales charge because of the
sales charge imposed on the prior purchase, then to the extent the
sales charge on the subsequent shares is so reduced or waived, the
sales charge incurred on the initial purchase may not be used to
determine the basis in the shares disposed of for purposes of
determining tax gain or loss.  To the extent the sales charge is not
allowed in determining gain or loss on the disposition of the initial
shares, it is includable in the basis of the subsequent shares
acquired. Additionally, any loss realized on a redemption or exchange
of Fund shares may be disallowed under "wash sale" rules to the extent
the shares disposed of are replaced with other shares of the same Fund
within a period of 61 days, beginning 30 days before and ending 30 days
after such disposition, including pursuant to reinvestment of dividends
in Fund shares.

Periodic withdrawals under the systematic withdrawal plan involve
redemptions of shares, which may result in tax liability for the
redeeming shareholder. Additionally, any redemption of shares is a
potentially taxable transaction, even if a reinvestment privilege is
later exercised.

Dividends to shareholders who are non-resident aliens may be subject to
a United States withholding tax at a rate of up to 30% under existing
provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty laws.  Non-resident shareholders are
urged to consult their own tax advisers concerning the applicability of
the United States withholding tax.

If eligible, the International  Fund will determine whether to make an
election to treat any qualified foreign income taxes paid by it as paid
by its shareholders. In determining whether to make this election, the
Fund will take into consideration such factors as the amount of foreign
taxes paid and the administrative costs associated with making the
election. If the election is made, shareholders of the Fund would be
required to include their respective pro rata portions of such
qualified foreign taxes in computing their taxable income and would
then generally be entitled to credit such amounts against their United
States federal income taxes due, if any, provided that certain holding
period requirements are satisfied, or to include such amounts in their
itemized deductions, if any.  For any year for which it makes such an
election, the International  Fund will report to its shareholders
(shortly after the close of its fiscal year) the amount per share of
such foreign taxes that must be included in the shareholder's gross
income and will be potentially available as a credit or deduction,
subject to the limitations generally applicable under the Code.  The
other Funds will not qualify to make this election, and consequently
their shareholders will not report on their own tax returns their
shares of the foreign taxes paid by these Funds nor be entitled to
claim a deduction or credit.

Dividends and capital gains distributions may also be subject to state
and local taxes.  Shareholders are urged to consult their attorneys or
tax advisers regarding specific questions as to federal, state or local
taxes.

Back-up Withholding.  Each Fund is required to withhold and remit to
the United States Treasury 31% of (i) reportable taxable dividends and
distributions and (ii) the proceeds of any redemptions of Fund shares
with respect to any shareholder who is not exempt from withholding and
who fails to furnish the Fund with a correct taxpayer identification
number, who fails to report fully dividend or interest income or who
fails to certify to the Company that he has provided a correct taxpayer
identification number and that he is not subject to withholding.  (An
individual's taxpayer identification number is his or her social
security number.) The 31% "Back-up withholding tax" is not an
additional tax and may be credited against a taxpayer's regular federal
income tax liability.

Special Tax Rules Affecting Investments.  The Code includes special
rules applicable to certain listed options (excluding equity options as
defined in the Code), futures contracts, and options on futures
contracts which a Fund may write, purchase or sell. Such options and
contracts are generally classified as Section 1256 contracts under the
Code.  The character of gain or loss resulting from the sale,
disposition, closing out, expiration or other termination of
Section 1256 contracts is generally treated as long-term capital gain
or loss to the extent of 60 percent thereof and short-term capital gain
or loss to the extent of 40 percent thereof ("60/40 gain or loss").
Such contracts, when held by the Fund at the end of a fiscal year,
generally are required to be treated as sold at market value on the
last day of such fiscal year for federal income tax purposes
("marked-to-market").  Over-the-counter options, equity options, and
certain other options or future contracts are not classified as
Section 1256 contracts and are not subject to the mark-to-market rule
or to 60/40 gain or loss treatment.  Any gains or losses from
transactions in over-the-counter options generally constitute
short-term capital gains or losses.  If over-the-counter call options
written, or over-the-counter put options purchased, by a Fund are
exercised, the gain or loss realized on the sale of the underlying
securities may be either short-term or long-term, depending on the
holding period of the securities.  In determining the amount of gain or
loss, the sales proceeds are reduced by the premium paid for
over-the-counter puts or increased by the premium received for
over-the-counter calls.

Certain transactions in options, futures contracts, or options on
futures contracts may constitute "straddles" which are defined in the
Code as offsetting positions with respect to personal property.  A
straddle in which at least one (but not all) of the positions are
Section 1256 contracts is a "mixed straddle" under the Code if certain
conditions are met.

The Code generally provides with respect to straddles (i) "loss
deferral" rules which may postpone recognition for tax purposes of
losses from certain closing purchase transactions or other dispositions
of a position in the straddle to the extent of unrealized gains in the
offsetting position, (ii) "wash sale" rules which may postpone
recognition for tax purposes of losses where a position is sold and a
new offsetting position is acquired within a prescribed period and
(iii) "short sale" rules which may terminate the holding period of
securities owned by the Fund when offsetting positions are established
and which may convert certain losses from short-term to long-term.

The Code provides that certain elections may be made for mixed
straddles that can alter the character of the capital gain or loss
recognized upon disposition of positions which form part of a straddle.
Certain other elections are also provided in the Code.  No
determination has been reached to make any of these elections.

The effect of the tax rules described above with respect to options and
futures contracts may be to change the amount, timing and character of
a Fund's income, gains and losses and therefore of its distributions to
shareholders.

These rules also generally apply to options, futures and forward
contracts relating to foreign currency, except that (1) options,
futures and forward contracts on certain foreign currencies are not
governed by Section 1256, (2) gains and losses on foreign currency
forward contracts are generally treated as ordinary income and losses,
and (3) gains and losses on a Fund's foreign currency options and
futures contracts that are not governed by Section 1256, if any, are
generally treated as ordinary income and loss.

Additionally, under the Code gains or losses attributable to
fluctuations in exchange rates between the time a Fund accrues income
or receivables or expenses or other liabilities denominated in a
foreign currency and the time the Fund actually collects such income or
pays such liabilities, are treated as ordinary income or ordinary loss.
Similarly, gains or losses on the disposition of debt securities
denominated in foreign currency, to the extent attributable to
fluctuations in exchange rates between the acquisition and disposition
dates, are treated as ordinary income or loss.

If a Fund purchases shares in certain foreign investment entities,
referred to as "passive foreign investment companies," the Fund itself
may be subject to U.S. federal income tax and an additional charge in
the nature of interest on a portion of any "excess distribution" from
such company or gain from the disposition of such shares, even if the
distribution or gain is distributed by the Fund to its shareholders in
a manner that satisfies the distribution requirements referred to
above.  If a Fund were able and elected to treat a passive foreign
investment company as a "qualified electing fund," in lieu of the
treatment described above, the Fund would be required each year to
include in income, and distribute to shareholders in accordance with
the distribution requirements described above, the Fund's pro rata
share of the ordinary earnings and net capital gains of the company,
whether or not actually received by the Fund.  A Fund generally should
be able to make an alternative election to mark these investments to
market annually, resulting in the recognition of ordinary income
(rather than capital gain) or ordinary loss, subject to limitations on
the ability to use any such loss.

A Fund may be required to treat amounts as taxable income or gain,
subject to the distribution requirements referred to above, even though
no corresponding amounts of cash are received concurrently, as a result
of (1) mark to market, constructive sale or other rules applicable to
passive foreign investment companies, partnerships or trusts in which
the Fund invests or to certain options, futures, forward contracts, or
"appreciated financial positions" or (2) the inability to obtain cash
distributions or other amounts due to currency controls or restrictions
on repatriation imposed by a foreign country with respect to the Fund's
investments in issuers in such country or (3) tax rules applicable to
debt obligations acquired with "original issue discount," including
zero-coupon or deferred payment bonds and pay-in-kind debt obligations,
or to market discount if an election is made with respect to such
market discount.  A Fund may therefore be required to obtain cash to be
used to satisfy these distribution requirements by selling portfolio
securities at times that it might not otherwise be desirable to do so,
thereby potentially generating additional taxable gain, or borrowing
the necessary cash, thereby incurring interest expenses.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations presently in effect,
and no attempt is made to describe special tax rules that may be
applicable to certain categories of shareholders, such as tax-exempt or
tax-deferred entities or retirement plans, insurance companies, and
financial institutions. For the complete provisions, reference should
be made to the pertinent Code sections and the Treasury Regulations
promulgated thereunder.  The Code and these Treasury Regulations are
subject to change by legislative or administrative action either
prospectively or retroactively.


OTHER INFORMATION

Performance Information

From time to time a Fund may include its total return, average annual
total return, yield and current dividend return in advertisements and/or
other types of sales literature. These figures are computed separately for
Class 1, Class A and Class B shares of each Fund. These figures are based
on historical earnings and are not intended to indicate future
performance. The Company may include comparative performance information
in advertising or marketing a Fund's shares.  Such performance information
may include data from the following industry and financial publications:
Barron's, Business Week, CDA Investment Technologies Inc., Changing Times,
Forbes, Fortune, Institutional Investor, Investors Daily, Money,
Morningstar Mutual Fund Values, The New York Times, USA Today and The Wall
Street Journal.

Yield

A Fund's 30-day yield figure described below is calculated according to a
formula prescribed by the SEC.  The formula can be expressed as follows:
YIELD = 2[( [(a-b/(c*d))] + 1)6 - 1], where

	a = dividends and interest earned during the period
	b = expenses accrued for the period (net of reimbursement)
	c =	the average daily number of shares outstanding during the
period that were entitled to receive dividends
	d = the maximum offering price per share on the last day of the
period

For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations purchased by a Fund at a discount or premium,
the formula generally calls for amortization of the discount or premium;
the amortization schedule will be adjusted monthly to reflect changes in
the market values of the debt obligations.

Investors should recognize that in periods of declining interest rates a
Fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates, the Fund's yield will tend to be
somewhat lower.  In addition, when interest rates are falling, the inflow
of net new money to the Fund from the continuous sale of its shares will
likely be invested in portfolio instruments producing lower yields than
the balance of the Fund's investments, thereby reducing the current yield
of the Fund.  In periods of rising interest rates, the opposite can be
expected to occur.

Average Annual Total Return

"Average annual total return" figures, as described below, are computed
according to a formula prescribed by the SEC.  The formula can be
expressed as follows: P(l+T)n = ERV, where:

	P		=	a hypothetical initial payment of $ 1,000
	T		=	average annual total return
	n		=	number of years
	ERV	= Ending Redeemable Value of a Hypothetical $ 1,000 investment
made at the beginning of a 1-, 5- or 10-year period at the
end of the 1-, 5- or 10-year period (or fractional portion
 thereof), assuming reinvestment of all dividends and
distributions.


The average annual total return (computed in the manner described in the
Prospectus) for each Fund are shown in the tables below.  These results
are based on historical earnings and asset value fluctuations and are
not intended to indicate future performance.  Such information should be
considered in light of each Fund's investment objectives and policies as
well as the risks incurred in each Fund's investment practices.  No
Class O, P, or Y shares were outstanding for the year ended October 31,
2000.

						Class 1		Class A
	Class B		Class L
						Shares		Shares
	Shares		Shares

International Fund

i)	total return for one year period ended
	10/31/00				20.33%		24.44%
	25.04%		--
ii)	total return for five year period ended
	10/31/00				--		23.69%		23.97%
		--
iii)	total return since inception
	(based on inception date of 3/17/95)	--		24.05%
	24.28%		--
iv)	total return since inception
	(based on inception date of 8/08/96)	23.57%		--
	--		--
v)	total return since inception
	(based on inception date of 9/12/00)	--		--		--
		(11.60)%

Large Cap Fund

i)	total return for one year period ended
	10/31/00				6.26%		9.90%		9.76%
	--
ii)	total return for five year period ended
	10/31/00				19.81%		--		--
	--
iii)	Total return for the ten year period ended
	10/31/00				18.55%		--		--
	--
iv)	total return since inception
	(based on inception date of 4/14/87)	13.95%		--
	--		--
v)	total return since inception
	(based on inception date of 8/18/96)	--		21.91%
	22.35%		--
vi)	total return since inception
	(based on inception date of 9/19/00) 	--		--
	--		(5.30)%

Growth and Income Fund

i)	total return for one year period ended
	10/31/00				3.55%		(0.10)%
	(0.06)%		--
ii)	total return for five year period ended
	10/31/00				14.59%		--		--
	--
iii)	total return for ten year period ended
10/31/00				14.95%		--		--
	--
iv)	total return since inception
	(based on inception date of 4/14/87)	11.55%		--
	--		--
v)	total return since inception
	(based on inception date of 8/18/96)	--		15.35%
	15.73%		--
vi)	total return since inception
	(based on inception date of 10/10/00)	--		--
	--		0.93%

The yield for Class A and Class B shares is not fixed and will fluctuate
in response to prevailing interest rates and the market value of
portfolio securities, and as a function of the type of securities owned
by the Fund, portfolio maturity and the Fund's expenses.

The Funds may illustrate in advertising materials the use of a Payroll
Deduction Plan as a convenient way for business owners to help their
employees set up either IRA or voluntary mutual fund accounts.  The
Funds may illustrate in advertising materials retirement planning
through employee contributions and/or salary reductions.  Such
advertising material will illustrate that employees may have the
opportunity to save for retirement and reduce taxes by electing to defer
a portion of their salary into a special mutual fund IRA account.  The
Funds may illustrate in advertising materials that Uniform Gift to
Minors Act accounts may be used as a vehicle for saving for a child's
financial future.  Such illustrations will include statements to the
effect that upon reaching the age of majority, such custodial accounts
become the child's property.

Shareholder Services

Uniform Gifts to Minors Act ("UGMA").  The Company recognizes the
importance to a child of establishing a savings and investment plan
early in life for education and other purposes when the child becomes
older.  The advantages of regular investment with interest or earnings
compounding over a number of years are great.  In addition, taxes on
these earnings are assessed against the income of the child rather than
the donor, usually at a lower bracket.

Investors wishing to establish a UGMA account should call their
Financial Professional for an application.  Individuals desiring to open
an account under UGMA are also advised to consult with a tax adviser
before establishing the account.

Individual Retirement Account.  Any individual who has compensation or
earned income from employment or self-employment and who is under age
70 1/2 may establish an IRA.  The limitation on an individual's annual
contribution to an IRA is the lesser of 100% of compensation or $2,000.

The Small Business Job Protection Act of 1996 changed the eligibility
requirements for participants in Individual Retirement Accounts
("IRAs").  Under these new provisions, if you or your spouse have earned
income, each of you may establish an IRA and make maximum annual
contributions equal to the lesser of earned income or $2,000.  As a
result of this legislation, married couples where one spouse is non-
working may now contribute a total of $4,000 annually to their IRAs.

The Taxpayer Relief Act of 1997 changed the requirements for determining
whether or not you are eligible to make a deductible IRA contribution.
Under the new rules effective beginning January 1, 1998, if you are
considered an active participant in an employer-sponsored retirement
plan, you may still be eligible for a full or partial deduction
depending upon your combined adjusted gross income ("AGI").  For married
couples filing jointly for 1998 a full deduction is permitted if your
combined AGI is $50,000 or less ($30,000 for unmarried individuals); a
partial deduction will be allowed when AGI is between $50,000-$60,000
($30,000-$40,000 for an unmarried individual); and no deduction is
available when AGI is above $60,000 ($40,000 for an unmarried
individual).  However, if you are married and your spouse is covered by
an employer-sponsored retirement plan, but you are not, you will be
eligible for a full deduction if your combined AGI is $150,000 or less.
 A partial deduction is permitted if your combined AGI is between
$150,000-160,000, and no deduction is permitted when AGI is above
$160,000.

The rules applicable to so-called "Roth IRAs" differ from those
described above.

In addition, any individual, regardless of age, may establish a rollover
IRA to receive an eligible rollover distribution from an
employer-sponsored plan.

Simplified Employee Pension Plan (SEP) and Salary Reduction Simplified
Employee Pension Plan (SARSEP).  A SEP/SARSEP is a means for an employer
to provide retirement contributions to IRAs for all employees, without
the complicated reporting and record keeping involved in a qualified
plan.  Employees covered by a SEP/SARSEP can use the same IRA to receive
their own allowable IRA contribution.

Section 403(b)(7) Plan.  Employees of certain exempt organizations and
schools can have a portion of their compensation set aside, and income
taxes attributable to such portion deferred, in a Section 403(b)(7)
plan.  Teachers, school administrators, ministers, employees of
hospitals, libraries, community chests, funds, foundations, and many
others may be eligible.  The employer must be an organization described
in Section 501(c)(3) of the Internal Revenue Code and must be exempt
from tax under Section 501(a) of the Code.  In addition, any employee of
most public educational institutions is eligible if his employer is a
state or a political subdivision of a state, or any agency or
instrumentality of either.  The employee is not taxed on the amount set
aside or the earnings thereon until the funds are withdrawn, normally at
retirement.

Transfer Agent

Citi Fiduciary Trust Company (the "transfer agent"), located at 125
Broad Street, New York, New York  10004, serves as the Funds' transfer
and dividend-paying agent.  Under the transfer agency agreement, the
transfer agent, either directly or through a sub-transfer agent,
maintains the shareholder account records for the Funds, handles certain
communications between shareholders and the Funds, distributes dividends
and distributions payable by the Funds and produces statements with
respect to account activity for the Funds' and their shareholders.  For
these services, the transfer agent receives fees from the Funds computed
on the basis of the number of shareholder accounts that the transfer
agent maintains for the Funds during the month and is reimbursed for
out-of-pocket expenses.

Sub-Transfer Agent

PFPC Global Fund Services is located at 101 Federal Street, Boston,
Massachusetts 02110 and serves as the Sub-Transfer Agent for  Other
Accounts.

The Company has engaged the services of PFS Shareholder Services,
located at 3100 Breckinridge Blvd., Bldg 200, Duluth, Georgia 30099-
0062, as the Sub-Transfer Agent for PFS Accounts.

Custody of Assets

Securities owned by the Company and all cash, including proceeds from
the sale of shares of the Company and of securities in the Company's
investment portfolio, are held by PFPC Trust Company, located at 8800
Tinicum Blvd., Philadelphia, PA  19153, as Custodian for each Fund other
than International  Fund.  Chase Manhattan Bank, located at Chase
Metrotech Center, Brooklyn, NY  11245 serves as Custodian for
International  Fund.

Shareholder Reports

Semi-annual statements are furnished to shareholders, and annually such
statements are audited by the independent accountants.

PFS ACCOUNTS

An Account Transcript is available at a shareholder's request, which
identifies every financial transaction in an account since it was
opened. To defray administrative expenses involved with providing
multiple years worth of information, there is a $15 charge for each
Account Transcript requested.  Additional copies of tax forms are
available at the shareholder's request. A $10 fee for each tax form will
be assessed.

Additional information regarding the Sub-Transfer Agent's services may
be obtained by contacting the Client Services Department at (800) 544-
5445.



Legal Counsel

Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02110

Shareholder and Trustee Responsibility

Under the laws of certain states, including Massachusetts where the
Company was organized, shareholders of a Massachusetts business trust
may, under certain circumstances, be held personally liable as partners
for the obligations of the Company.  However, the risk of a shareholder
incurring any financial loss on account of shareholder liability is
limited to circumstances in which the Company itself would be unable to
meet its obligations.  The Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the
Company and provides that notice of the disclaimer may be given in each
agreement, obligation, or instrument which is entered into or executed
by the Company or Trustees.  The Declaration of Trust provides for
indemnification out of Company property to any shareholder held
personally liable for the obligations of the Company and also provides
for the Company to reimburse such shareholder for all legal and other
expenses reasonably incurred in connection with any such claim or
liability.

Under the Declaration of Trust, the Trustees and Officers are not liable
for actions or failure to act; however, they are not protected from
liability by reason of their willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of their office.  The Company will provide indemnification to its
Trustees and Officers as authorized by its By-Laws and by the 1940 Act
and the rules and regulations thereunder.

About the Company

The Company was organized on January 29, 1987 under the laws of The
Commonwealth of Massachusetts and is a business entity commonly known as
a ''Massachusetts business trust.'' It is a diversified, open-end
management investment company authorized to issue an unlimited number of
Class A, Class B, Class 1, Class L, Class O, Class P, and Class Y shares
of beneficial interest of $.01 par value, in the Funds. Shares issued
are fully paid, non-assessable and have no preemptive or conversion
rights. In the event of liquidation of any Fund, shareholders of such
Fund are entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders.

As of December 31, 1997, the name of the Company was changed from the
Common Sense Funds Trust to Concert Investment Series(r).; and to the
Smith Barney Investment Series on September 11, 2000.

Shareholders are entitled to one vote for each full share held and to
fractional votes for fractional shares held in the election of Trustees
(to the extent hereafter provided) and on other matters submitted to the
vote of shareholders. Each class of shares represents interest in the
assets of each Fund and has identical voting, dividend, liquidation and
other rights on the same terms and conditions, except that the
distribution fees and service fees and any incremental transfer agency
fees related to each class of shares of each Fund are borne solely by
that class, and each class of shares of each Fund has exclusive voting
rights with respect to provisions of the Plan which pertains to that
class of each Fund. All shares have equal voting rights, except that
only shares of the respective Fund are entitled to vote on matters
concerning only that Fund. There will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such
time as less than a majority of the Trustees holding office have been
elected by shareholders, at which time the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Shareholders
may, in accordance with the Declaration of Trust, cause a meeting of
shareholders to be held for the purpose of voting on the removal of
Trustees. Except as set forth above, the Trustees shall continue to hold
office and appoint successor Trustees.

PFS Investments acts as custodian for certain employee benefit plans and
individual retirement accounts.


Other Information Regarding Smith Barney Mutual Funds

In an industry where the average portfolio manager has seven years of
experience (source: ICI, 1998), the portfolio managers of Smith Barney
Mutual Funds average 21 years in the industry and 15 years with the
firm.

Smith Barney Mutual Funds offers more than 60 mutual funds.  We
understand that many investors prefer an active role in allocating the
mix of funds in their portfolio, while others want the asset allocation
decisions to be made by experienced managers.

That's why we offer four "styles" of fund management that can be
tailored to suit each investor's unique financial goals.

Classic Series - our portfolio manager driven funds
Our Classic Series lets investors participate in mutual funds whose
investment decisions are determined by experienced portfolio managers,
based on each fund's investment objectives and guidelines.  Classic Series
funds invest across asset classes and sectors, utilizing a range of
strategies in order to achieve their objectives.

Index Series- funds that track the market
Our Index funds are designed to provide investment results that track, as
closely as possible, the performance of a stock or bond market index.
This strategy distinguishes an index fund from an "actively managed"
mutual fund.  Instead of trying to outperform a market or segment, a
portfolio manager looks to an index to determine which securities the fund
should own.

Premier Selections Series - our best ideas, concentrated funds
We offer a series of Premier Selections funds managed by several of our
most experienced and proven managers.  This series of funds is built on a
unique strategy of combining complementary investment management styles to
create broader, multiclass and multicap products that are distinguished by
a highly concentrated focus.

Research Series- driven by exhaustive fundamental securities analysis
Built on a foundation of substantial buy-side research under the direction
of our Citibank Global Asset Management (CGAM) colleagues, our Research
funds focus on well-defined industries, sectors and trends.

Style Pure Series - our solution to funds that stray
Our Style Pure Series funds are the building blocks of asset allocation.
 The funds stay fully invested within their asset class and investment
style, enabling you to make asset allocation decisions in conjunction with
your financial professional.


FINANCIAL STATEMENTS

The Company's Annual Report for the fiscal year ended October 31, 2000,
is incorporated herein by reference in its entirety.



APPENDIX A

RATINGS OF BONDS, NOTES AND COMMERCIAL PAPER

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 - An obligation rated 'AAA' has the highest rating assigned by
Standard & Poor's.  The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.

AA - An obligation rated 'AA' differs from the highest rated obligations
only in small degree.  The obligor's capacity to meet its financial
commitment on the obligation is very strong.

A - An obligation rated 'A' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories.  However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.

BB, B, CCC, CC, C - An obligation rated 'BBB' exhibits adequate
protection parameters.  However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.  Obligations
rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant
speculative characteristics.  'BB' indicates the least degree of
speculation and 'C' the highest.  While such obligations will likely
have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse
conditions.

Plus (+) or minus (-) - The ratings from 'AA' to 'CCC' may be modified
by the addition of a plus or minus sign to show relative standing within
the major rating categories.

N.R. - This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard &
Poor's does not rate a particular obligation as a matter of policy.


Fitch IBCA, Duff & Phelps

AAA - Highest credit quality.  'AAA' ratings denote the lowest
expectation of credit risk.  They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments.  This capacity is highly unlikely to be adversely affected
by foreseeable events.

AA - Very high credit quality.  'AA' ratings denote a very low
expectation of credit risk.  They indicate very strong capacity for
timely payment of financial commitments.  This capacity is not
significantly vulnerable to foreseeable events.

A - High credit quality.  'A' ratings denote a low expectation of credit
risk.  The capacity for timely payment of financial commitments is
considered strong.  This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.

BBB - Good credit quality.  'BBB' ratings indicate that there is
currently a low expectation of credit risk.  The capacity for timely
payment of financial commitments is considered adequate, but adverse
changes in circumstances and in economic conditions are more likely to
impair this capacity.  This is the lowest investment-grade category.

BB - Speculative.  'BB' ratings indicate that there is a possibility of
credit risk developing particularly as the result of adverse economic
change over time; however, business or financial alternatives may be
available to allow financial commitments to be met.  Securities rated in
this category are not investment grade.

B - Highly speculative.  'B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.  Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.

CCC, CC, C - High default risk.  Default is a real possibility.
Capacity for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments.  A 'CC' rating
indicates that default of some kind appears probable.  'C' ratings
signal imminent default.

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, Duff & Phelps

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 - Highest credit quality.  Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.

F2 - Good credit quality.   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 - Fair credit quality.  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.




53
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Secdocs\SAI 2001 Retail.docNYDOCS:294334.2




Statement of Additional Information

Smith Barney Investment Series
Seven World Trade Center
New York, NY 10048

February 28, 2001

Select Small Cap
Portfolio

Select Growth and Income Portfolio
Select Mid Cap Portfolio
Select Government Portfolio
                                     Select Growth Portfolio

Smith Barney Investment Series (the "Trust") currently offers eight
separate investment portfolios, five of which are described in this
Statement of Additional Information ("SAI") (the investment portfolios
described herein are individually referred to as a "Portfolio," and
collectively, the "Portfolios").  This SAI expands upon and supplements
the information contained in the prospectus dated February 28, 2001 for
the Portfolios, as amended or supplemented from time to time, and should
be read in conjunction therewith.

The prospectus may be obtained from designated insurance companies
offering separate accounts ("separate accounts") which fund certain
variable annuity and variable life insurance contracts (each, a
"contract") and qualified pension and retirement plans or by writing or
calling the Trust at the address or telephone number listed above.  This
SAI, although not in itself a prospectus, is incorporated by reference
into the prospectus in its entirety.

TABLE OF CONTENTS

	Page

General Information	2
Goals and Investment Policies	2
Investment Practices	6
Risk Factors	20
Investment Restrictions	25
Trustees and Officers	26
Investment Advisory Agreements	29
Distributor	31
Portfolio Turnover	31
Portfolio Transactions and Brokerage	32
Determination of Net Asset Value	33
Taxes	35
Performance	36
Additional Information about the Portfolios	38
Financial Statements	39
Appendix A - Ratings of Bonds, Notes and Commercial Paper	A-1


GENERAL INFORMATION

SSB Citi Fund Management LLC, a limited liability company formed
September 21, 1999 ("SSB Citi" or the "manager"), (which was
incorporated on March 12, 1968), Seven World Trade Center, New York, NY
10048, renders investment management advice to investment companies with
aggregate assets under management in excess of $146 billion as of
January 31, 2001.  The manager is an affiliate of Salomon Smith Barney
Inc. ("Salomon Smith Barney").  The manager and Salomon Smith Barney are
subsidiaries of Citigroup Inc. ("Citigroup"), a financial services
company that uses diverse channels to offer a broad range of financial
services to consumer and corporate customers around the world.  Among
these businesses are Citibank, Commercial Credit, Primerica Financial
Services, Salomon Smith Barney, SSB Citi Asset Management, Travelers
Life & Annuity, and Travelers Property Casualty.

Salomon Smith Barney (the "Distributor") is the distributor of the
Portfolios' shares.

GOALS AND INVESTMENT POLICIES

The following disclosures supplement disclosures set forth in the
Prospectus and do not, standing alone, present a complete and accurate
explanation of the matters disclosed.

The differences in goals and investment policies among the Portfolios
can be expected to affect the return of each Portfolio and the degree of
market and financial risk to which each Portfolio is subject. The goal
and investment policies, the percentage limitations, and the kinds of
securities in which each Portfolio may invest are generally not
fundamental policies and therefore may be changed by the Trustees
without shareholder approval.  Although each Portfolio has a different
goal which it pursues through separate investment policies, each
Portfolio, except the Mid Cap Portfolio, will not purchase any
securities issued by any company primarily engaged in the manufacture of
alcohol or tobacco.

Each of the Portfolios may depart from its principal investment
strategies in response to adverse market, economic or political
conditions by taking temporary defensive positions in all types of money
market and short-term debt securities.  If a Portfolio takes a temporary
defensive position, it may be unable to achieve its investment
objective.

Select Small Cap Portfolio

Select Small Cap Portfolio (formerly known as Select Emerging Growth
Portfolio) seeks capital appreciation by investing in a portfolio of
securities consisting principally of common stocks of small sized
companies considered by the manager to be emerging growth companies. Any
ordinary income received from portfolio securities is entirely
incidental. There can be no assurance that the objective of capital
appreciation will be realized; therefore, full consideration should be
given to the risks inherent in the investment techniques that the
manager may use to achieve such objective.

Under normal conditions, the Portfolio invests at least 65% of its total
assets in common stocks of small sized companies, both domestic and
foreign, in the early stages of their life cycle that the manager
believes have the potential to become major enterprises. Investments in
such companies may offer greater opportunities for growth of capital
than larger, more established companies, but also may involve certain
special risks. Small cap companies often have limited product lines,
markets, or financial resources, and they may be dependent upon one or a
few key people for management. The securities of such companies may be
subject to more abrupt or erratic market movements than securities of
larger, more established companies or the market averages in general.
While the portfolio will invest primarily in common stocks, to a limited
extent, it may invest in other securities such as preferred stocks,
convertible securities and warrants.

The Portfolio may also invest in special situations involving new
management, special products and techniques, unusual developments,
mergers or liquidations. Investments in unseasoned companies and special
situations often involve much greater risks than are inherent in
ordinary investments, because securities of such companies may be more
likely to experience unexpected fluctuations in price.

The Portfolio may hold a portion of its assets in high grade short-term
debt securities and high grade corporate or government bonds in order to
provide liquidity.  Short-term investments may include repurchase
agreements with banks or broker-dealers. The Portfolio may invest up to
20% of its total assets in securities of foreign issuers.

Select Mid Cap Portfolio

Select Mid Cap Portfolio seeks long-term growth of capital.  The
Portfolio attempts to achieve its investment objective by investing,
under normal market conditions, substantially all of its assets in
equity securities and at least 65% of its total assets 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 at the time of the Portfolio's
investment.  The size of the companies in the Index changes with market
conditions and the composition of the Index. Companies whose
capitalization falls outside this range after purchase continue to be
considered medium-sized companies for purposes of the 65% policy.
Investing in medium-capitalization stocks may involve greater risk than
investing in large capitalization stocks since they can be subject to
more abrupt or erratic movements. However, they tend to involve less
risk than stocks of small capitalization companies.  The Portfolio may
invest up to 35% of its assets in equity securities of companies with
market capitalizations that do not qualify them as medium sized at the
time of the Portfolio's investment.

The Portfolio will normally invest in all types of equity securities,
including common stocks, preferred stocks, securities that are
convertible into common or preferred stocks, such as warrants and
convertible bonds, and depositary receipts for those securities. The
Portfolio may maintain a portion of its assets, which will usually not
exceed 10%, in U.S. Government securities, money market obligations, and
in cash to provide for payment of the Portfolio's expenses and to meet
redemption requests. It is the policy of the Portfolio to be as fully
invested in equity securities as practicable at all times.

Consistent with its investment objective and policies described above,
the Portfolio may invest up to 25% of its total assets in foreign
securities, including both direct investments and investments made
through depositary receipts. The Portfolio may also invest in real
estate investment trusts; purchase or sell securities on a when-issued
or delayed-delivery basis; enter into forward commitments to purchase
securities; lend portfolio securities; purchase and sell put and call
options; and enter into interest rate futures contracts, stock index
futures contracts and related options.


Select Growth Portfolio

Select Growth Portfolio seeks capital appreciation through investments
in common stocks and options on common stocks. Any income realized on
its investments will be purely incidental to its goal of capital
appreciation.

The Portfolio also may hold a portion of its assets in high grade short-
term debt securities and high grade corporate or government bonds in
order to provide liquidity. The amount of assets the Portfolio may hold
for liquidity purposes is based on market conditions and the need to
meet redemption requests.  A description of the ratings of commercial
paper and bonds is contained in the Appendix.  Short-term investments
may include repurchase agreements with banks or broker-dealers.

Certain policies of the Portfolio, such as purchasing and selling
options on stocks, purchasing options on stock indices and purchasing
stock index futures contracts and options thereon involve inherently
greater investment risk and could result in more volatile price
fluctuations.  The Portfolio may also invest up to 20% of its total
assets in securities of foreign issuers and in investment companies.
Since the Portfolio may take substantial risks in seeking its goal of
capital appreciation, it is not suitable for investors unable or
unwilling to assume such risks.

Select Growth and Income Portfolio

Select Growth and Income Portfolio seeks reasonable growth and income
through investments in equity securities that provide dividend or
interest income, including common and preferred stocks and securities
convertible into common and preferred stocks.

Convertible securities rank senior to common stocks in a corporation's
capital structure. They are consequently of higher quality and entail
less risk than the corporation's common stock, although the extent to
which such risk is reduced depends in large measure upon the degree to
which the convertible security sells above its value as a fixed income
security. The Portfolio may purchase convertible securities rated Ba or
lower by Moody's Investors Service, Inc. ("Moody's") or BB or lower by
Standard & Poor's Ratings Group ("S&P") and may also purchase non-rated
securities considered by the manager to be of comparable quality.
Although the Portfolio selects these securities primarily on the basis
of their equity characteristics, investors should be aware that debt
securities rated in these categories are considered high risk
securities; the rating agencies consider them speculative, and payment
of interest and principal is not considered well assured. To the extent
that such convertible securities are acquired by the Portfolio, there is
a greater risk as to the timely payment of the principal of, and timely
payment of interest or dividends on, such securities than in the case of
higher rated convertible securities.

Although the portfolio turnover rate will not be considered a limiting
factor, the Portfolio does not intend to engage in trading directed at
realizing short-term profits. Nevertheless, changes in the portfolio
will be made promptly when determined to be advisable by reason of
developments not foreseen at the time of the investment decision, and
usually without reference to the length of time the security has been
held.

The Portfolio may hold a portion of its assets in high grade short-term
debt securities and high grade corporate or government bonds in order to
provide liquidity. The amount of assets the Portfolio may hold for
liquidity purposes is based on market conditions and the need to meet
redemption requests.  Short-term investments may include repurchase
agreements with banks or broker-dealers.  The Portfolio may also invest
up to 20% of its total assets in securities of foreign issuers and in
investment companies.  The Portfolio may engage in portfolio management
strategies and techniques involving options, futures contracts and
options on futures.

Select Government Portfolio

Select Government Portfolio seeks high current return consistent with
preservation of capital.  The Portfolio intends to invest at least 80%
of its assets in debt securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.  Securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
include: (1) U.S. Treasury obligations, which differ in their interest
rates, maturities and times of issuance: U.S. Treasury bills (maturity
of one year or less), U.S. Treasury notes (maturity of one to ten
years), and U.S. Treasury bonds (generally maturities of greater than
ten years), including the principal components or the interest
components issued by the U.S. Government under the Separate Trading of
Registered Interest and Principal of Securities program (i.e.
''STRIPS''), all of which are backed by the full faith and credit of the
United States; and (2) obligations issued or guaranteed by U.S.
Government agencies or instrumentalities, including government
guaranteed mortgage-related securities, some of which are backed by the
full faith and credit of the U.S. Treasury, some of which are supported
by the right of the issuer to borrow from the U.S. Government and some
of which are backed only by the credit of the issuer itself.

The Portfolio may enter into repurchase agreements with domestic banks
or broker-dealers deemed creditworthy by the manager solely for purposes
of investing the Portfolio's cash reserves or when the Portfolio is in a
temporary defensive posture.  The Portfolio may write covered or fully
collateralized call options on U.S. Government securities and enter into
closing or offsetting purchase transactions with respect to certain of
such options.  The Portfolio may also write secured put options and
enter into closing or offsetting purchase transactions with respect to
such options.  The Portfolio may write both listed and over-the-counter
options.

The Portfolio seeks to obtain a high current return consistent with the
preservation of capital from the following sources:

? interest paid on the Portfolio's securities;
? premiums earned upon the expiration of options written;
? net profits from closing transactions; and
? net gains from the sale of portfolio securities on the exercise of
options or otherwise.

The Portfolio is not designed for investors seeking long-term capital
appreciation.  Moreover, varying economic and market conditions may
affect the value of and yields on U.S. Government securities.
Accordingly, there is no assurance that the Portfolio's investment
objective will be achieved.

The Portfolio may engage in transactions involving obligations issued or
guaranteed by U.S. Government agencies and instrumentalities which are
supported by any of the following: (a) the full faith and credit of the
U.S. Government (such as Government National Mortgage Association
("GNMA") Certificates), (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Government, (c)
discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. Agencies and
instrumentalities include, but are not limited to: Federal Land Banks,
Farmers Home Administration, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks and Federal National
Mortgage Association ("FNMA").

While the Portfolio has no policy limiting the maturities of the debt
securities in which it may invest, the manager seeks to moderate market
risk by generally maintaining a portfolio duration within a range of
approximately four to six years. Duration is a measure of the expected
life of a debt security that was developed as a more precise alternative
to the concept of "term to maturity." Duration incorporates a debt
security's yield, coupon interest payments, final maturity and call
features into one measure.  Traditionally, a debt security's "term to
maturity" has been used as a proxy for the sensitivity of the security's
price to changes in interest rates (which is the "interest rate risk" or
"price volatility" of the security).  However, "term to maturity"
measures only the time until a debt security provides its final payment
taking no account of the pattern of the security's payments of interest
or principal prior to maturity.  Duration measures the length of the
time interval between the present and the time when the interest and
principal payments are scheduled to be received (or in the case of a
callable bond, expected to be received), weighing them by the present
value of the cash to be received at each future point in time. In
general, the lower the coupon rate of interest or the longer the
maturity, or the lower the yield-to-maturity of a debt security, the
longer its duration; conversely, the higher the coupon rate of interest,
the shorter the maturity or the higher the yield-to-maturity of a debt
security, the shorter its duration.

With respect to some securities, there may be some situations where even
the standard duration calculation does not properly reflect the interest
rate exposure of a security. In these and other similar situations, the
manager will use more sophisticated analytical techniques that
incorporate the economic life of a security into the determination of
its interest rate exposure. The duration is likely to vary from time to
time as the manager pursues its strategy of striving to maintain an
active balance between seeking to maximize income and endeavoring to
maintain the value of the Portfolio's capital. Thus, the objective of
providing high current return consistent with preservation of capital to
shareholders is tempered by seeking to avoid undue market risk and thus
provide reasonable total return as well as high distributed return.
There is, of course, no assurance that the manager will be successful in
achieving such results for the Portfolio.

The Portfolio generally purchases debt securities at a premium over the
principal or face value in order to obtain higher current income. The
amount of any premium declines during the term of the security to zero
at maturity. Such decline generally is reflected in the market price of
the security and thus in the Portfolio's net asset value. Any such
decline is realized for accounting purposes as a capital loss at
maturity or upon resale. Prior to maturity or resale, such decline in
value could be offset, in whole or part, or increased by changes in the
value of the security due to changes in interest rate levels.

The principal reason for selling call or put options is to obtain,
through the receipt of premiums, a greater return than would be realized
on the underlying securities alone. By selling options, the Portfolio
reduces its potential for capital appreciation on debt securities if
interest rates decline. Thus, if market prices of debt securities
increase, the Portfolio would receive a lower total return from its
optioned positions than it would have received if the options had not
been sold. The purpose of selling options is intended to improve the
Portfolio's total return and not to "enhance" monthly distributions.
During periods when the Portfolio has capital loss carryforwards, any
capital gains generated from such transactions will be retained in the
Portfolio.  The purchase and sale of options may result in a high
portfolio turnover rate.

INVESTMENT PRACTICES

This section contains a discussion of certain investment practices.  The
Portfolios indicated may engage in these and any other practices not
prohibited by their investment restrictions.  For further information
about risks associated with these practices, see "Risk Factors" below.

EQUITY SECURITIES

Common Stocks (All Portfolios except Government Portfolio).  Each
Portfolio 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.

Preferred Stocks and Convertible Securities (All Portfolios except
Government Portfolio).  Each Portfolio may invest in convertible debt
and preferred stocks.  Convertible debt securities and preferred stock
entitle the holder to acquire the issuer's stock by exchange or purchase
for a predetermined rate.  Convertible securities are subject both to
the credit and interest rate risks associated with fixed income
securities and to the stock market risk associated with equity
securities.

Warrants (All Portfolios except Government Portfolio).  Each Portfolio
may purchase warrants.  Warrants acquired by a Portfolio entitle it to
buy common stock from the issuer at a specified price and time.
Warrants are subject to the same market risks as stocks, but may be more
volatile in price.  A Portfolio's investment in warrants will not
entitle it to receive dividends or exercise voting rights and will
become worthless if the warrants cannot be profitably exercised before
the expiration dates.

REITs (All Portfolios except Government Portfolio).  Each Portfolio may
invest in shares of real estate investment trusts (REITs), which are
pooled investment vehicles that invest in real estate or real estate
loans or interests.  Investing in REITs involves risks similar to those
associated with investing in equity securities of small capitalization
companies.  REITs are dependent upon management skills, are not
diversified, and are subject to risks of project financing, default by
borrowers, self-liquidation, and the possibility of failing to qualify
for the exemption from taxation on distributed amounts under the
Internal Revenue Code of 1986, as amended (the "Code").

Illiquid and Restricted Securities.  The Portfolios each may invest in
illiquid and restricted securities. As used herein, restricted
securities are those that have been sold in the United States without
registration under the Securities Act of 1933 and are thus subject to
restrictions on resale. Excluded from the limitation, however, are any
restricted securities which are eligible for resale pursuant to Rule
144A under the Securities Act of 1933 and which have been determined to
be liquid by the Trustees or by the manager pursuant to board-approved
guidelines. The determination of liquidity is based on the volume of
reported trading in the institutional secondary market for each
security. This investment practice could have the effect of increasing
the level of illiquidity in each Portfolio to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities. These difficulties and delays could result in a
Portfolio's inability to realize a favorable price upon disposition of
restricted securities, and in some cases might make disposition of such
securities at the time desired by the Portfolio impossible. Since market
quotations are not readily available for restricted securities, such
securities will be valued by a method that the Trustees believe
accurately reflects fair value.

Securities of Foreign Issuers (All Portfolios except Government
Portfolio).  The Small Cap Portfolio, the Growth Portfolio and the
Growth and Income Portfolio may invest up to 20% of the value of their
total assets and the Mid Cap Portfolio may invest up to 25% of the value
of its total assets in securities of foreign governments and companies
of developed and emerging markets countries.

Each Portfolio may also purchase foreign securities in the form of
American Depositary Receipts (''ADRs'') and European Depositary Receipts
(''EDRs'') or other securities representing underlying shares of foreign
companies. ADRs are publicly traded on exchanges or over-the-counter in
the United States and are issued through ''sponsored'' or
''unsponsored'' arrangements. In a sponsored ADR arrangement, the
foreign issuer assumes the obligation to pay some or all of the
depositary's transaction fees, whereas under an unsponsored arrangement,
the foreign issuer assumes no obligation and the depositary's
transaction fees are paid by the ADR holders. In addition, less
information is available in the United States about an unsponsored ADR
than about a sponsored ADR, and the financial information about a
company may not be as reliable for an unsponsored ADR as it is for a
sponsored ADR. Each Portfolio may invest in ADRs through both sponsored
and unsponsored arrangements.

The Small Cap Portfolio, the Mid Cap Portfolio, the Growth Portfolio and
the Growth and Income Portfolio may invest in the securities of
developing countries, commonly known as "emerging markets" countries.
See "Risk Factors Securities of Developing /Emerging Markets Countries".

FIXED INCOME SECURITIES

Corporate Debt Obligations (All Portfolios).  Each Portfolio 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 factors 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 (All Portfolios).   The U.S. Government
securities in which the Portfolios may invest include: bills,
certificates of indebtedness, and notes and bonds issued by the U.S.
Treasury or by agencies or instrumentalities of the U.S. Government.
Some U.S. Government securities, such as U.S. Treasury bills and bonds,
are supported by the full faith and credit of the U.S. Treasury; others
are supported by the right of the issuer to borrow from the U.S.
Treasury; others are supported by the discretionary authority of the
U.S. Government to purchase the agency's obligations; still others are
supported only by the credit of the instrumentality.

Mortgage Related Securities (Government Portfolio).  The Government
Portfolio may invest in mortgage-related securities, including those
representing an undivided ownership interest in a pool of mortgage
loans, e.g., GNMA, FNMA, FHLMC Certificates.  Mortgage loans made by
banks, savings and loan institutions, and other lenders are often
assembled into pools, which are issued or guaranteed by an agency or
instrumentality of the U.S. Government, though not necessarily by the
U.S. Government itself. Interests in such pools are collectively
referred to as ''mortgage-related securities.''

Mortgage-related securities are characterized by monthly payments to the
holder, reflecting the monthly payments made by the borrowers who
received the underlying mortgage loans. The payments to the
securityholders (such as the Portfolio), like the payments on the
underlying loans, represent both principal and interest. Although the
underlying mortgage loans are for specified periods of time, such as 20
or 30 years, the borrowers can, and typically do, pay them off sooner.
Thus, the securityholders frequently receive prepayments of principal,
in addition to the principal which is part of the regular monthly
payment. A borrower is more likely to prepay a mortgage which bears a
relatively high rate of interest. This means that in times of declining
interest rates, some of the Portfolio's higher yielding securities might
be converted to cash, and the Portfolio will be forced to accept lower
interest rates when that cash is used to purchase additional securities.
The increased likelihood of prepayment when interest rates decline also
limits market price appreciation of mortgage-related securities. If the
Portfolio buys mortgage-related securities at a premium, mortgage
foreclosures or mortgage prepayments may result in a loss to the
Portfolio of up to the amount of the premium paid since only timely
payment of principal and interest is guaranteed.

The Government National Mortgage Association ("GNMA") is a wholly owned
corporate instrumentality of the United States within the U.S.
Department of Housing and Urban Development.  GNMA's principal programs
involve its guarantees of privately issued securities backed by pools of
mortgages.  Certificates of the Government National Mortgage Association
("GNMA Certificates") are mortgage-backed securities, which evidence an
undivided interest in a pool of mortgage loans.  GNMA Certificates
differ from bonds in that principal is paid back monthly by the borrower
over the term of the loan rather than returned in a lump sum at
maturity.  GNMA Certificates that the Portfolio purchases are the
"modified pass-through" type. "Modified pass-through" GNMA Certificates
entitle the holder to receive a share of all interest and principal
payments paid and owned on the mortgage pool net of fees paid to the
"issuer" and GNMA, regardless of whether or not the mortgagor actually
makes the payment.  The National Housing Act authorizes GNMA to
guarantee the timely payment of principal and interest on securities
backed by a pool of mortgages insured by the Federal Housing
Administration ("FHA") or the Farmers' Home Administration ("FMHA"), or
guaranteed by the Veterans Administration ("VA").  Once a pool of such
mortgages is assembled and approved by GNMA, the GNMA guarantee is
backed by the full faith and credit of the U.S. Government.  GNMA is
also empowered to borrow without limitation from the U.S. Treasury if
necessary to make any payments required under its guarantee.

The average life of a GNMA Certificate is likely to be substantially
less than the original maturity of the mortgage pools underlying the
securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of
principal investment long before maturity of the mortgages in the pool.
The Portfolio normally will not distribute principal payments (whether
regular or prepaid) to its shareholders.  Rather, it will invest such
payments in additional mortgage-related securities of the types
described above or other U.S. Government securities.  Interest received
by the Portfolio will, however, be distributed to shareholders.
Foreclosures impose no risk to principal investment because of the GNMA
guarantee.

As prepayment rates of the individual mortgage pools vary widely, it is
not possible to predict accurately the average life of a particular
issue of GNMA Certificates.   However, statistics published by the FHA
indicate that the average life of single-family dwelling mortgages with
25-to 30-year maturities, the type of mortgages backing the vast
majority of GNMA Certificates, is approximately 12 years.  Therefore, it
is customary to treat GNMA Certificates as 30-year mortgage-backed
securities which prepay fully in the twelfth year.

The coupon rate of interest of GNMA Certificates is lower than the
interest rate paid on the VA-guaranteed or FHA-insured mortgages
underlying the GNMA Certificates, but only by the amount of the fees
paid to GNMA and the GNMA Certificate issuer.  For the most common type
of mortgage pool, containing single-family dwelling mortgages, GNMA
receives an annual fee of 0.06 of one percent of the outstanding
principal for providing its guarantee, and the GNMA Certificate issuer
is paid an annual servicing fee of 0.44 of one percent for assembling
the mortgage pool and for passing through monthly payments of interest
and principal to Certificate holders.  The coupon rate by itself,
however, does not indicate the yield which will be earned on the GNMA
Certificates for the following reasons:

1.  Certificates are usually issued at a premium or discount, rather
than at par.

2.  After issuance, Certificates usually trade in the secondary market
at a premium or discount.

3.  Interest is paid monthly rather than semi-annually as is the case
for traditional bonds. Monthly compounding has the effect of raising the
effective yield earned on GNMA Certificates.

4.  The actual yield of each GNMA Certificate is influenced by the
prepayment experience of the mortgage pool underlying the Certificate.
If mortgagors prepay their mortgages, the principal returned to
Certificate holders may be reinvested at higher or lower rates.

In quoting yields for GNMA Certificates, the customary practice is to
assume that the Certificates will have a 12 year life.

Quotes available for GNMA Certificates from securities dealers depend
on, among other things, the level of market rates, the Certificate's
coupon rate and the prepayment experience of the pool of mortgages
backing each Certificate.

The Federal Home Loan Mortgage Corporation ("FHLMC") was created in 1970
to promote development of a nationwide secondary market in conventional
residential mortgages.  FHLMC issues two types of mortgage pass-through
securities, mortgage participation certificates ("PCs") and guaranteed
mortgage certificates ("GMCs").  PCs resemble GNMA Certificates in that
each PC represents a pro rata share of all interest and principal
payments made and owed on the underlying pool.  Like GNMA Certificates,
PCs are assumed to be prepaid fully in their twelfth year.  FHLMC
guarantees timely monthly payment of interest of PCs and the ultimate
payment of principal.

GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semiannually and return
principal once a year in guaranteed minimum payments.  The expected
average life of these securities is approximately 10 years.

The Federal National Mortgage Association ("FNMA") creates a secondary
market in mortgages insured by the FHA.  FNMA issues guarantees mortgage
pass-through certificates ("FNMA Certificates").  FNMA Certificates
resemble GNMA Certificates in that each Certificate represents a pro
rata share of all interest and principal payments made and owed on the
underlying pool.  FNMA guarantees timely payment of interest on FNMA
Certificates and the full return of principal.  Like GNMA Certificates,
FNMA Certificates are assumed to be prepaid fully in their twelfth year.

Risk of foreclosure of the underlying mortgages is greater with FHLMC
and FNMA securities because, unlike GNMA securities, FHLMC and FNMA
securities are not guaranteed by the full faith and credit of the U.S.
Government.

Forward Commitments (Government Portfolio and Mid Cap Portfolio).   The
Portfolio may purchase or sell U.S. Government securities on a ''when-
issued'' or ''delayed delivery'' basis (''Forward Commitments''). These
transactions occur when securities are purchased or sold by the
Portfolio with payment and delivery taking place in the future,
frequently a month or more after such transactions. The price is fixed
on the date of the commitment, and the seller continues to accrue
interest on the securities covered by the Forward Commitment until
delivery and payment take place. At the time of settlement, the market
value of the securities may be more or less than the purchase or sale
price.

A Forward Commitment sale is covered if the Portfolio owns or has the
right to acquire the underlying securities subject to the Forward
Commitment.  A Forward Commitment sale is for cross-hedging purposes if
it is not covered, but is designed to provide a hedge against a decline
in value of a security which the Portfolio owns or has the right to
acquire.  In either circumstance, the Portfolio maintains in a
segregated account (which is marked to market daily) either the security
covered by the Forward Commitment or appropriate securities as required
by the Investment Company Act of 1940, as amended (the "1940 Act")
(which may have maturities which are longer than the term of the Forward
Commitment) with the Portfolio's custodian in an aggregate amount equal
to the amount of its commitment as long as the obligation to sell
continues.  By entering into a Forward Commitment sale transaction, the
Portfolio forgoes or reduces the potential for both gain and loss in the
security which is being hedged by the Forward Commitment sale.

The Portfolio may either settle a Forward Commitment by taking delivery
of the securities or may either resell or repurchase a Forward
Commitment on or before the settlement date in which event the Portfolio
may reinvest the proceeds in another Forward Commitment. The Portfolio's
use of Forward Commitments may increase its overall investment exposure
and thus its potential for gain or loss. When engaging in Forward
Commitments, the Portfolio relies on the other party to complete the
transaction; should the other party fail to do so, the Portfolio might
lose a purchase or sale opportunity that could be more advantageous than
alternative opportunities at the time of the failure.

The Portfolio maintains a segregated account (which is marked to market
daily) of appropriate securities as required by the 1940 Act covered by
the Forward Commitment with the Portfolio's custodian in an aggregate
amount equal to the amount of its commitment as long as the obligation
to purchase or sell continues.

Short-Term Investments (All Portfolios).  In certain circumstances the
Portfolios may invest without limitation in all types of short-term
money market instruments, 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. To the extent a
Portfolio is investing in short-term investments as a temporary
defensive posture, the applicable Portfolio's investment objective may
not be achieved.

Commercial Paper (All Portfolios).   Commercial paper consists of
short-term (usually 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, such as one of the
Portfolios 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.


DERIVATIVE INSTRUMENTS

Options, Futures Contracts and Related Options (All Portfolios)

Selling Call and Put Options (Small Cap Portfolio, Mid Cap Portfolio,
Growth Portfolio, Growth and Income Portfolio and Government Portfolio).
The principal reason for selling options is to obtain, through receipt
of premiums, a greater current return than would be realized on the
underlying securities alone.  A Portfolio's current return can be
expected to fluctuate because premiums earned from writing options and
dividend or interest income yields on portfolio securities vary as
economic and market conditions change.  Writing options on portfolio
securities also results in a higher portfolio turnover.  The purchaser
of a call option pays a premium to the writer (i.e., the seller) for the
right to buy the underlying security from the writer at a specified
price during a certain period.  Small Cap Portfolio, Growth Portfolio
and Growth and Income Portfolio sell call options only on a covered
basis.  Government Portfolio sells call options either on a covered
basis, or for cross-hedging purposes.  A call option is covered if the
Portfolio owns or has the right to acquire the underlying securities
subject to the call option at all times during the option period.  Thus,
Government Portfolio may sell options on U.S. Government securities or
forward commitments of such securities.  An option is for cross-hedging
purposes (relative to Government Portfolio only) to hedge against a
security which the Portfolio owns or has the right to acquire.  In such
circumstances, Government Portfolio maintains in a segregated account
with the Portfolio's Custodian, cash or U.S. Government securities in an
amount not less than the market value of the underlying security, marked
to market daily, while the option is outstanding.  The purchaser of a
put option pays a premium to the seller (i.e., the writer) for the right
to sell the underlying security to the writer at a specified price
during a certain period.  A Portfolio sells put options only on a
secured basis, which means that, at all times during the option period,
the Portfolio would maintain in a segregated account with its Custodian
cash, cash equivalents or liquid securities in an amount of not less
than the exercise price of the option, or will hold a put on the same
underlying security at an equal or greater exercise price.  A Portfolio
generally sells put options when the manager wishes to purchase the
underlying security for the Portfolio at a price lower than the current
market price of the security.

In order to terminate its position as writer of a call or put option, a
Portfolio may enter into a "closing purchase transaction," which is the
purchase of a call (put) on the same underlying security and having the
same exercise price and expiration date as the call (put) previously
sold by the Portfolio.  The Portfolio will realize a gain (loss) if the
premium plus commission paid in the closing purchase transaction is less
(greater) than the premium it received on the sale of the option.  A
Portfolio would also realize a gain if an option it has sold lapses
unexercised.  A Portfolio may sell options that are listed on an
exchange as well as options that are traded over-the-counter.  A
Portfolio may close out its position as writer of an option only if a
liquid secondary market exists for options of that series, but there is
no assurance that such a market will exist, particularly in the case of
over-the-counter options, since they can be closed out only with the
other party to the transaction.  Alternatively, a Portfolio may purchase
an offsetting option, which does not close out its position as a writer,
but provides an asset of equal value to its obligation under the option
sold.  If a Portfolio is not able to enter into a closing purchase
transaction or to purchase an offsetting option with respect to an
option it has sold, it will be required to maintain the securities
subject to the call or the collateral securing the put until a closing
purchase transaction can be entered into (or the option is exercised or
expires), even though it might not be advantageous to do so.

By selling a call option, a Portfolio loses the potential for gain on
the underlying security above the exercise price while the option is
outstanding; by writing a put option a Portfolio might become obligated
to purchase the underlying security at an exercise price that exceeds
the then current market price.

Each of the United States exchanges has established limitations
governing the maximum number of call or put options on the same
underlying security (whether or not covered) that may be written by a
single investor, whether acting alone or in concert with others,
regardless of whether such options are written on one or more accounts
or through one or more brokers.  An exchange may order the liquidation
of positions found to be in violation of those limits, and it may impose
other sanctions or restrictions.  These position limits may restrict the
number of options the Portfolio may be able to write.

Purchasing Call and Put Options (All Portfolios).   A Portfolio may
purchase call options to protect (e.g., hedge) against anticipated
increases in the prices of securities it wishes to acquire.
Alternatively, call options may be purchased for their leverage
potential.  Since the premium paid for a call option is typically a
small fraction of the price of the underlying security, a given amount
of funds will purchase call options covering a much larger quantity of
such security than could be purchased directly.  By purchasing call
options, a Portfolio can benefit from any significant increase in the
price of the underlying security to a greater extent than had it
invested the same amount in the security directly.  However, because of
the very high volatility of option premiums, a Portfolio could bear a
significant risk of losing the entire premium if the price of the
underlying security did not rise sufficiently, or if it did not do so
before the option expired.  Conversely, put options may be purchased to
protect (e.g., hedge) against anticipated declines in the market value
of either specific portfolio securities or of a Portfolio's assets
generally.  Alternatively, put options may be purchased for capital
appreciation in anticipation of a price decline in the underlying
security and a corresponding increase in the value of the put option.
The purchase of put options for capital appreciation involves the same
significant risk of loss as described above for call options.  In any
case, the purchase of options for capital appreciation would increase
the Portfolio's volatility by increasing the impact of changes in the
market price of the underlying securities on the Portfolio's net asset
value.  The Portfolios may purchase either listed or over-the-counter
options.

Options on Stock Indexes (All Portfolios except Government Portfolio).
Options on stock indices are similar to options on stock, but the
delivery requirements are different.  Instead of giving the right to
take or make delivery of stock at a specified price, an option on a
stock index gives the holder the right to receive an amount of cash upon
exercise of the option.  Receipt of this cash amount will depend upon
the closing level of the stock index upon which the option is based
being greater than (in the case of a call) or less than (in the case of
a put) the exercise price of the option.  The amount of cash received
will be the difference between the closing price of the index and the
exercise price of the option, multiplied by a specified dollar multiple.
The writer of the option is obligated, in return for the premium
received, to make delivery of this amount.  Some stock index options are
based on a broad market index such as the Standard & Poor's 500 or the
New York Stock Exchange Composite Index, or a narrower index such as the
Standard & Poor's 100.  Indexes are also based on an industry or market
segment such as the AMEX Oil and Gas Index or the Computer and Business
Equipment Index.  Options are currently traded on The Chicago Board
Options Exchange, the New York Stock Exchange, the American Stock
Exchange and other exchanges.  Gain or loss to a Portfolio on
transactions in stock index options will depend on price movements in
the stock market generally (or in a particular industry or segment of
the market) rather than price movements of individual securities.  As
with stock options, the Portfolio may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
Exchange, or it may let the option expire unexercised.

Futures Contracts (All Portfolios).  Each Portfolio may engage in
transactions involving futures contracts and related options in
accordance with rules and interpretations of the Commodity Futures
Trading Commission ("CFTC") under which the Portfolios are exempt from
registration as a "commodity pool".

An interest rate futures contract is a bilateral agreement pursuant to
which two parties agree to take or make delivery of a specific type of
debt security at a specified future time and at a specified price.
Although interest rate futures contracts call for delivery of specified
securities, in most cases the contracts are closed out (by an offsetting
purchase or sale) prior to actual delivery, with the difference between
the contract price and the offsetting price paid in cash.

A stock index futures contract is a bilateral agreement pursuant to
which two parties agree to take or make delivery of cash equal to a
specified dollar amount times the difference between the stock index
value at a specified time and the price at which the futures contract is
originally struck.  A stock index fluctuates with changes in the market
values of the stocks included.  No physical delivery of the underlying
stocks in the index is made.

Currently, stock index futures contracts can be purchased with respect
to the Standard & Poor's 500 Stock Index on the Chicago Mercantile
Exchange ("CME"), the New York Stock Exchange Composite Index on the New
York Futures Exchange and the Value Line Stock Index on the Kansas City
Board of Trade.  Differences in the stocks included in the indexes may
result in differences in correlation of the futures contracts with
movements in the value of the securities being hedged.

Foreign stock index futures traded outside the United States include the
Nikkei Index of 225 Japanese stocks traded on the Singapore
International Monetary Exchange ("Nikkei Index"), Osaka Index of
50 Japanese stocks traded on the Osaka Exchange, Financial Times Stock
Exchange Index of the 100 largest stocks on the London Stock Exchange,
the All Ordinaries Share Price Index of 307 stocks on the Sydney,
Melbourne Exchanges, Hang Seng Index of 33 stocks on the Hong Kong Stock
Exchange, Barclays Share Price Index of 40 stocks on the New Zealand
Stock Exchange and Toronto Index of 35 stocks on the Toronto Stock
Exchange.  Futures and futures options on the Nikkei Index are traded on
the CME and United States commodity exchanges may develop futures and
futures options on other indices of foreign securities.  Futures and
options on United States devised index of foreign stocks are also being
developed.  Investments in securities of foreign entities and securities
denominated in foreign currencies involve risks not typically involved
in domestic investment, including fluctuations in foreign exchange
rates, future foreign political and economic developments, and the
possible imposition of exchange controls or other foreign or United
States governmental laws or restrictions applicable to such investments.

In contrast to the purchase or sale of a security, no price is paid or
received upon the purchase or sale of a futures contract.  Initially, a
Portfolio is required to deposit with its Custodian in an account in the
broker's name an amount of appropriate securities as required by the
1940 Act equal to a percentage (which will normally range between 2% and
10%) of the contract amount.  This amount is known as initial margin.
The nature of initial margin in futures transactions is different from
that of margin in securities transactions in that futures contract
margin does not involve the borrowing of funds by the customer to
finance the transaction.  Rather, the initial margin is in the nature of
a performance bond or good faith deposit on the contract, which is
returned to the Portfolio upon termination of the futures contract and
satisfaction of its contractual obligations.  Subsequent payments to and
from the broker, called variation margin, are made on a daily basis as
the price of the underlying securities or index fluctuates, making the
long and short positions in the futures contract more or less valuable,
a process known as marking to market.

For example, when a Portfolio purchases a futures contract and the price
of the underlying security or index rises, that position increases in
value, and the Portfolio receives from the broker a variation margin
payment equal to that increase in value.  Conversely, where the
Portfolio purchases a futures contract and the value of the underlying
security or index declines, the position is less valuable, and the
Portfolio is required to make a variation margin payment to the broker.

At any time prior to expiration of the futures contract, the Portfolio
may elect to terminate the position by taking an opposite position.  A
final determination of variation margin is then made, additional cash is
required to be paid by or released to the Portfolio, and the Portfolio
realizes a loss or a gain.

When a Portfolio anticipates a significant market or market sector
advance, the purchase of a futures contract affords a hedge against not
participating in the advance at a time when the Portfolio is otherwise
fully invested ("anticipatory hedge").  Such purchase of a futures
contract serves as a temporary substitute for the purchase of individual
securities, which may be purchased in an orderly fashion once the market
has stabilized.  As individual securities are purchased, an equivalent
amount of futures contracts could be terminated by offsetting sales.  A
Portfolio may sell futures contracts in anticipation of or in a general
market or market sector decline that may adversely affect the market
value of the Portfolio's securities ("defensive hedge").  To the extent
that the Portfolio's portfolio of securities changes in value in
correlation with the underlying security or index, the sale of futures
contracts substantially reduces the risk to the Portfolio of a market
decline and, by so doing, provides an alternative to the liquidation of
securities positions in the Portfolio with attendant transaction costs.

For example, if Government Portfolio holds long-term U.S. Government
securities, and a rise in long-term interest rates is anticipated, it
could, in lieu of selling its portfolio securities, sell futures
contracts for similar long-term securities.  If interest rates increased
and the value of the Portfolio's securities declined during the period
the contracts were outstanding, the value of the Portfolio's futures
contracts should increase, thereby protecting the Portfolio by
preventing net asset value from declining as much as it otherwise would
have.

In the event of the bankruptcy of a broker through which a Portfolio
engages in transactions in listed options, futures or related options,
the Portfolio could experience delays and/or losses in liquidating open
positions purchased incur a loss of all or part of its margin deposits
with the broker.  Similarly, in the event of the bankruptcy of the
writer of an over-the-counter option purchased by Government Portfolio,
the Portfolio could experience a loss of all or part of the value of the
option.  Transactions are entered into by a Portfolio only with brokers
or financial institutions deemed creditworthy by the manager.

Each Portfolio's futures transactions will be entered into for
traditional hedging purposes; that is, futures contracts will be sold to
protect against a decline in the price of securities or currencies that
the Portfolio owns, or futures contracts will be purchased to protect a
Portfolio against an increase in the price of securities of currencies
it has committed to purchase or expects to purchase.  A Portfolio pays
commissions on futures contracts and options transactions.

Options on Futures Contracts (All Portfolios).   A Portfolio may also
purchase and sell options on futures contracts which are traded on an
Exchange.  An option on a futures contract gives 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), at a specified exercise price at any time
during the option period.  As a seller of an option on a futures
contract, a Portfolio is subject to initial margin and maintenance
requirements similar to those applicable to futures contracts.  In
addition, net option premiums received by a Portfolio are required to be
included as initial margin deposits.  When an option on a futures
contract is exercised, delivery of the futures position is accompanied
by cash representing the difference between the current market price of
the futures contract and the exercise price of the option.  A Portfolio
may purchase put options on futures contracts in lieu of, and for the
same purposes as, the sale of a futures contract.  The purchase of call
options on futures contracts in intended to serve the same purpose as
the actual purchase of the futures contract.

Forward Currency Contracts and Options on Currency (Mid Cap Portfolio).
A forward currency contract is an obligation to purchase or sell a
currency against another currency at a future date and price as agreed
upon by the parties.  The Portfolio may either accept or make delivery
of the currency at the maturity of the forward contract or, prior to
maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract.  The Portfolio engages in forward
currency transactions in anticipation of, or to protect itself against
fluctuations in exchange rates.  The Portfolio might sell a particular
foreign currency forward, for example, when it holds bonds denominated
in that currency but anticipates, and seeks to be protected against,
decline in the currency against the U.S. dollar.  Similarly, the
Portfolio might sell the U.S. dollar forward when it holds bonds
denominated in U.S. dollars but anticipates, and seeks to be protected
against, a decline in the U.S. dollar relative to other currencies.
Further, the Portfolio might purchase a currency forward to "lock in"
the price of securities denominated in that currency which it
anticipates purchasing.

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

The Portfolio may purchase put and call options on foreign currencies to
reduce the risk of currency exchange fluctuation.  Premiums paid for
such put and call options will be limited to no more than 5% of the
Portfolio's net assets at any given time.  Options on foreign currencies
operate similarly to options on securities, and are traded primarily in
the over-the-counter market, although options on foreign currencies are
traded on United States and foreign exchanges.  Exchange-traded options
are expected to be purchased by the Portfolio from time to time and
over-the-counter options may also be purchased, but only when the
manager believes that a liquid secondary market exists for such options,
although there can be no assurance that a liquid secondary market will
exist for a particular option at any specific time.  Options on foreign
currencies are affected by all of those factors which influence foreign
exchange rates and investment generally.

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

The value of a foreign currency option is dependent upon the value of
the underlying foreign currency relative to the U.S. dollar.  As a
result, the price of the option position may vary with changes in the
value of either or both currencies and has no relationship to the
investment merits of a foreign security.  Because foreign currency
transactions occurring in the interbank market (conducted directly
between currency traders, usually large commercial banks, and their
customers) involve substantially larger amounts than those that may be
involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 million) for the underlying
foreign currencies at prices that are less favorable than for round
lots.

There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations
available through dealers or other market sources be firm or revised on
a timely basis.  Quotation information available is generally
representative of very large transactions in the interbank market and
thus may not reflect relatively smaller transactions (i.e., less than
$1 million) where rates may be less favorable.  The interbank market in
foreign currencies is a global, around-the-clock market.  To the extent
that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements
may take place in the underlying markets that cannot be reflected in the
options markets.

A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options.
Exchange markets for options on foreign currencies exist but are
relatively new, and the ability to establish and close out positions on
the exchanges is subject to maintenance of a liquid secondary market.
Closing transactions may be effected with respect to options traded in
the over-the-counter ("OTC") markets (currently the primary markets for
options on foreign currencies) only by negotiating directly with the
other party to the option contract or in a secondary market for the
option if such market exists.  Although the Portfolio intends to
purchase only those options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market
will exist for any particular option at any specific time.  In such
event, it may not be possible to effect closing transactions with
respect to certain options, with the result that the Portfolio would
have to exercise those options which it has purchased in order to
realize any profit.  The staff of the Securities and Exchange Commission
("SEC") has taken the position that, in general, purchased OTC options
and the underlying securities used to cover written OTC options are
illiquid securities.  However, the Portfolio may treat as liquid the
underlying securities used to cover written OTC options, provided it has
arrangements with certain qualified dealers who agree that the Portfolio
may repurchase any option it writes for a maximum price to be calculated
by a predetermined formula.  In these cases, the OTC option itself would
only be considered illiquid to the extent that the maximum repurchase
price under the formula exceeds the intrinsic value of the option.

Use of Segregated and Other Special Accounts (All Portfolios).   Use of
many hedging and other strategic transactions including currency and
market index transactions by the Portfolio will require, among other
things, that the Portfolio segregate cash, liquid securities or other
assets with its Custodian, or a designated sub-custodian, to the extent
the Portfolio's obligations are not otherwise "covered" through
ownership of the underlying security, financial instrument or currency.
In general, either the full amount of any obligation by the Portfolio to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or,
subject to any regulatory restrictions, appropriate securities as
required by the 1940 Act at least equal to the current amount of the
obligation must be segregated with the custodian or sub-custodian.  The
segregated assets cannot be sold or transferred unless equivalent assets
are substituted in their place or it is no longer necessary to segregate
them.  A call option on securities written by the Portfolio, for
example, will require the Portfolio to hold the securities subject to
the call (or securities convertible into the needed securities without
additional consideration) or to segregate liquid securities sufficient
to purchase and deliver the securities if the call is exercised.  A call
option sold by the Portfolio on an index will require the Portfolio to
own portfolio securities that correlate with the index or to segregate
liquid securities equal to the excess of the index value over the
exercise price on a current basis.  A put option on securities written
by the Portfolio will require the Portfolio to segregate liquid
securities equal to the exercise price.  Except when the Portfolio
enters into a forward contract in connection with the purchase or sale
of a security denominated in a foreign currency or for other
non-speculative purposes, which requires no segregation, a currency
contract that obligates the Portfolio to buy or sell a foreign currency
will generally require the Portfolio to hold an amount of that currency,
liquid securities denominated in that currency equal to the Portfolio's
obligations or to segregate liquid securities equal to the amount of the
Portfolio's obligations.

OTC options entered into by the Portfolio, including those on
securities, currency, financial instruments or indices, and OCC-issued
and exchange-listed index options will generally provide for cash
settlement, although the Portfolio will not be required to do so.  As a
result, when the Portfolio sells these instruments it will segregate an
amount of assets equal to its obligations under the options.  OCC-issued
and exchange-listed options sold by the Portfolio other than those
described above generally settle with physical delivery, and the
Portfolio will segregate an amount of assets equal to the full value of
the option.  OTC options settling with physical delivery or with an
election of either physical delivery or cash settlement will be treated
the same as other options settling with physical delivery.

In the case of a futures contract or an option on a futures contract,
the Portfolio must deposit initial margin and, in some instances, daily
variation margin in addition to segregating assets sufficient to meet
its obligations to purchase or provide securities or currencies, or to
pay the amount owed at the expiration of an index-based futures
contract.  These assets may consist of cash, cash equivalents, liquid
securities or other acceptable assets.  The Portfolio will accrue the
net amount of the excess, if any, of its obligations relating to swaps
over its entitlements with respect to each swap on a daily basis and
will segregate with its custodian, or designated sub-custodian, an
amount of cash or liquid securities having an aggregate value equal to
at least the accrued excess.  Caps, floors and collars require
segregation of assets with a value equal to the Portfolio's net
obligation, if any.

Hedging and other strategic transactions may be covered by means other
than those described above when consistent with applicable regulatory
policies.  The Portfolio may also enter into offsetting transactions so
that its combined position, coupled with any segregated assets, equals
its net outstanding obligation in related options and hedging and other
strategic transactions.  The Portfolio could purchase a put option, for
example, if the strike price of that option is the same or higher than
the strike price of a put option sold by the Portfolio.  Moreover,
instead of segregating assets if it holds a futures contract or forward
contract, the Portfolio could purchase a put option on the same futures
contract or forward contract with a strike price as high or higher than
the price of the contract held.  Other hedging and other strategic
transactions may also be offset in combinations.  If the offsetting
transaction terminates at the time of or after the primary transaction,
no segregation is required, but if it terminates prior to that time,
assets equal to any remaining obligation would need to be segregated.

OTHER PRACTICES

Repurchase Agreements (All Portfolios).   Each Portfolio may enter into
repurchase agreements with broker-dealers or domestic banks.  A
repurchase agreement is a short-term investment in which the purchaser
(i.e., the Portfolio) acquires ownership of a debt security and the
seller agrees to repurchase the obligation at a future time and set
price, usually not more than seven days from the date of purchase,
thereby determining the yield during the purchaser's holding period.
Repurchase agreements are collateralized by the underlying debt
securities and may be considered to be loans under the 1940 Act.  The
Portfolio will make payment for such securities only upon physical
delivery or evidence of book entry transfer to the account of a
custodian or bank acting as agent.  The seller under a repurchase
agreement is required to maintain the value of the underlying securities
marked to market daily at not less than the repurchase price.  The
underlying securities (normally securities of the U.S. Government, or
its agencies and instrumentalities), may have maturity dates exceeding
one year.  The Portfolio does not bear the risk of a decline in value of
the underlying security unless the seller defaults under its repurchase
obligation.  In the event of a bankruptcy or other default of a seller
of a repurchase agreement, the Portfolio could experience both delays in
liquidating the underlying securities and loss including: (a) possible
decline in the value of the underlying security during the period while
the Portfolio seeks to enforce its rights thereto, (b) possible lack of
access to income on the underlying security during this period, and
(c) expenses of enforcing its rights.

For the purpose of investing in repurchase agreements, the manager may
aggregate the cash that certain funds or accounts that are advised or
subadvised by the manager or its affiliates would otherwise invest
separately into a joint account. The cash in the joint account is then
invested in repurchase agreements and the Portfolios, funds or accounts
that contributed to the joint account share pro rata in the net revenue
generated. The manager believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced
transaction costs, higher returns, higher quality investments and
greater diversity of investments for a Portfolio than would be available
to a Portfolio investing separately. The manner in which the joint
account is managed is subject to conditions set forth in an SEC
exemptive order authorizing this practice, which conditions are designed
to ensure the fair administration of the joint account and to protect
the amounts in that account.

Reverse Repurchase Agreements (Mid Cap and Government Portfolios).  Mid
Cap Portfolio and Government Portfolio may invest in reverse repurchase
agreements with broker/dealers and other financial institutions.  Such
agreements involve the sale of portfolio securities with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment.  Any securities purchased with the funds obtained from the
agreement and securities collateralizing the agreement will have a
maturity date no later than the repayment date.  Generally, the
Portfolio will be able to keep the interest income associated with the
"coupon" on those securities, subject to the payment of a fee to the
dealer.  Such transactions are generally advantageous because the
Portfolio attempts to lock-in a greater rate of interest on the cash
derived from the transaction than the interest cost of obtaining that
cash.  Opportunities to realize earnings from the use of the proceeds
equal to or greater than the interest required to be paid may not always
be available, and the Portfolio intends to use the reverse repurchase
technique only when the manager believes it will be advantageous to the
Portfolio.  The use of reverse repurchase agreements may exaggerate any
interim increase or decrease in the value of the Portfolio's assets.
The Portfolio's custodian bank will maintain a separate account for the
Portfolio with securities having a value equal to or greater than such
commitments.

Short Sales against the Box (Small Cap Portfolio, Mid Cap Portfolio,
Growth Portfolio and Growth and Income Portfolio).   Each Portfolio may
from time to time make short sales of securities it owns or has the
right to acquire through conversion or exchange of other securities it
owns. A short sale is ''against the box'' to the extent that the
Portfolio contemporaneously owns or has the right to obtain at no added
cost securities identical to those sold short. In a short sale, the
Portfolio does not immediately deliver the securities sold and does not
receive the proceeds from the sale. The Portfolio is said to have a
short position in the securities sold until it delivers the securities
sold, at which time it receives the proceeds of the sale.

To secure its obligation to deliver the securities sold short, the
Portfolio will deposit in escrow in a separate account with its
custodian an equal amount of the securities sold short or securities
convertible into or exchangeable for such securities. The Portfolio may
close out a short position by purchasing and delivering an equal amount
of the securities sold short, rather than by delivering securities
already held by the Portfolio, because the Portfolio may want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.

Loans of Portfolio Securities (All Portfolios).   Each of the Portfolios
may lend portfolio securities to unaffiliated brokers, dealers and
financial institutions provided that cash equal to 100% of the market
value of the securities loaned is deposited by the borrower with the
particular Portfolio and is marked to market daily.  While such
securities are on loan, the borrower is required to pay the Portfolio
any income accruing thereon.  Furthermore, the Portfolio may invest the
cash collateral in portfolio securities thereby increasing the return to
the Portfolio as well as increasing the market risk to the Portfolio.  A
Portfolio will not lend its portfolio securities if such loans are not
permitted by the laws or regulations of any state in which its shares
are qualified for sale.  However, should the Portfolio believe that
lending securities is in the best interests of the Portfolio's
shareholders, it would consider withdrawing its shares from sale in any
such state.

Loans would be made for short-term purposes and subject to termination
by the Portfolio in the normal settlement time, currently five business
days after notice, or by the borrower on one day's notice.  Borrowed
securities must be returned when the loan is terminated.  Any gain or
loss in the market price of the borrowed securities which occurs during
the term of the loan inures to the Portfolio and its shareholders, but
any gain can be realized only if the borrower does not default.  Each
Portfolio may pay reasonable finders', administrative and custodial fees
in connection with a loan.

RISK FACTORS

General.  Investors should realize that risk of loss is inherent in the
ownership of any securities and that each Portfolio's net asset value
will fluctuate, reflecting fluctuations in the market value of its
portfolio positions.

Fixed Income Securities.  Investments in fixed income securities may
subject the Portfolios 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 Portfolio 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 Portfolio 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 Portfolio
will suffer from the inability to invest in higher yield securities.

Below Investment Grade Fixed-Income Securities.  Securities rated in the
fourth highest ratings category by an NRSRO, such as those rated BBB by
S&P or Baa by Moody's, are generally regarded as having adequate
capacity to pay interest and repay principal, but may have some
speculative characteristics.  Securities rated below the fourth highest
ratings category by an NRSRO, including those rated below Baa by Moody's
or BBB by S&P, are not "investment grade," and may have more speculative
characteristics, including the possibility of default or bankruptcy of
the issuers of such securities, market price volatility based upon
interest rate sensitivity, questionable creditworthiness and relative
liquidity of the secondary trading market.  Because high yield bonds
have been found to be more sensitive to adverse economic changes or
individual corporate developments and less sensitive to interest rate
changes than higher-rated investments, an economic downturn could
disrupt the market for high yield bonds and adversely affect the value
of outstanding bonds and the ability of issuers to repay principal and
interest.  In addition, in a declining interest rate market, issuers of
high yield bonds may exercise redemption or call provisions, which may
force a Portfolio, to the extent it owns such securities, to replace
those securities with lower yielding securities.  This could result in a
decreased return.

Small Capitalization Companies.  Small companies (those companies that
have market capitalizations in the lowest 20% of all publicly traded
U.S. companies) may (i) be subject to more volatile market movements
than securities of larger, more established companies; (ii) have limited
product lines, markets or financial resources; and (iii) depend upon a
limited or less experienced management group.  The securities of small
companies may be traded only on the over-the-counter market or on a
regional securities exchange and may not be traded daily or in the
volume typical of trading on a national securities exchange.
Disposition by the Portfolio of small company securities in order to
meet redemptions may require the Portfolio to sell these securities at a
discount from market prices, over a longer period of time or during
periods when disposition is not desirable.

Foreign Securities.   Investments in securities of foreign issuers
involve certain risks not ordinarily associated with investments in
securities of domestic issuers.  Such risks include fluctuations in
foreign exchange rates, future political and economic developments, and
the possible imposition of exchange controls or other foreign
governmental laws or restrictions.  Since each Portfolio (except the
Government Portfolio) may invest in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency
exchange rates will, to the extent the Portfolio does not adequately
hedge against such fluctuations, affect the value of securities in its
portfolio and the unrealized appreciation or depreciation of investments
so far as U.S. investors are concerned.  In addition, with respect to
certain countries, there is the possibility of expropriation of assets,
confiscatory taxation, political or social instability or diplomatic
developments which could adversely affect investments in those
countries.

With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could affect investment in
those countries. There may be less publicly available information about
a foreign security than about a security issued by a U.S. company, and
foreign entities may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those of
United States entities. In addition, certain foreign investments made by
the Portfolio may be subject to foreign withholding taxes, which would
reduce the Portfolio's total return on such investments and the amounts
available for distributions by the Portfolio to its shareholders. See
''Dividends, Distributions and Taxes.'' Foreign financial markets, while
growing in volume, have, for the most part, substantially less volume
than United States markets, and securities of many foreign companies are
less liquid and their prices more volatile than securities of comparable
domestic companies. The foreign markets also have different clearance
and settlement procedures, and 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. Delays in settlement could result in temporary periods
when assets of the Portfolio are not invested and no return is earned
thereon. The inability of each Portfolio to make intended security
purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to
the Portfolio due to subsequent declines in value of the portfolio
security or, if the Portfolio has entered into a contract to sell the
security, could result in possible liability to the purchaser. Costs
associated with transactions in foreign securities, including custodial
costs and foreign brokerage commissions, are generally higher than with
transactions in United States securities. In addition, each Portfolio
will incur cost in connection with conversions between various
currencies. There is generally less government supervision and
regulation of exchanges, financial institutions and issuers in foreign
countries than there are in the United States. These risks may be
intensified in the case of investments in developing or emerging
markets. In many developing markets, there is less government
supervision and regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the United States. The
foreign securities markets of many of the countries in which the
Portfolio may invest may also be smaller, less liquid, and subject to
greater price volatility than those in the United States.  Finally, in
the event of a default on any such foreign debt obligations, it may be
more difficult for the Portfolio to obtain or to enforce a judgment
against the issuers of such securities.

Currency Risks.  The U.S. dollar value of securities denominated in a
foreign currency will vary with changes in currency exchange rates,
which can be volatile.  Accordingly, changes in the value of the
currency in which a Portfolio's investments are denominated relative to
the U.S. dollar will affect the Portfolio's net asset value.  Exchange
rates are generally affected by the forces of supply and demand in the
international currency markets, the relative merits of investing in
different countries and the intervention or failure to intervene of U.S.
or foreign governments and central banks.  However, currency exchange
rates may fluctuate based on factors intrinsic to a country's economy.
Some emerging market countries also may have managed currencies, which
are not free floating against the U.S. dollar.  In addition, emerging
markets are subject to the risk of restrictions upon the free conversion
of their currencies into other currencies.  Any devaluations relative to
the U.S. dollar in the currencies in which a Portfolio's securities are
quoted would reduce the Portfolio's net asset value per share.

Special Risks of Countries in the Asia Pacific Region.   Certain of the
risks associated with international investments are heightened for
investments in these countries. For example, some of the currencies of
these countries have experienced devaluations relative to the U.S.
dollar, and adjustments have been made periodically in certain of such
currencies.  Certain countries, such as Indonesia, face serious exchange
constraints.  Jurisdictional disputes also exist.  In addition, Hong
Kong reverted to Chinese administration on July 1, 1997.  The long-term
effects of this reversion are not known at this time.

Securities of Developing/Emerging Markets Countries.   A developing or
emerging markets country generally is considered to be a country that is
in the initial stages of its industrialization cycle. Investing in the
equity markets of developing countries involves exposure to economic
structures that are generally less diverse and mature, and to political
systems that can be expected to have less stability, than those of
developed countries. Historical experience indicates that the markets of
developing countries have been more volatile than the markets of the
more mature economies of developed countries; however, such markets
often have provided higher rates of return to investors.

One or more of the risks discussed above could affect adversely the
economy of a developing market or a Portfolio's investments in such a
market.  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 of governments may remain
unsettled.  There can be no assurance that any investments that a
Portfolio might make in such emerging markets would not be expropriated,
nationalized or otherwise confiscated at some time in the future.  In
such an event, the Portfolio could lose its entire investment in the
market involved.  Moreover, changes in the leadership or policies of
such markets could halt the expansion or reverse the liberalization of
foreign investment policies now occurring in certain of these markets
and adversely affect existing investment opportunities.

Many of a Portfolio's investments in the securities of emerging markets
may be unrated or rated below investment grade. Securities rated below
investment grade (and comparable unrated securities) are the equivalent
of high yield, high risk bonds, commonly known as "junk bonds." 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
business, financial, economic, or political conditions.

Derivative Instruments.  In accordance with its investment policies,
each Portfolio 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.  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. Transactions in derivative instruments can be, but are not
necessarily, riskier than investments in conventional stocks, bonds and
money market instruments.

The following are the principal risks associated with derivative
instruments:

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 Portfolio in order to achieve an
average portfolio volatility that is within the expected range for that
type of Portfolio.

Credit risk:  Certain types of derivatives are subject to the risk
that the counterparty may fail to honor contract terms.

Liquidity and valuation risk:  Many derivative instruments are
traded in institutional markets rather than on an exchange.  Certain
derivative instruments are not readily marketable and are subject to a
Portfolio'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 Portfolio is reviewed and
analyzed by the Portfolio's portfolio manager to assess the risk and
reward of each such instrument in relation to the Portfolio's 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 Portfolio and its shareholders.

Special Risks of Using Futures Contracts.  The prices of Futures
Contracts are volatile and are influenced by, among other things, 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 or 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.  A Portfolio, however, would
presumably have sustained comparable losses if, instead of the Futures
Contract, it had invested in the underlying financial instrument and
sold it after the decline.  Where a Portfolio enters into Futures
transactions for non-hedging purposes, it will be subject to greater
risks and could sustain losses which are not offset by gains on other
Portfolio assets.

Furthermore, in the case of a Futures Contract purchase, in order to be
certain that each Portfolio has sufficient assets to satisfy its
obligations under a Futures Contract, the Portfolio segregates and
commits to back the Futures Contract an amount of cash and liquid
securities equal in value to the current value of the underlying
instrument less the margin deposit.

Most U.S. 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.

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 held by the Portfolios; (iv)
there is uncertainty concerning the fluctuation of the Euro relative to
non-Euro currencies; 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
Portfolios.

Portfolio Turnover.   Each Portfolio may purchase or sell securities
without regard to the length of time the security has been held and thus
may experience a high rate of portfolio turnover. A 100% turnover rate
would occur, for example, if all the securities in a portfolio were
replaced in a period of one year. Under certain market conditions, the
Growth Portfolio and the Government Portfolio may experience a high rate
of portfolio turnover. This may occur, for example, if the Portfolio
writes a substantial number of covered call options and the market
prices of the underlying securities appreciate. The rate of portfolio
turnover is not a limiting factor when the manager deems it desirable to
purchase or sell securities or to engage in options transactions. The
annual turnover rates of the Growth Portfolio and the Government
Portfolio are not expected to exceed 400%; and the annual turnover rates
of the Small Cap Portfolio, the Mid Cap Portfolio and the Growth and
Income Portfolio are not expected to exceed 100%. High portfolio
turnover involves correspondingly greater transaction costs, including
any brokerage commissions, which are borne directly by the respective
Portfolio and may increase the recognition of short-term, rather than
long-term, capital gains if securities are held for one year or less and
may be subject to applicable income taxes. See ''Dividends,
Distributions and Taxes.''

INVESTMENT RESTRICTIONS

The Portfolios have adopted the following fundamental investment
restrictions for the protection of shareholders.  Under the 1940 Act, a
fundamental policy of a portfolio may not be changed without the vote of
a majority, as defined in the 1940 Act, of the outstanding voting
securities of the portfolio.  Such majority is defined as the lesser of
(a) 67% or more of the shares present at the meeting, if the holders of
more than 50% of the outstanding shares of the portfolio are present or
represented by proxy, or (b) more than 50% of the outstanding shares.
The percentage limitations contained in the restrictions listed below
(other than with respect to (1) below) apply at the time of purchases of
securities.

The investment policies adopted by the Portfolios prohibit each
Portfolio from:

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

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

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

	4.	Purchasing or selling real estate, real estate mortgages,
commodities or commodity contracts, but this restriction
shall not prevent the Portfolio from (a) investing in
securities of issuers engaged in the real estate business or
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 Portfolio's investment objective and
policies); or (d) investing in real estate investment trust
securities.

	5.	Issuing "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.

The Portfolios have also adopted certain nonfundamental investment
restrictions that may be changed by the Trust's Board of Trustees at any
time.  Accordingly the Portfolios are prohibited from:

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

	2.	Making short sales of securities or maintaining a short
position.

	3.	Pledging, hypothecating, mortgaging or otherwise encumbering
more than 33-1/3% of the value of a Portfolio's total
assets.

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

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

	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.

If any percentage restriction described above is complied with at the
time of an investment, a later increase or decrease in percentage
resulting from a change in values or assets will not constitute a
violation of such restriction.

TRUSTEES AND OFFICERS

The Trustees and executive officers and their principal occupations for
the past five years are listed below. Each Trustee who is an
"interested person" of the Trust, as defined in the Investment Company
Act of 1940, as amended (the "1940 Act"), is indicated by an asterisk.
Unless otherwise noted below, the address of each Trustee or officer is
Seven World Trade Center, New York, New York  10048.

Donald M. Carlton (age 63), Trustee.   Director, American Electric
Power (Electric Utility) (since 2000); Director, Valero Energy
(Petroleum Refining) (since 1999); Consultant, URS Corporation
(Engineering) (since 1999); Director, National Instruments Corp.
(Technology) (since 1994); former Chief Executive Officer, Radian
Corporation (Engineering) (from 1969 to 1996); former Chief Executive
Officer Radian International L.L.C. (Engineering) (from 1996 to 1998).

A. Benton Cocanougher (age 62), Trustee.  Dean and Professor of
Marketing, College and Graduate School of Business of Texas A & M
University (since 1987); former Director, Randall's Food Markets, Inc.
(from 1990 to September 1999); Director, First American Bank and First
American Savings Bank (from 1994 to October 1999).

Stephen Randolph Gross (age 53), Trustee.  Director, Hotpalm.com, Inc.
(Wireless Applications) (since May 2000); Partner, Capital Investment
Advisory Partners (Consulting) (since January 2000); Director, United
Telesis, Inc. (Telecommunications) (since January 1999); Managing
Director, Fountainhead Ventures, L.L.C. (Consulting) (since March
1998); Director, ebank.com, Inc. (since January 1998); Director, Ikon
Ventures, Inc. (since January 1998); Chairman, Gross, Collins & Cress,
P.C. (Accounting Firm) (since 1979).

Heath B. McLendon* (age 66), Trustee and President.   Chairman,
President and Chief Executive Officer, SSB Citi (since March 1996);
Managing Director, Salomon Smith Barney (since 1993); President,
Travelers Investment Adviser, Inc.; Chairman or Co-Chairman of the
Board, Trustee or Director of seventy-seven investment companies
associated with Citigroup.

Alan G. Merten (age 59), Trustee.  Director, Re-route.com (Information
Technology) (since 2000); Director, BTG, Inc. (Information Technology)
(since 1997); President, George Mason University (since 1996);
Director, Comshare, Inc. (Information Technology) (since 1985); former
Director, Indus (Information Technology) (from 1995 to 1999); former
Dean, Johnson Graduate School of Management of Cornell University (from
1989 to 1996).

R. Richardson Pettit (age 58), Trustee.  Professor of Finance,
University of Houston (since 1977); former Managing Director,
Windermere Investments (Financial Consulting) (from January 1997 to
June 1997).

James E. Conroy (age 49), Vice President and Investment Officer.
Managing Director of Salomon Smith Barney; Mr. Conroy serves as
Investment Officer of four Smith Barney Mutual Funds.

Michael Kagan (age 41), Vice President and Investment Officer.
Director of Salomon Smith Barney; Mr. Kagan is Vice President and
Investment Officer of three other Smith Barney Mutual Funds.

Jeffrey Russell (age 43), Vice President and Investment Officer.
Managing Director of Salomon Smith Barney; Mr. Russell is Vice
President and Investment Officer of six other Smith Barney Mutual
Funds.

Larry Weissman (age 39), Vice President and Investment Officer.
Managing Director of Salomon Smith Barney; prior to October 1997,
Portfolio Manager of Neuberger & Berman LLC; prior to 1995, Portfolio
Manager of College Retirement Equities Fund.

Lewis E. Daidone (age 42), Senior Vice President and Treasurer.
Managing Director, Salomon Smith Barney; Chief Financial Officer, Smith
Barney Mutual Funds; Director and Senior Vice President, SSB Citi and
Travelers Investment Adviser, Inc; Treasurer and Senior Vice President
or Executive Vice President of eighty-three investment companies
associated with Citigroup.

Irving David (age 39), Controller.  Director, Salomon Smith Barney;
former Assistant Treasurer, First Investment Management Company;
Controller or Assistant Treasurer of fifty-three investment companies
associated with Citigroup.

Frances Guggino (age 42), Assistant Controller.  Vice President,
Citibank (since 1991).

Paul Brook (age 46), Assistant Controller.  Director, Salomon Smith
Barney; Managing Director, AMT Investors Capital Services Inc. (from
1997 to 1998); Partner, Ernst & Young LLP (from 1990 to 1997);
Controller or Assistant Treasurer of forty-three investment companies
associated with Citigroup (from 1997 to 1998).

Anthony Pace (age 35), Assistant Treasurer.  Vice President, Mutual
Fund Administration for Salomon Smith Barney Inc. (since 1986).

Marianne Motley (age 41), Assistant Treasurer.  Director, Mutual Fund
Administration for Salomon Smith Barney Inc. (since 1994).

Robert I. Frenkel (age 45), Secretary.  Managing Director and General
Counsel, Global Mutual Funds for SSB Citi Asset Management Group (since
1994); Secretary of seventeen investment companies associated with
Citigroup.

Thomas C. Mandia (age 38), Assistant Secretary.  Director and Deputy
General Counsel, SSB Citi Asset Management Group (since 1992);
Assistant Secretary of seventeen investment companies associated with
Citigroup.

Rosemary D. Emmens (age 31), Assistant Secretary.  Vice President and
Associate General Counsel, SSB Citi Asset Management Group (since
1998); Assistant Secretary of seventeen investment companies associated
with Citigroup; Counsel, The Dreyfus Corporation (from 1995 to 1998).

Harris Goldblat (age 31), Assistant Secretary.  Associate General
Counsel, SSB Citi Asset Management Group (since 2000); Assistant
Secretary of seventeen investment companies associated with Citigroup;
Associate, Stroock & Stroock & Lavan LLP (from 1997 to 2000);
Associate, Sills Cummis Radin Tischman Epstein & Gross (from 1996 to
1997); Clerk to the Honorable James M. Havey, P.J.A.D. (from 1995 to
1996).

As of February 12, 2001, the Trustees and officers of the Trust as a
group owned less than one percent of the outstanding shares of each
Portfolio of the Trust.  As of February 12, 2001, to the knowledge of
the Trust and its Trustees, no shareholder or "group" (as the term is
used in Section 13(d) of the Securities Act of 1933) beneficially owned
more than 5% of the outstanding shares of any Portfolio of the Trust.

TRUSTEE COMPENSATION

Information regarding compensation paid to the Trustees of the Trust for
the fiscal year ended October 31, 2000 is set forth below.  Mr. McLendon
is not compensated for his service as Trustee, because of his
affiliation with the manager.  Each of the Trustees serves on the Board
of other investment companies in the Smith Barney Fund Complex.

The Portfolios pay each of the Trustees who is not a director, officer
or employee of the manager or any of its affiliates an annual fee of
$48,000 plus $2000 for each Board of Trustees meeting attended, $1000
for each Committee meeting attended (each Committee chairman is paid an
additional $300 for each Committee meeting attended), $1000 for each
telephonic Board meeting in which each Trustee participated (unless such
meeting is for information purposes only in which case $100 is paid).
In addition, the Portfolios will reimburse these trustees for travel and
out-of-pocket expenses incurred in connection with Board of Trustees
meetings.  For the fiscal year ended October 31, 2000, such expenses
totaled $41,964.








             Name






Retirement
Benefits
Accrued as
Part of
Fund
Expenses
(1)






Total
Compensati
on Paid
From Trust






Total
Compensati
on Paid
From  Fund
Complex






Number of
Funds for
Which
Trustee
Serves
Within
Complex
Dr. Donald M.
Carlton
-
$61,000
$61,000
2
Dr. A. Benton
Cocanougher
-
$62,000
$62,000
2
Stephen Randolph
Gross
-
$61,000
$61,000
2
Heath B. McLendon*
-
-
--
77
Dr. Alan G. Merten
-
$61,100
$61,100
2
Dr. R. Richardson
Pettit
-
$61,700
$59,000
2
*Designates an "Interested Person" of the Trust, as defined under the
1940 Act.

(1)	The Trustees instituted a retirement plan effective April 1, 1996.
For the current Trustees who are not "interested persons" of the Trust,
the retirement benefits payable thereunder are payable for a ten year
period following retirement, with the annual payment to be based upon
the highest total annual compensation received in any of the three
calendar years preceding retirement.  Trustees with more than five but
less than ten years of service at retirement will receive a prorated
benefit. Total retirement benefits accrued under the plan for the 2000
fiscal year were $1,570,818.  Because the amount of retirement benefits
an individual Trustee will receive is based upon the time of retirement,
an exact amount of accrual is not known for any individual; however,
each Portfolio accrues an amount based upon actuarial assumptions meant
to provide retirement benefits for all of its Trustees.  The amount of
benefits to be paid upon retirement is therefore not currently
determinable for any current Trustee.



INVESTMENT ADVISORY AGREEMENTS

Investment Manager.  The manager provides investment advisory and
management services to the Trust, and to other investment companies
affiliated with Salomon Smith Barney.

The Trust and the manager are parties to a separate Investment Advisory
Agreement for each Portfolio (each, an "Advisory Agreement" and
together, the "Advisory Agreements").  An investment advisory agreement
with the manager and the Trust, on behalf of each Portfolio, was
approved by the Board of Trustees of the Trust at a meeting held on June
12, 2000.  Under the Advisory Agreements, the Trust retains the manager
to manage the investment of its assets and to place orders for the
purchase and sale of its portfolio securities.  The manager is
responsible for obtaining and evaluating economic, statistical, and
financial data and for formulating and implementing investment programs
in furtherance of each Portfolio's investment objectives.  The manager
also furnishes at no cost to the Trust (except as noted herein) the
services of sufficient executive and clerical personnel for the Trust as
are necessary to prepare registration statements, prospectuses,
shareholder reports, and notices and proxy solicitation materials.  In
addition, the manager furnishes at no cost to the Trust the services of
a President of the Trust, one or more Vice Presidents as needed, and a
Secretary.

Under the Advisory Agreements, the Trust bears the cost of its
accounting services, which includes maintaining its financial books and
records and calculating the daily net asset value of each Portfolio.
The costs of such accounting services include the salaries and overhead
expenses of a Treasurer or other principal financial officer and the
personnel operating under his direction.  The services are provided at
cost which is allocated among all investment companies advised or
subadvised by the manager.  The Trust also pays transfer agency fees,
custodian fees, legal fees, the costs of reports to shareholders and all
other ordinary expenses not specifically assumed by the manager.

The Trust retains the manager to manage the investment of its assets and
to place orders for the purchase and sale of its portfolio securities.
Under the relevant Advisory Agreement, the Trust pays the manager
investment management fees at the following  rates, based on the
following amounts of their average daily net assets:

? For Small Cap Portfolio, Growth and Income Portfolio, Mid Cap
Portfolio, and Growth Portfolio (calculated separately for each
Portfolio), 0.75% of the Portfolio's average daily net assets.

? For the Government Portfolio, 0.60% of the Portfolio's average daily
net assets.

The manager may, from time to time, agree to waive its investment
advisory fees or any portion thereof or elect to reimburse a Portfolio
for ordinary business expenses in excess of an agreed upon amount.

The average daily net assets of each Portfolio are determined by taking
the average of all of the determinations of net asset value of such
Portfolio for each business day during a given calendar month.  Such fee
is payable for each calendar month as soon as practicable after the end
of that month.

The following table shows expenses paid under the relevant investment
advisory agreement during the fiscal years ended October 31, 1999 and
2000.  The Portfolios were not in existence for prior fiscal years.



Select
Small
Cap

Select Mid
Cap

Select
Growth

Select
Growth &
Income

Select
Governmen
t

October 31, 2000
Gross Advisory
Fees*

$47,934
$49,370
$113,202
$44,203
$30,476
October 31, 1999
Gross Advisory
Fees**
$4,490
$2,674
$4,582
$2,689
$3,709
*Had the manager not waived the entire management fee for each fund
except Select Growth (for which a portion of the management fee was
waived) and reimbursed certain expenses in order to cap total annual
portfolio expenses, the Gross Advisory Fees would have been: $71,372,
$79,789, $92,376, $65,219 and $63,486 for the Select Small Cap, Select
Mid Cap, Select Growth, Select Growth and Income and Select Government
Portfolios, respectively.
**Had the manager not waived the management fee and reimbursed certain
expenses in order to cap total annual portfolio expenses, the Gross
Advisory Fees would have been: $20,253, $15,856, $24,854, $15,325 and
$18,000 for the Select Small Cap, Select Mid Cap, Select Growth, Select
Growth and Income and Select Government Portfolios, respectively.


Each Portfolio's Advisory Agreement provides that the manager shall not
be liable to the Trust for any actions or omissions if it acted in good
faith without negligence or misconduct.  The Advisory Agreements provide
that the manager shall not be liable to the Trust for any actions or
omissions if it acted in good faith without negligence or misconduct.

Each Advisory Agreement has an initial term of two years and thereafter
with respect to each Portfolio may be continued from year to year if
specifically approved at least annually (a)(i) by the Trustees or
(ii) by vote of a majority of the Portfolio's outstanding voting
securities, and (b) by the affirmative vote of a majority of the
Trustees who are not parties to the agreement or interested persons of
any such party by votes cast in person at a meeting called for such
purpose.  The Advisory Agreements provide that they shall terminate
automatically if assigned and that they may be terminated without
penalty by either party on 60 days written notice.

Code of Ethics.  Pursuant to Rule 17j-1 of the 1940 Act, the Portfolios,
the manager 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 Portfolios.
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.

DISTRIBUTOR

Salomon Smith Barney, located at 388 Greenwich Street, New York NY
10013, distributes shares of the Portfolios as their principal
underwriter.

The Distributor may be deemed to be an underwriter for purposes of the
Securities Act of 1933.

The Distributor acts as the principal underwriter of the shares of the
Portfolios pursuant to a written agreement for the Portfolios
("Underwriting Agreement").  The Distributor's obligation is an agency
or "best efforts" arrangement under which the Distributor is required to
take and pay only for such shares of each Portfolio as may be sold to
the public.  The Distributor is not obligated to sell any stated number
of shares.  The Underwriting Agreement is renewable from year to year if
approved (a) by the Trustees or by a vote of a majority of the Trust's
outstanding voting securities, and (b) by the affirmative vote of a
majority of Trustees who are not parties to the Agreement or interested
persons of any party by votes cast in person at a meeting called for
such purpose.  The Underwriting Agreement provides that it will
terminate if assigned, and that it may be terminated without penalty by
either party on 60 days' written notice.  The Distributor is not
currently paid a fee for the provision of distribution services with
respect to the Portfolios.

PORTFOLIO TURNOVER

The portfolio turnover rate may vary greatly from year to year as well
as within a year. For the last two fiscal years, each Portfolio's
portfolio turnover rates were:

Year
Ended
10/31
Select
Small Cap

Select Mid
Cap
Select
Growth

Select
Growth &
Income

Select
Government

2000
69%
58%
30%
72%
0%
1999*
0%
8%
6%
1%
0%
*Period from September 15, 1999 to October 31, 1999. The portfolio
turnover rates for this period are not annualized.


PORTFOLIO TRANSACTIONS AND BROKERAGE

The manager is responsible for decisions to buy and sell securities for
the Trust and for the placement of its portfolio transactions and the
negotiation of any commissions paid on such transactions.  It is the
policy of the manager to seek the best security price available with
respect to each transaction.  In over-the-counter transactions, orders
are placed directly with a principal market maker unless it is believed
that a better price and execution can be obtained by using a broker.
Except to the extent that the Trust may pay higher brokerage commissions
for brokerage and research services (as described below) on a portion of
its transactions executed on securities exchanges, the manager seeks the
best security price at the most favorable commission rate.  From time to
time, the Portfolio may place brokerage transactions with affiliated
persons of the manager.  In selecting broker/dealers and in negotiating
commissions, the manager considers the firm's reliability, the quality
of its execution services on a continuing basis and its financial
condition.  When more than one firm is believed to meet these criteria,
preference may be given to firms that also provide research services to
the Trust or the manager.

Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an
account to pay a broker or dealer who supplies brokerage and research
services a commission for effecting a securities transaction in excess
of the amount of commission another broker or dealer would have charged
for effecting the transaction.  Brokerage and research services include
(a) furnishing advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities, (b) furnishing
analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts, (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody), and
(d) furnishing other products or services that assist the manager in
fulfilling its investment-decision making responsibilities.

Pursuant to provisions of the relevant Advisory Agreement, the Trustees
have authorized the manager to cause the Trust to incur brokerage
commissions in an amount higher than the lowest available rate in return
for research services provided to the manager.  The manager is of the
opinion that the continued receipt of supplemental investment research
services from dealers is essential to its provision of high quality
portfolio management services to the Trust.  The manager undertakes that
such higher commissions will not be paid by the Trust unless (a) the
manager determines in good faith that the amount is reasonable in
relation to the services in terms of the particular transaction or in
terms of the manager's overall responsibilities with respect to the
accounts as to which it exercises investment discretion, (b) such
payment is made in compliance with the provisions of Section 28(e) and
other applicable state and federal laws, and (c) in the opinion of the
manager, the total commissions paid by the Trust are reasonable in
relation to the expected benefits to the Trust over the long term.  The
investment advisory fees paid by the Trust under the Advisory Agreements
are not reduced as a result of the manager's receipt of research
services.  During the fiscal year ended October 31, 2000, the Trust
directed no brokerage commissions to brokers because of research
services provided  to the Trust's Portfolios.

To the extent consistent with the NASD Rules, and subject to seeking
best execution and such other policies as the Trustees may determine,
the manager may consider sales of shares of the Trust as a factor in the
selection of firms to execute portfolio transactions for the Trust.

The manager places portfolio transactions for other advisory accounts
including other investment companies.  Research services furnished by
firms through which the Portfolios effect their securities transactions
may be used by the manager in servicing all of its accounts; not all of
such services may be used by the manager in connection with the
Portfolios.  In the opinion of the manager, the benefits from research
services to the Portfolios of the Trust and to the accounts managed by
the manager cannot be measured separately.  Because the volume and
nature of the trading activities of the accounts are not uniform, the
amount of commissions in excess of the lowest available rate paid by
each account for brokerage and research services will vary.  However, in
the opinion of the manager, such costs to the Portfolios will not be
disproportionate to the benefits received by the Portfolios on a
continuing basis.

The manager will seek to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities by
the Portfolios and other accounts that the manager may establish in the
future.  In some cases, this procedure could have an adverse effect on
the price or the amount of securities available to the Portfolios.  In
making such allocations among the Trust and other advisory accounts, the
main factors considered by the manager over the respective investment
objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, and the
size of investment commitments generally held.

The following table summarizes for each Portfolio the total brokerage
commissions paid.


Fiscal
Year
Ended
10/31
Select
Small Cap

Select Mid
Cap
Select
Growth

Select
Growth &
Income

Select
Governmen
t

2000
$5,399
$9,069
$22,749
$9,210
-
1999*
$5,455
$1,691
$2,258
$1,571
-
*For the period from September 15, 1999 to October 31, 1999.

The Portfolios may from time to time place brokerage transactions with
the Distributor or other brokers that may be considered affiliated
persons of the manager or the Distributor.  Such affiliated persons
currently include Robinson Humphrey, Inc. ("Robinson Humphrey"), an
affiliate of the manager.

The Portfolios paid the following commissions to affiliated brokers
during the periods shown:


					Robinson	Smith
Fiscal 2000 Commissions			Humphrey	Barney

Select Small Cap				-		$192
Select Mid Cap				-		$108
Select Growth	 			-  		$399
Select Growth & Income			-		$160
Select Government			-		-

Fiscal 2000 Percentage

Select Small Cap				-		3.56%
Select Mid Cap				-		1.19%
Select Growth				-		1.75%
Select Growth & Income			-		1.74%
Select Government			-		-

Percentage of Transactions with
Affiliates to Total Transactions
					Robinson	Smith
					Humphrey	Barney

Select Small Cap				-		1.84%
Select Mid Cap				-		0.32%
Select Growth				-		1.03%
Select Growth & Income			-		0.91%
Select Government			-		-



					Robinson	Smith
Fiscal 1999 Commissions			Humphrey	Barney

Select Small Cap				-		-
Select Mid Cap				-		-
Select Growth	 			-  		-
Select Growth & Income			-		-
Select Government			-		-

Fiscal 1999 Percentage

Select Small Cap				-		-
Select Mid Cap				-		-
Select Growth				-		-
Select Growth & Income			-		-
Select Government			-		-

Percentage of Transactions with
Affiliates to Total Transactions
				Robinson	Smith
				Humphrey	Barney

Select Small Cap			-		-
Select Mid Cap			-		-
Select Growth			-		-
Select Growth & Income		-		-
Select Government		-		-

Each Portfolio paid no brokerage commissions prior to 1999.



DETERMINATION OF NET ASSET VALUE

The assets attributable to each Portfolio reflect the value of separate
interests in a single portfolio of securities.  The net asset value of
the shares will be determined separately by subtracting the expenses and
liabilities. The net asset value of the shares of each Portfolio is
determined at 4:00 p.m., New York time (or at the close of the New York
Stock Exchange (the "Exchange"), if earlier) on each business day on
which the Exchange is open. The Exchange is closed on the following
holidays:  New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, and Christmas.

The value of equity securities is computed by (i) valuing listed or
unlisted securities for which market quotations are readily available at
the prices reported by an independent pricing services, or as supplied
by the National Association of Securities Dealers Automated Quotations
(NASDAQ) or by broker-dealers, and (ii) valuing any securities for which
market quotations are not readily available and any other assets at fair
value as determined in good faith by the Board of Trustees.  Options on
stocks, options on stock indexes and stock index futures contracts and
options thereon, which are traded on exchanges, are valued at their last
sales or settlement price as of the close of such exchanges, or, if no
sales are reported, at the mean between the last reported bid and asked
prices.

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

U.S. Government securities are traded in the over-the-counter market and
valuations are based on quotations of one of more dealers that make
markets in the securities as obtained from such dealers or from a
pricing service.  Options and interest rate futures contracts and
options thereon, which are traded on exchanges, are valued at their last
sales or settlement price as of the close of such exchanges, or, if no
sales are reported, at the mean between the last reported bid and asked
prices.   Debt securities having a remaining maturity of 60 days or less
are valued on an amortized cost basis to the extent this approximates
market value.


TAXES

General.  The following is a summary of certain federal income tax
considerations that may affect the Portfolios and their shareholders.
The discussion relates only to Federal income tax law as applicable to
U.S. citizens.  Distributions by the Portfolios also may 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 Portfolio of the Trust.


Tax Status of the Portfolios.

Each Portfolio expects to be treated as a separate taxable entity for
Federal income tax purposes.

Each Portfolio intends to qualify separately each year as a "regulated
investment company" under the Code.  A qualified Portfolio will not be
liable for Federal income taxes to the extent that its taxable net
investment income and net realized capital gains are distributed to its
shareholders, provided that the Portfolio distributes at least 90% of
the sum of its net investment income and any excess of its net short-
term capital gain over its net long-term capital loss and complies with
certain other requirements regarding the sources of its income and
diversification of its assets.  If a Portfolio were to fail to qualify
as a regulated investment company under the Code, all of its income
(without deduction for distributions to shareholders) would be subject
to tax at corporate rates.

Each Portfolio 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 Portfolio as
taxable income.

Each intends at least annually to declare and make distributions of
substantially all of its taxable income and net taxable capital gains
to its shareowners (i.e., the Separate Accounts).  Such distributions
are automatically reinvested in additional shares of the Portfolio at
net asset value and are includable in gross income of the separate
accounts holding such shares.  See the accompanying contract prospectus
for information regarding the federal income tax treatment of
distributions to the separate accounts and to holders of the contracts.

Tax treatment of shareholders.  The Trust has been informed that
certain of the life insurance companies offering contracts intend to
qualify each of the subaccounts as a "segregated asset account" within
the meaning of the Code.  For a subaccount to qualify as a segregated
asset account, the Portfolio in which such subaccount holds shares must
meet the diversification requirements of Section 817(h) of the Code and
the regulations promulgated thereunder.  To meet those requirements, a
Portfolio generally may not invest more than certain specified
percentages of its assets in the securities of any one, two, three or
four issuers.  For these purposes, all obligations of the United States
Treasury and each governmental instrumentality are treated as
securities of separate issuers.

Income on assets of a subaccount qualified as a segregated asset
account whose underlying investments are adequately diversified will
not be taxable to contract owners.  However, in the event a subaccount
is not so qualified, all annuities allocating any amount of premiums to
such subaccount will not qualify as annuities for federal income tax
purposes and the holders of such annuities would be taxed on any income
on the annuities for any taxable year.

The Trust has undertaken to meet the diversification requirements of
Section 817(h) of the Code.  This undertaking may limit the ability of
a particular Portfolio to make certain otherwise permitted investments.


PERFORMANCE

From time to time, the Portfolios may quote a yield or total return in
advertisements or in reports and other communications to shareholders.
The Trust may include comparative performance information in advertising
or marketing the Portfolio's shares.  Such performance information may
include data from the following industry and financial publications:
Barron's, Business Week, CDA Investment Technologies Inc., Changing
Times, Forbes, Fortune, Institutional Investor, Investors Daily, Money,
Morningstar Mutual Fund Values, The New York Times, USA Today and The
Wall Street Journal.

Yield

A Portfolio's 30-day yield figure described below is calculated
according to a formula prescribed by the SEC.  The formula can be
expressed as follows: YIELD = 2[( [(a-b/(c*d))] + 1)6 - 1], where

	a = dividends and interest earned during the period
	b = expenses accrued for the period (net of reimbursement)
	c =	the average daily number of shares outstanding during the
period that were entitled to receive dividends
	d = the maximum offering price per share on the last day of the
period

For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations purchased by the Portfolio at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect
changes in the market values of the debt obligations.

Investors should recognize that in periods of declining interest rates a
Portfolio's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates, the Portfolio's yield
will tend to be somewhat lower.  In addition, when interest rates are
falling, the inflow of net new money to the Portfolio from the
continuous sale of its shares will likely be invested in portfolio
instruments producing lower yields than the balance of the Portfolio's
investments, thereby reducing the current yield of the Portfolio.  In
periods of rising interest rates, the opposite can be expected to occur.

Average Annual Total Return

"Average annual total return" figures, as described below, are computed
according to a formula prescribed by the SEC.  The formula can be
expressed as follows: P(l+T)n = ERV, where:

	P		=	a hypothetical initial payment of $ 1,000
	T		=	average annual total return
	n		=	number of years
	ERV	= 	Ending Redeemable Value of a Hypothetical $ 1,000
investment made at the beginning of a 1-, 5- or
10-year period at the end of the 1-, 5- or 10-year
period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.

The average annual total returns (computed in the manner described in
the Prospectus) and yield (if applicable) as of October 31, 2000, for
each Portfolio are shown in the table below.  These results are based on
historical earnings and asset value fluctuations and are not intended to
indicate future performance.  Such information should be considered in
light of each Portfolio's investment objectives and policies as well as
the risks incurred in each Portfolio's investment practices.


 Select
Small
Cap

Select Mid
Cap

Select
Growth

Select
Growth &
Income

Select
Governmen
t

1 year
11.64%
43.43%
15.61%
6.86%
6.55%
Total Return
since inception
(based on
inception date
of 9/15/99)



9.47%



38.99%



18.83%



7.00%



7.00%


ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS

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

Transfer Agent

Citi Fiduciary Trust Company, 125 Broad Street, New York, NY 10004 is
the transfer agent for the Portfolios. Under the transfer agency
agreement, the transfer agent, either directly or through a sub-transfer
agent, maintains the shareholder account records for the Portfolios,
handles certain communications between shareholders and the Portfolios,
distributes dividends and distributions payable by the Portfolios and
produces statements with respect to account activity for the Portfolios.
For these services, the transfer agent receives fees from the Portfolios
computed on the basis of the number of shareholder accounts that the
transfer agent maintains for the Portfolios during the month and is
reimbursed for out-of-pocket expenses. PFPC Global Fund Services, 101
Federal Street, Boston, Massachusetts 02110, serves as the Portfolios'
sub-transfer agent.

Custody of Assets

Securities owned by the Trust and all cash, including proceeds from the
sale of shares of the Trust and of securities in the Trust's investment
portfolio, are held by PFPC Trust Company, located at 8800 Tinicum
Blvd., Philadelphia, PA  19153, as Custodian for each Portfolio.

Shareholder Reports

Semi-annual statements are furnished to shareholders, and annually such
statements are audited by the independent auditors.

Independent Auditors

KPMG	 LLP, 757 Third Avenue, New York, New York 10017, the independent
auditors for the Trust, perform annual examinations of the Trust's
financial statements.

Shareholder and Trustee Responsibility

Under the laws of certain states, including Massachusetts where the
Trust was organized, shareholders of a Massachusetts business trust may,
under certain circumstances, be held personally liable as partners for
the obligations of the Trust.  However, the risk of a shareholder
incurring any financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to
meet its obligations.  The Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust
and provides that notice of the disclaimer may be given in each
agreement, obligation, or instrument which is entered into or executed
by the Trust or Trustees.  The Declaration of Trust provides for
indemnification out of Trust property to any shareholder held personally
liable for the obligations of the Trust and also provides for the Trust
to reimburse such shareholder for all legal and other expenses
reasonably incurred in connection with any such claim or liability.

Under the Declaration of Trust, the Trustees and Officers are not liable
for actions or failure to act; however, they are not protected from
liability by reason of their willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of their office.  The Trust will provide indemnification to its Trustees
and Officers as authorized by its By-Laws and by the 1940 Act and the
rules and regulations thereunder.

About the Trust

The Trust was organized on January 29, 1987 under the laws of The
Commonwealth of Massachusetts and is a business entity commonly known as
a ''Massachusetts business trust.'' It is a diversified, open-end
management investment company authorized to issue an unlimited number of
shares of beneficial interest of $.01 par value, in the Portfolios.
Shares issued are fully paid, non-assessable and have no preemptive or
conversion rights. In the event of liquidation of any Portfolio,
shareholders of such Portfolio are entitled to share pro rata in the net
assets of the Portfolio available for distribution to shareholders.

As of December 31, 1997, the name of the Trust was changed from the
Common Sense Funds Trust to Concert Investment Series(r); and then to
Smith Barney Investment Series on September 11, 2000.

Shareholders are entitled to one vote for each full share held and to
fractional votes for fractional shares held in the election of Trustees
(to the extent hereafter provided) and on other matters submitted to the
vote of shareholders. Each share of a Portfolio represents an interest
in the assets of that Portfolio and has identical voting, dividend,
liquidation and other rights on the same terms and conditions.  Only
shares of the respective Portfolio are entitled to vote on matters
concerning only that Portfolio. There will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such
time as less than a majority of the Trustees holding office have been
elected by shareholders, at which time the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Shareholders
may, in accordance with the Declaration of Trust, cause a meeting of
shareholders to be held for the purpose of voting on the removal of
Trustees. Except as set forth above, the Trustees shall continue to hold
office and appoint successor Trustees.

FINANCIAL STATEMENTS

The Trust's Annual Report for the fiscal year ended October 31, 2000, is
incorporated herein by reference in its entirety.



APPENDIX A

RATINGS OF BONDS, NOTES AND COMMERCIAL PAPER

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 - An obligation rated 'AAA' has the highest rating assigned by
Standard & Poor's.  The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.

AA - An obligation rated 'AA' differs from the highest rated obligations
only in small degree.  The obligor's capacity to meet its financial
commitment on the obligation is very strong.

A - An obligation rated 'A' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories.  However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.

BB, B, CCC, CC, C - An obligation rated 'BBB' exhibits adequate
protection parameters.  However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.  Obligations
rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant
speculative characteristics.  'BB' indicates the least degree of
speculation and 'C' the highest.  While such obligations will likely
have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse
conditions.

Plus (+) or minus (-) - The ratings from 'AA' to 'CCC' may be modified
by the addition of a plus or minus sign to show relative standing within
the major rating categories.

N.R. - This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard &
Poor's does not rate a particular obligation as a matter of policy.


Fitch IBCA, Duff & Phelps

AAA - Highest credit quality.  'AAA' ratings denote the lowest
expectation of credit risk.  They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments.  This capacity is highly unlikely to be adversely affected
by foreseeable events.

AA - Very high credit quality.  'AA' ratings denote a very low
expectation of credit risk.  They indicate very strong capacity for
timely payment of financial commitments.  This capacity is not
significantly vulnerable to foreseeable events.

A - High credit quality.  'A' ratings denote a low expectation of credit
risk.  The capacity for timely payment of financial commitments is
considered strong.  This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.

BBB - Good credit quality.  'BBB' ratings indicate that there is
currently a low expectation of credit risk.  The capacity for timely
payment of financial commitments is considered adequate, but adverse
changes in circumstances and in economic conditions are more likely to
impair this capacity.  This is the lowest investment-grade category.

BB - Speculative.  'BB' ratings indicate that there is a possibility of
credit risk developing particularly as the result of adverse economic
change over time; however, business or financial alternatives may be
available to allow financial commitments to be met.  Securities rated in
this category are not investment grade.

B - Highly speculative.  'B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.  Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.

CCC, CC, C - High default risk.  Default is a real possibility.
Capacity for meeting financial commitments is solely reliant upon
sustained, favorable business or economic developments.  A 'CC' rating
indicates that default of some kind appears probable.  'C' ratings
signal imminent default.

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, Duff & Phelps

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 - Highest credit quality.  Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.

F2 - Good credit quality.   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 - Fair credit quality.  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.





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