8.  Legal Matters

Beginning in June 2004, class action lawsuits alleging violations
of the federal securities laws were filed against Citigroup Global
Markets Inc. (the "Distributor") and a number of its affiliates,
including Smith Barney Fund Management LLC and Salomon Brothers
Asset Management Inc. (the "Advisers"), substantially all of the
mutual funds managed by the Advisers, including the Fund (the "Funds"),
and directors or trustees of the Funds (collectively, the "Defendants").
The complaints alleged, among other things, that the Distributor
created various undisclosed incentives for its brokers to sell
Smith Barney and Salomon Brothers funds.  In addition, according to the
complaints, the Advisers caused the Funds to pay excessive brokerage
commissions to the Distributor for steering clients towards proprietary
funds.  The complaints also alleged that the defendants breached their
fiduciary duty to the Funds by improperly charging Rule 12b-1 fees and
by drawing on fund assets to make undisclosed payments of soft dollars
and excessive brokerage commissions.  The complaints also alleged that
the Funds failed to adequately disclose certain of the allegedly wrongful
conduct.  The complaints sought injunctive relief and compensatory and
punitive damages, rescission of the Funds' contracts with the Advisers,
recovery of all fees paid to the Advisers pursuant to such contracts and
an award of attorneys' fees and litigation expenses.
On December 15, 2004, a consolidated amended complaint (the "Complaint")
was filed alleging substantially similar causes of action.  While the
lawsuit is in its earliest stages, to the extent that the Complaint
purports to state causes of action against the Funds, Citigroup Asset
Management believes the Funds have significant defenses to such
allegations, which the Funds intend to vigorously assert in responding
to the Complaint.
Additional lawsuits arising out of these circumstances and presenting
similar allegations and requests for relief may be filed against the
Defendants in the future.
As of the date of this report, Citigroup Asset Management and the Funds
believe that the resolution of the pending lawsuit will not have a
material effect on the financial position or results of operations of
the Funds or the ability of the Advisers and their affiliates to continue
to render services to the Funds under their respective contracts.