N-14

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 3, 2006.

SECURITIES ACT FILE NO. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933  [X]

PRE-EFFECTIVE AMENDMENT NO.  [    ]

POST-EFFECTIVE AMENDMENT NO.  [    ]

LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

125 BROAD STREET, NEW YORK, NY 10004

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

1-800-451-2010

(REGISTRANT’S AREA CODE AND TELEPHONE NUMBER)

R. JAY GERKEN

LEGG MASON & CO., LLC

399 PARK AVENUE, 4^TH FLOOR

NEW YORK, NY 10022

(NAME AND ADDRESS OF AGENT FOR SERVICE)

WITH COPIES TO:

DIANNE E. O’DONNELL, ESQ.	ROBERT I. FRENKEL, ESQ.
WILLKIE FARR & GALLAGHER LLP 787 SEVENTH AVENUE	LEGG MASON & CO., LLC 300 FIRST STAMFORD PLACE
NEW YORK, NY 10019-6099	STAMFORD, CT 06902

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: Registrant proposes that the Registration Statement become effective December 3, 2006 pursuant to Rule 488 under the Securities Act of 1933, as amended.

TITLE OF SECURITIES BEING REGISTERED:

Class I shares and Class II shares.

The Registrant has registered an indefinite amount of securities under the Securities Act of 1933, as amended, pursuant to Section 24(f) under the Investment Company Act of 1940, as amended; accordingly, no fee is payable herewith because of reliance upon Section 24(f).

LEGG MASON PARTNERS FUNDS

125 Broad Street

New York, New York 10004

Special Meeting of Shareholders to be held February 9, 2007

December [28], 2006

Dear Shareholder:

You are being asked to vote on a proposed transaction related to the legacy Citigroup Asset Management funds you own. These funds consist of the Legg Mason Partners funds (formerly known as Smith Barney funds), the Salomon Brothers funds and the CitiFunds.

A chart summarizing the proposals to reorganize the funds is included on the reverse side of this letter, and detailed information about each of the proposals is contained in the enclosed materials.

The Boards of Trustees of each of the funds identified as “your fund” on the reverse side of this letter has called a special meeting of shareholders (“Meeting”) for your fund to be held on February 9, 2007, at the offices of Bingham McCutchen LLP, 399 Park Avenue, 19th floor, New York, New York 10022 at 10:00 a.m. Eastern Time in order to vote on the proposed transaction regarding your fund(s). Each transaction involves a proposal to reorganize your fund into Legg Mason Partners Variable Aggressive Growth Portfolio (formerly, Smith Barney Variable Aggressive Growth Portfolio) (a “Reorganization”). The attached Proxy Statement/Prospectus only asks for your approval of the proposed Reorganization for your fund(s). After careful consideration, the Board(s) of the respective fund(s) recommends that you vote “FOR” each proposed Reorganization.

The Reorganizations are part of a larger set of initiatives that Legg Mason has recently undertaken following its acquisition of Citigroup Asset Management in 2005. These initiatives are designed to integrate and streamline many of the company’s mutual fund offerings, including the legacy Citigroup Asset Management funds, in an effort to focus on those funds that Legg Mason believes offer the best prospects for long-term viability and attractive long-term performance. The other initiatives, which are not included in the attached materials, include proposals to reorganize other funds as well as proposed changes in the investment strategies, policies and restrictions of certain funds and changes to the funds’ fee structures and forms of organization. Certain of these initiatives also will require shareholder approval. The Boards of the affected funds have recently approved these initiatives and if the initiatives apply to your fund, they have been presented for your consideration and approval in separate sets of proxy materials that were sent to you earlier in the fall. Legg Mason believes that these initiatives also will create a stronger and more cohesive family of funds.

Your vote is very important to us regardless of the number of shares you own. Whether or not you plan to attend the Meeting in person, please read the Proxy Statement/Prospectus and cast your vote promptly. To vote, simply sign and return the voting instruction card in the enclosed postage-paid envelope or follow the instructions on the voting instruction card for voting by touch-tone telephone or on the internet.

It is important that your vote be received no later than the time of the Meeting.

Sincerely,

R. Jay Gerken

President and Chief Executive Officer

Legg Mason Partners Variable Portfolios II

Legg Mason Partners Investment Series

N

Your Fund	Surviving Fund
Legg Mason Partners Variable Aggressive Growth Portfolio (A) (formerly Greenwich Street Series Fund—Salomon Brothers Variable Aggressive Growth Fund)	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (formerly Smith Barney Aggressive Growth Portfolio)
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (formerly Smith Barney Premier Selections All Cap Growth Portfolio)	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (formerly Smith Barney Aggressive Growth Portfolio)

LEGG MASON PARTNERS FUNDS

IMPORTANT NEWS FOR SHAREHOLDERS

The enclosed combined Proxy Statement/Prospectus describes a proposal to reorganize your fund(s) into a compatible fund. While we encourage you to read the full text of the enclosed combined Proxy Statement/Prospectus, here is a brief overview of the proposed fund reorganizations. Please refer to the more complete information contained elsewhere in the combined Proxy Statement/Prospectus about the reorganizations.

COMMON QUESTIONS ABOUT THE PROPOSED REORGANIZATIONS

Q. WHY IS A SHAREHOLDER MEETING BEING HELD?

A. The Board of your fund has approved a reorganization, subject to shareholder approval, under which your fund would be combined with Legg Mason Partners Variable Aggressive Growth Portfolio (B), another Legg Mason-affiliated fund that has investment objectives and policies similar to your fund. If shareholders of your fund approve the reorganization, you would become a shareholder of Legg Mason Partners Variable Aggressive Growth Portfolio (B).

Q. HOW WILL A REORGANIZATION AFFECT ME?

A. If the reorganization of your fund is approved, your fund’s assets and liabilities will be combined with the assets and liabilities of the surviving fund and you will become a shareholder of the surviving fund. You will receive shares of the surviving fund having an aggregate net asset value equal to the aggregate net asset value of the shares of your fund that you own on the date of the reorganization.

Q. WHY IS THE REORGANIZATION BEING RECOMMENDED?

A. As you may be aware, on December 1, 2005, Legg Mason acquired substantially all the asset management businesses of Citigroup Asset Management. Since that time, Legg Mason has undertaken a broad set of initiatives, including a comprehensive review of its various products, with the goal of integrating and streamlining the legacy Citigroup Asset Management funds, in an effort to focus on those funds that we believe offer the best prospects for superior long-term growth and attractive long-term performance. Asset growth over time offers the potential for greater economies of scale, lower expenses and portfolio management efficiency.

Q. ARE MY FUND’S INVESTMENT OBJECTIVE AND POLICIES SIMILAR TO THOSE OF ITS SURVIVING FUND?

A. Legg Mason has recommended the surviving fund based on, among other factors, its evaluation of the compatibility of your fund’s investment objective and policies with those of the surviving fund. There are, however, certain differences in investment objectives, principal investment policies and strategies, and principal risks between your fund and the surviving fund. Please see “Comparison of Investment Objectives, Strategies, and Principal Risks of Investing in the Funds” in the Proxy Statement/Prospectus. The following chart provides a brief summary of some of the more significant of these differences, as considered by your fund’s board.

Reorganization

Significant Differences in Objectives and Strategies

Legg Mason Partners Variable Aggressive Growth Portfolio (A) into Legg Mason Partners Variable Aggressive Growth Portfolio (B)

The investment objectives of the funds are identical. Both funds seek capital appreciation. The principal investment policies of the funds differ as follows: •   Your fund may invest up to 20% of its assets in securities of foreign issuers, while the surviving fund may invest up to 10% of its assets in foreign securities. •   Your fund may hold up to 35% of its assets in cash and short-term investments for cash management purposes; may not invest in a master demand note if as a result more than 10% of the value of its total assets would be invested in such notes or other illiquid securities; may

Reorganization	Significant Differences in Objectives and Strategies
	invest in special situations involving new management, special products and techniques, unusual developments, mergers or liquidations; and may use derivatives to hedge its investments, as a substitute for buying and selling securities or as a cash flow management technique.
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio into Legg Mason Partners Variable Aggressive Growth Portfolio (B)	There are no material differences in the investment objectives of the funds. Your fund seeks long-term capital growth, while the surviving fund seeks capital appreciation. The principal investment policies of the funds differ as follows: •   Your fund allocates its assets among growth stocks of small, medium and large capitalizations according to specified targets, while the surviving fund has the flexibility to vary its investments among various capitalizations. •   Your fund may invest up to 25% of its assets in foreign securities, while the surviving fund may invest up to 10% of its assets in foreign securities. •   Your fund may use derivative contracts to hedge its investments, as a substitute for buying or selling securities, as a cash flow management technique, or to enhance its return. •   Your fund is permitted to engage in short sales.

Q. HOW WILL THE REORGANIZATION AFFECT FUND FEES AND EXPENSES?

A. The chart below illustrates the effect of the reorganizations on your fund’s fees and expenses:

Legg Mason Partners Variable Aggressive Growth Portfolio (A) into Legg Mason Partners Variable Aggressive Growth Portfolio (B)	•   Total operating expenses for both classes of the surviving fund are lower than your fund’s current total operating expenses •   The management fee of the surviving fund is the same as your fund’s current management fee
Legg Mason Variable Premier Selections All Cap Growth Portfolio into Legg Mason Partners Variable Aggressive Growth Portfolio (B)	•   Total operating expenses of the surviving fund are lower than your fund’s current total operating expenses •   The management fee of the surviving fund is the same as your fund’s current management fee

Please see “Comparison of Fees and Expenses” in the Proxy Statement/Prospectus for a detailed breakdown of the fees and expenses paid by your fund in comparison with those paid by the surviving fund.

Q. WILL I HAVE TO PAY ANY SALES LOAD, CHARGE OR OTHER COMMISSION IN CONNECTION WITH THE REORGANIZATION?

A. No. No sales load, deferred sales charge, commission, redemption fee, or other transactional fee will be charged as a result of the reorganization. You will receive shares of the surviving fund having an aggregate net asset value equal to the aggregate net asset value of the shares of your fund that you own on the date of the reorganization.

Q. WHAT IF I REDEEM OR EXCHANGE MY SHARES BEFORE THE CLOSING OF THE REORGANIZATION?

A. Redemptions or exchanges of fund shares which occur before the closing of the reorganization will be processed according to your fund’s policies and procedures in effect at the time of the redemption or exchange.

-2-

Q. WILL MY SHAREHOLDER PRIVILEGES CHANGE AS A RESULT OF THE REORGANIZATION?

A. No. You will receive the same class of shares of the surviving fund that you currently hold, which have privileges identical to your shares, except that shareholders of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio will receive Class I shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B), which have privileges identical to your shares.

Please see “Comparison of Distribution and Shareholder Servicing Arrangements and Purchase, Redemption and Exchange Policies and Procedures” and “Appendix C-Purchases, Redemptions and Exchanges of Fund Shares-Other Shareholder Information” in the Proxy Statement/Prospectus for a description of the differences among fund classes.

Q. WILL I HAVE TO PAY ANY TAXES AS A RESULT OF THE REORGANIZATION?

A. Each reorganization is intended to qualify as a tax-free transaction for Federal income tax purposes. Assuming the reorganization of your fund qualifies for such treatment, you will not recognize a gain or loss for Federal income tax purposes as a result of the reorganization. As a condition to the closing of the reorganization, your fund will receive an opinion of counsel to the effect that the reorganization will qualify for such treatment. Opinions of counsel are not binding on the Internal Revenue Service or the courts. You should talk to your tax advisor about any state, local and other tax consequences of your fund’s reorganization.

Q. WHAT HAPPENS IF SHAREHOLDERS OF ONE FUND APPROVE THEIR REORGANIZATION, WHILE SHAREHOLDERS OF THE OTHER FUND DO NOT?

A. Neither of the proposed reorganizations is contingent upon the approval of the other reorganization. Thus, if shareholders of your fund approve the reorganization of your fund, your fund will be reorganized into the surviving fund even if shareholders of the other fund do not approve their reorganization.

Q. WHO WILL PAY FOR THE REORGANIZATION?

A. Legg Mason and the funds will share the costs of the Reorganization involving the Legg Mason Partners funds. Please see “Proxy Solicitation” in the Proxy Statement/Prospectus for a description of the costs to be borne by Legg Mason and those to be borne by the funds.

Q. WHY AM I RECEIVING MULTIPLE PROXY MATERIALS OR OTHER MATERIALS FROM MY FUND?

A. Legg Mason has developed a broader set of initiatives designed to integrate and streamline the legacy Citigroup Asset Management funds. The other initiatives, which are not included in the attached materials, include proposals to reorganize other legacy Citigroup Asset Management funds as well as a number of other governance- and investment-related matters. Certain of these initiatives will require shareholder approval. The Boards of the affected funds recently have approved these initiatives and if the initiatives apply to your fund, they were presented for your consideration and approval in separate sets of proxy materials that were sent to you earlier in the fall. For a discussion of certain of these proposals, see “Effect of Proposed ‘Shell’ Reorganizations of the Funds,” “Fundamental Investment Restrictions” and “Form of Organization” in the Proxy Statement/Prospectus.

Q. ARE THERE ANY PROPOSED CHANGES TO THE SURVIVING FUND THAT I SHOULD KNOW ABOUT?

A. Yes. As part of the initiatives referred to in the previous question, shareholders of the surviving fund will be asked to approve certain proposals, including electing Board members and approving certain other governance- and investment-related proposals. If these proposals are approved by shareholders of the surviving fund, it is currently anticipated that they would take effect before the end of the first half of 2007.

Q. HOW DOES MY BOARD RECOMMEND THAT I VOTE?

A. Your fund’s Board, including all of the independent Board members, unanimously recommends that you vote FOR the reorganization of your fund.

Q. WHAT HAPPENS IF A REORGANIZATION IS NOT APPROVED?

A. If the shareholders of your fund do not approve the reorganization of your fund, then you will remain a shareholder of your fund.

-3-

Q. I AM AN INVESTOR WHO HOLDS A SMALL NUMBER OF SHARES. WHY SHOULD I VOTE?

A. Your vote makes a difference. If many shareholders just like you fail to vote their proxies, your fund may not receive enough votes to go forward with the shareholder meeting, and additional costs will be incurred to solicit additional proxies.

Q. WHEN IS THE REORGANIZATION OF MY FUND EXPECTED TO HAPPEN?

A. If shareholders approve the reorganization of your fund, the reorganization of your fund is expected to occur on April 27, 2007.

Q. HOW CAN I VOTE?

A. In addition to voting by mail by returning the enclosed voting instruction card, you may also vote by either touch-tone telephone or online via the Internet, as follows:

To vote by touch-tone telephone:	To vote by Internet:
(1)    Read the Proxy Statement/Prospectus and have your voting instruction card at hand.	(1)    Read the Proxy Statement/Prospectus and have your voting instruction card at hand.
(2)    Call the toll-free number that appears on your voting instruction card.	(2)    Go to the website that appears on your voting instruction card.
(3)    Enter the control number set out on the voting instruction card and follow the simple instructions.	(3)    Enter the control number set out on the voting instruction card and follow the simple instructions.

Q. WHO GETS TO VOTE?

A. If you owned shares of your fund at the close of business on December 15, 2006, you are entitled to vote those shares, even if you are no longer a shareholder of the fund.

Q. WHO DO I CALL IF I HAVE QUESTIONS?

A. If you need more information or have any questions on how to cast your vote, please call Computershare Fund Services, your fund’s proxy solicitor, at 866-402-1719.

Your vote is important. Please vote promptly to avoid the additional expense of another solicitation.

-4-

LEGG MASON PARTNERS VARIABLE PORTFOLIOS II

Legg Mason Partners Variable Aggressive Growth Portfolio (A)

(formerly Greenwich Street Series Fund—Salomon Brothers Variable Aggressive Growth Fund)

LEGG MASON PARTNERS INVESTMENT SERIES

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

(formerly Smith Barney Premier Selections All Cap Growth Portfolio)

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held on February 9, 2007

Please take notice that a Special Meeting of Shareholders (the “Meeting”) of each of the above-referenced Funds (each an “Acquired Fund”), will be held at the offices of Bingham McCutchen LLP, 399 Park Avenue, 19th Floor, New York, New York 10022, on February 9, 2007, at 10:00 a.m., Eastern time, for the following purposes:

PROPOSAL 1: To approve an Agreement and Plan of Reorganization (the “Reorganization Agreement”), providing for (i) the acquisition of all of the assets and the assumption of all of the liabilities of the respective Acquired Fund, in exchange for shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B) (formerly Smith Barney Aggressive Growth Portfolio) (the “Acquiring Fund”) (a “Reorganization”) to be distributed to the shareholders of the respective Acquired Fund and (ii) the subsequent termination of the Acquired Fund.

PROPOSAL 2: To transact such other business as may properly come before the Meeting or any adjournments or postponements thereof.

The appointed proxies will vote in their discretion on any other business as may properly come before the Meeting or any adjournments or postponements thereof.

Holders of record of shares of each Acquired Fund at the close of business on December 15, 2006 are entitled to vote at the Meeting and at any adjournments or postponements thereof.

Shares of the Funds are offered only to variable annuity and variable life insurance separate accounts established by insurance companies (each, a “Participating Insurance Company,” and collectively, the “Participating Insurance Companies”) to fund variable annuity contracts and variable life insurance policies (the “Variable Annuity Funds”). The rights accompanying shares of the Variable Annuity Funds are legally vested in the variable annuity contracts and variable life insurance products offered by the separate accounts of Participating Insurance Companies. However, in accordance with current law and interpretations thereof, Participating Insurance Companies will vote shares held in the separate accounts in a manner consistent with voting instructions timely received from the holders of variable annuity contracts and variable life insurance policies. A signed voting instruction form or other authorization by a holder that does not specify how the holder’s shares should be voted on a proposal may be deemed an instruction to vote such shares in favor of the proposal. Those persons who have a voting interest at the close of business on December 15, 2006 will be entitled to submit instructions to their Participating Insurance Company. Each Participating Insurance Company will vote Variable Annuity Fund shares held in separate accounts for which no timely instructions are received from the holders of variable annuity contracts and variable life insurance policies, as well as shares it owns, in the same proportion as those shares for which such insurance company receives voting instructions. For purposes of this combined Proxy Statement/Prospectus, the term “shareholder” (when used to refer to the beneficial holder of ownership interests in the Acquired Fund) shall also be deemed to include holders of variable annuity contracts and variable life insurance policies.

If you hold shares through a variable annuity contract or a variable life insurance policy, and if you do not give specific voting instructions for your shares, they may not be voted at all or, as described above, they may be voted in a manner that you may not intend. Therefore, you are strongly encouraged to give your Participating Insurance Company specific instructions as to how you want your shares to be voted.

Votes cast by proxy or in person at the Meeting will be tabulated by the inspectors of election appointed for the Meeting. The inspectors of election will determine whether or not a quorum is present at the Meeting. The inspectors of election will treat abstentions as present for purposes of determining a quorum.

I

YOUR VOTE ON THIS MATTER IS IMPORTANT. PLEASE VOTE PROMPTLY BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE OR BY FOLLOWING THE ENCLOSED INSTRUCTIONS TO VOTE BY TELEPHONE OR OVER THE INTERNET.

By Order of the Boards of Trustees,

Robert I. Frenkel

Secretary

December [28], 2006

“Smith Barney” and “Salomon Brothers” are service marks of Citigroup, licensed for use by Legg Mason as the names of funds and investment advisers. Legg Mason and its affiliates, as well as the Funds’ investment manager, are not affiliated with Citigroup.

II

The information in this Proxy Statement/Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Proxy Statement/Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED NOVEMBER 3, 2006

PROXY STATEMENT/PROSPECTUS

DECEMBER     , 2006

PROXY STATEMENT FOR:

LEGG MASON PARTNERS VARIABLE PORTFOLIOS II

Legg Mason Partners Variable Aggressive Growth Portfolio (A)

(formerly Greenwich Street Series Fund—Salomon Brothers Variable Aggressive Growth Fund)

LEGG MASON PARTNERS INVESTMENT SERIES

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

(formerly Smith Barney Premier Selections All Cap Growth Portfolio)

(collectively, the “Acquired Funds”)

125 Broad Street

New York, New York 10004

1-800-451-2010

PROSPECTUS FOR:

LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, INC.

Legg Mason Partners Variable Aggressive Growth Portfolio (B)

(formerly Smith Barney Aggressive Growth Portfolio)

(the “Acquiring Fund”)

(each a “Fund” and, collectively, the “Funds”)

125 Broad Street

New York, New York 10004

1-800-451-2010

This combined Proxy Statement and Prospectus (the “Proxy Statement/Prospectus”) is being furnished in connection with the solicitation of proxies by the Boards of Trustees (each a “Board”) of each of the Acquired Funds for a Special Meeting of Shareholders of each Acquired Fund (the “Meeting”). Each Meeting will be held on February 9, 2007 at 10:00 a.m., Eastern time, at the offices of Bingham McCutchen LLP, 399 Park Avenue, 19th Floor, New York, New York 10022. At the Meeting, shareholders of each Acquired Fund will be asked to consider and act upon the following:

PROPOSAL 1: To approve an Agreement and Plan of Reorganization (the “Reorganization Agreement”), providing for (i) the acquisition of all of the assets and the assumption of all of the liabilities of the respective Acquired Fund, in exchange for shares of the Acquiring Fund (the “Reorganization”) to be distributed to the shareholders of the respective Acquired Fund and (ii) the subsequent termination of such Acquired Fund.

PROPOSAL 2: To transact such other business as may properly come before the Meeting or any adjournments or postponements thereof.

Each Reorganization Agreement contemplates the transfer of all of the assets and the assumption of all of the liabilities of an Acquired Fund to the Acquiring Fund in exchange for shares of the Acquiring Fund having an aggregate net asset value equal to the aggregate net asset value of the Acquired Fund. Each Acquired Fund would then distribute to its shareholders the portion of the shares of the Acquiring Fund to which each such shareholder is entitled, with each shareholder receiving shares of the Acquiring Fund having an aggregate net asset value equal to the aggregate net asset value of the shares of the Acquired Fund held by that shareholder as of the close of business on the day of the closing of the Reorganization. Thereafter, each Acquired Fund would be terminated.

You are being asked to approve the Reorganization Agreement pursuant to which a Reorganization would be accomplished. Because shareholders of the Acquired Funds are being asked to approve a transaction that will result in their holding shares of the Acquiring Fund, this Proxy Statement also serves as a Prospectus for the Acquiring Fund.

If the Reorganization Agreement is approved, the shareholders of the Acquired Fund will receive shares of the Acquiring Fund according to the following chart:

Acquired Fund–Share Class Exchanged	Acquiring Fund–Share Class Received
Legg Mason Partners Variable Aggressive Growth Portfolio (A) (formerly Greenwich Street Series Fund—Salomon Brothers Variable Aggressive Growth Fund)	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (formerly Smith Barney Aggressive Growth Portfolio)
Class I Class II	Class I Class II
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (formerly Smith Barney Premier Selections All Cap Growth Portfolio)	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (formerly Smith Barney Aggressive Growth Portfolio)
Single Class	Class I

If a Reorganization is approved, each shareholder of a class of an Acquired Fund will receive the same class of shares of the Acquiring Fund, except shareholders of the single share class of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio will receive Class I shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B).

Shareholders should be aware that, if shareholders of one Acquired Fund approve the Reorganization Agreement for that Fund, the reorganization of that Fund will be effected, even if the shareholders of the other Acquired Fund do not approve its Reorganization Agreement.

The Reorganizations are being structured as tax-free reorganizations for Federal income tax purposes. See “Information about the Reorganizations-Federal Income Tax Consequences” below. Shareholders should consult their tax advisors to determine the actual impact of the Reorganizations in light of their individual tax circumstances.

Each Fund is a series of an open-end management investment company. The investment objectives and principal investment strategies of each Acquired Fund are comparable to those of the Acquiring Fund. There are, however, certain

2

differences in investment objectives, policies, strategies and principal risks. Please see “Comparison of Investment Objectives, Strategies and Principal Risks of Investing in the Funds” in this Proxy Statement/Prospectus.

This Proxy Statement/Prospectus, which you should retain for future reference, sets forth concisely the information about the Acquiring Fund that a prospective investor should know before investing. A Statement of Additional Information (the “Reorganization SAI”) dated December [28], 2006 relating to this Proxy Statement/Prospectus and the Reorganizations has been filed with the Securities and Exchange Commission (the “SEC”) and is incorporated by reference into this Proxy Statement/Prospectus. A copy of the Reorganization SAI is available upon request and without charge by writing to the Funds at the address listed above or calling Shareholder Services at 800-451-2010.

For more information regarding the Funds, see the current prospectuses and statements of additional information of the Funds (the “Fund SAIs” and each, a “Fund SAI”) filed with the SEC on the dates as listed in Appendix A; the Acquired Funds’ prospectuses and the Fund SAIs are incorporated into this Proxy Statement/Prospectus by reference.

The most recent annual report and the semi-annual report next succeeding such annual report, if any, for each Fund, which highlights certain important information such as investment performance and expense and financial information and which have been filed with the SEC, are incorporated herein by reference. You may receive a copy of the prospectus, Fund SAI, annual report and semi-annual report for each Fund by contacting Shareholder Services at 800-451-2010, or by writing the Funds at the address listed above.

In addition, you can copy and review this Proxy Statement/Prospectus and the complete filing on Form N-14 containing the Proxy Statement/Prospectus and any of the above-referenced documents at the SEC’s Public Reference Room in Washington, DC. You may obtain information about the operation of the Public Reference Room by calling the SEC at (202) 551-8090. Reports and other information about each Fund are available on the EDGAR Database on the SEC’s Internet site at www.sec.gov. You may obtain copies of this information, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Room, 100 F Street, N.E., Washington, DC 20549.

A copy of the form of Reorganization Agreement pertaining to each Reorganization accompanies this Proxy Statement/Prospectus as Appendix B.

The information contained herein concerning the Acquired Funds has been provided by, and is included herein in reliance upon, the Acquired Funds. The information contained herein concerning the Acquiring Fund has been provided by, and is included herein in reliance upon, the Acquiring Fund.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES NOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

3

TABLE OF CONTENTS

	Page
SUMMARY	2
Proposed Reorganizations	2
Certain Defined Terms Used in this Proxy Statement and Prospectus	3
Comparison of Investment Objectives, Principal Investment Strategies and Risks	3
Effect on Expenses	4
FEE TABLES AND EXPENSE EXAMPLES	5
COMPARISON OF INVESTMENT OBJECTIVES, STRATEGIES AND PRINCIPAL RISKS OF INVESTING IN THE FUNDS	9
INFORMATION ABOUT THE PROPOSED REORGANIZATIONS	29
The Reorganization Agreements	29
Description of the Acquiring Fund’s Shares	30
Reasons for the Reorganizations and Board Considerations	30
Federal Income Tax Consequences	32
Effect of Proposed “Shell” Reorganizations of the Funds	34
TERMINATION OF THE ACQUIRED FUNDS	34
PORTFOLIO SECURITIES	34
INFORMATION ABOUT MANAGEMENT OF THE ACQUIRING FUND	34
Investment Manager and Sub-Advisers	34
Certain Legal Proceedings	35
Portfolio Manager of the Acquiring Fund	37
Performance of the Funds	37
ADDITIONAL INFORMATION ABOUT THE ACQUIRED FUNDS AND THE ACQUIRING FUND	38
Financial Highlights	38
Distributors	38
FORM OF ORGANIZATION	38
CAPITALIZATION	39
DIVIDENDS AND DISTRIBUTIONS	39
OTHER BUSINESS	40
SHAREHOLDER COMMUNICATIONS WITH THE BOARDS	40
VOTING INFORMATION	40
Proxy Solicitation	41
Quorum	41
Vote Required	41
Effect of Abstentions	42
Adjournments	42
Future Shareholder Proposals	42
Record Date and Outstanding Shares	42

	Page
LEGAL MATTERS	42
APPENDIX A: Dates of Prospectuses, SAIs and Shareholder Reports	A-1
APPENDIX B: Form of Agreement and Plan of Reorganization	B-1
APPENDIX C: Purchase, Redemptions and Exchanges of Fund Shares—Other Shareholder Information	C-1
APPENDIX D: Comparison of Investment Objectives, Principal Investment Strategies and Management	D-1
APPENDIX E: Form of Organization	E- 1
APPENDIX F: Similarities and Differences in the Forms of Organization of the Acquired Funds and the Acquiring Fund	F-1
APPENDIX G: Portfolio Manager Compensation	G-1
APPENDIX H: Financial Highlights of the Acquiring Fund	H-1
APPENDIX I: Management’s Discussion of Fund Performance for the Acquiring Fund	I-1
APPENDIX J: Historical Performance for the Funds	J-1
APPENDIX K: Comparison of Board Composition	K-1
APPENDIX L: Instructions for Signing Voting Instruction Card	L-1
APPENDIX M: 5% Shareholders of the Acquired and Acquiring Funds	M-1

ii

SUMMARY

This summary is qualified in its entirety by reference to the additional information contained elsewhere in this Proxy Statement/Prospectus and each Reorganization Agreement, the form of which is attached to this Proxy Statement/Prospectus as Appendix B.

Proposed Reorganizations

At meetings held in June, July and October 2006, the Board of each Acquired Fund and the Board of the Acquiring Fund, including all of the Board members who are not “interested persons” of the Funds under the Investment Company Act of 1940, as amended (the “1940 Act”) (“Independent Board Members”), unanimously approved the applicable Reorganization Agreement. Each Reorganization Agreement provides for:

1. the transfer of all of the assets and the assumption of all of the liabilities of the applicable Acquired Fund in exchange for shares of the Acquiring Fund having an aggregate net asset value equal to the aggregate net asset value of the shares of such Acquired Fund;

2. the distribution of shares of the Acquiring Fund to the shareholders of the respective Acquired Fund; and

3. the termination of the Acquired Fund.

Each Reorganization Agreement is subject to approval by the shareholders of the applicable Acquired Fund. The Reorganizations, if approved by shareholders, are scheduled to be effective as of the close of business on April 27, 2007, or on such later date as the parties may agree (“Closing Date”). As a result of the Reorganizations, each shareholder of an Acquired Fund will become the owner of the number of full and fractional shares of the Acquiring Fund having an aggregate net asset value equal to the aggregate net asset value of the shareholder’s Acquired Fund shares as of the close of business on the Closing Date. See “Information about the Reorganizations” below. For more information about the shares offered by the Acquired Funds and the Acquiring Fund see “Purchases, Redemptions and Exchanges of Fund Shares-Other Shareholder Information” in Appendix C.

For the reasons set forth below in “Information about the Proposed Reorganizations-Reasons for the Reorganizations and Board Considerations,” the Board of each Acquired Fund, including all of the Independent Board Members, has concluded that the Reorganization of such Acquired Fund would be in the best interests of the Acquired Fund and that the interests of the Acquired Fund’s existing shareholders would not be diluted as a result of the Reorganization. The Boards, therefore, are hereby submitting the Reorganization Agreements to the shareholders of the Acquired Funds and recommend that shareholders of each Acquired Fund vote “FOR” the Reorganization Agreement effecting the Reorganization for that Fund. The Board of the Acquiring Fund has approved each Reorganization on behalf of the Acquiring Fund.

For each Acquired Fund, approval of the relevant Reorganization Agreement will require, if a quorum is present at the Meeting, the affirmative vote of a majority of the outstanding voting securities of the Acquired Fund, as defined in the 1940 Act. A “majority of the outstanding voting securities” is defined in the 1940 Act as the lesser of (a) 67% or more of the voting securities present at the Meeting, if the holders of more than 50% of the outstanding voting securities of the Acquired Fund are present at the Meeting or represented by proxy, or (b) more than 50% of the outstanding voting securities of the Acquired Fund. See “Voting Information” below.

Prior to completion of a Reorganization, the Funds will have received an opinion of Dechert LLP to the effect that the Reorganization will qualify as a tax-free reorganization for Federal income tax purposes. Accordingly, no gain or loss will be recognized by an Acquired Fund or its shareholders as a result of the Reorganization of such Acquired Fund, and the aggregate tax basis of the Acquiring Fund shares received by each Acquired Fund shareholder will be the same as the aggregate tax basis of the shareholder’s Acquired Fund shares. For more information about the Federal income tax consequences of the Reorganizations, see “Information about the Proposed Reorganizations-Federal Income Tax Consequences” below.

Some of the portfolio assets of an Acquired Fund may be sold in connection with the Reorganization. The actual tax impact of such sales will depend on the difference between the price at which such portfolio assets are sold and the Acquired Fund’s basis in such assets. Any capital gains recognized in these sales on a net basis, after the application of any available capital loss carryforwards, will be distributed to the Acquired Fund shareholders as capital gain dividends (to the extent of net realized long-term capital gains distributed) and/or ordinary dividends (to the extent of net realized short-term capital gains distributed) during or with respect to the year of sale, and such distributions will be taxable to shareholders.

2

Certain Defined Terms Used in this Proxy Statement and Prospectus

Legg Mason Partners Variable Aggressive Growth Portfolio (A) and Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio are series of Massachusetts business trusts (the “Massachusetts Funds”). Legg Mason Partners Variable Aggressive Growth Portfolio (B) is a series of a Maryland corporation (the “Maryland Corporation”). For ease of reference and clarity of presentation, shares of common stock of the Maryland Corporation and beneficial interest of the Massachusetts Funds are hereinafter referred to as “shares,” and holders of shares are hereinafter referred to as “shareholders”; the Boards of Trustees overseeing the Massachusetts Funds and the Board of Directors overseeing the Maryland Corporation are each referred to herein as a “Board” and collectively as the “Boards”; the Declarations of Trust governing the Massachusetts Funds and the Articles of Incorporation governing the Maryland Corporation, each as amended and supplemented, are referred to herein as a “declaration of trust”; the term “termination” for the purposes of a series of a Massachusetts business trust refers to the liquidation of the assets and the distribution of the remaining trust property to the shareholders in accordance with their respective rights.

Comparison of Investment Objectives, Principal Investment Strategies and Risks

This section will help you compare the investment objectives, principal investment strategies and risks of the Acquired Funds and the Acquiring Fund. Please be aware that this is only a brief discussion. More detailed comparisons of the Funds appear later in this Proxy Statement/Prospectus, and a chart providing a side-by-side comparison of the Funds and their investment objectives, principal investment strategies and management can be found in Appendix D. These discussions include any material differences in the Funds’ “fundamental” investment policies, meaning those that can be changed only by shareholder vote, and “non-fundamental” investment policies, meaning those that can be changed by a Fund’s Board without a shareholder vote. The investment objective, principal investment strategies and risks of the Acquiring Fund will apply following the Reorganization. More information can be found in each Fund’s prospectus and Fund SAI.

Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

The investment objectives of both Funds are identical. Each Fund seeks capital appreciation.

Both Funds invest primarily in common stocks of companies that the portfolio manager believes are experiencing, or will experience, growth in earnings and/or cash flow that exceeds the average rate of earnings growth of the companies that comprise the S&P 500 Index. Both Funds may invest in the securities of large, well-known companies that offer prospects of long-term earnings growth. However, a significant portion of each Fund’s assets may be invested in the securities of small- to medium-sized companies because such companies often achieve higher earnings growth rates. In addition, both Funds are “diversified” under the 1940 Act, which means they are limited as to the percentage of assets that can be invested in the securities of a single issuer.

There are several differences between the Funds:

• Legg Mason Partners Variable Aggressive Growth Portfolio (A) may invest up to 20% in securities of foreign issuers, while Legg Mason Partners Variable Aggressive Growth Portfolio (B) may invest up to 10% of its assets in foreign securities;

• Legg Mason Partners Variable Aggressive Growth Portfolio (A) may hold up to 35% in cash and short-term investments for cash management purposes;

• Legg Mason Partners Variable Aggressive Growth Portfolio (A) may not invest in a master demand note if as a result more than 10% of the value of its total assets would be invested in such notes and other illiquid securities;

• Legg Mason Partners Variable Aggressive Growth Portfolio (A) may invest in special situations involving new management, special products and techniques, unusual developments, mergers and liquidations; and

• Legg Mason Partners Variable Aggressive Growth Portfolio (A) may use derivatives to hedge its investments, as a substitute for buying and selling securities or as a cash flow management technique.

The same portfolio manager, Richard A. Freeman, manages both Funds and employs a similar investment strategy for selecting securities for each Fund’s portfolio.

3

The Funds are subject to similar risks. As a result of the Reorganization, however, a shareholder in Legg Mason Partners Variable Aggressive Growth Portfolio (A) will be subject to following additional risk:

• securities lending risk.

A detailed explanation of the risks for the Funds is set out in “Comparison of Investment Objectives, Strategies and Principal Risks of Investing in the Funds” in this Proxy Statement/Prospectus.

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

There are no material differences between the Funds’ investment objectives. The investment objective of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio is long-term capital growth, while Legg Mason Partners Variable Aggressive Growth Portfolio (B)’s investment objective is capital appreciation.

In pursuing these investment objectives, both Funds invest primarily in equity securities of growth companies across all capitalization categories. Both Funds are “diversified” under the 1940 Act, which means they are limited as to the percentage of assets that can be invested in the securities of a single issuer.

There are, however, several material differences between the Funds:

• Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio allocates its assets among growth stocks of small, medium and large capitalizations according to specified target allocations, while Legg Mason Partners Variable Aggressive Growth Portfolio (B) has flexibility to vary its investments among various capitalizations.

• Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio is managed by three separate portfolio managers, with one portfolio manager managing the Large Cap Growth Segment, one portfolio manager managing the Mid Cap Growth segment and one portfolio manager managing the Small Cap Growth segment, while Legg Mason Partners Variable Aggressive Growth Portfolio (B) is managed by a single portfolio manager.

• Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio may invest up to 25% of its assets in foreign securities, while Legg Mason Partners Variable Aggressive Growth Portfolio (B) may invest up to 10% of its assets in foreign securities.

• Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio may use derivatives to hedge its investments, as a substitute for buying and selling securities, as a cash flow management technique, or to enhance its return.

• Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio is permitted to engage in short sales.

The Funds are subject to similar risks. As a result of the Reorganization, however, a shareholder in Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio will be subject to the following additional risks:

• securities lending risk; and

• greater exposure to small and medium cap company risk.

An investment in Legg Mason Partners Variable Aggressive Growth Portfolio (B), however, could pose less risk than investment in the Acquired Fund, because:

• the Acquiring Fund may invest a smaller portion of its assets in foreign securities; and

• the Acquiring Fund may use derivatives only for hedging and not for speculative purposes.

A detailed explanation of the risks for the Funds is set out in “Comparison of Investment Objectives, Strategies and Principal Risks of Investing in the Funds” in this Proxy Statement/Prospectus.

Effect on Expenses

The Reorganizations will have the following effects on expenses:

Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

Following the Reorganization, total annual operating expenses paid by Acquired Fund shareholders are expected to decline for holders of Class I and Class II shares from 0.84% and 1.09% to 0.77% and 1.03%, respectively.

4

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

Following the Reorganization, total annual operating expenses paid by Acquired Fund shareholders are expected to decline from 0.98% (gross) and 0.95% (net of voluntary fee waivers) to 0.77%.

FEE TABLES AND EXPENSE EXAMPLES

The tables below (1) compare the estimated fees and expenses of each class of each Fund, as of August 31, 2006 and (2) show the estimated fees and expenses of each class of the combined Fund, on a pro forma basis, as if the Reorganizations occurred on August 31, 2006.

The estimates are based on the contracts and agreements in effect as of August 31, 2006 and reflect the operating expense accrual rates on that date, which are based on each Fund’s net assets as of August 31, 2006. Accordingly, the actual fees and expenses of each class of each Fund and the combined Fund as of the Closing Date of the Reorganizations may differ from those reflected in the tables below due to changes in net assets from those at August 31, 2006.

Changes in net assets may result from purchases and redemptions of Fund shares, market appreciation or depreciation, and other factors occurring between that date and the Closing Date of the Reorganizations. As a general matter, changes (positive or negative) in any Fund’s expense ratios resulting from fluctuations in an Acquired or Acquiring Fund’s net assets will be borne by the shareholders of the Fund and the combined Fund. For information concerning the net assets of each Fund and class as of September 30, 2006, please see “Capitalization.”

Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

The estimated expenses of Legg Mason Partners Variable Aggressive Growth Portfolio (A) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) as of August 31, 2006 and pro forma expenses following the proposed Reorganization are set forth below:

	Pre-Reorganization						Pre-Reorganization
	Legg Mason Partners Variable Aggressive Growth Portfolio (A)*		Legg Mason Partners Variable Aggressive Growth Portfolio (B)*		Legg Mason Partners Variable Aggressive Growth Portfolio (B) Pro Forma Combined Fund*		Legg Mason Partners Variable Aggressive Growth Portfolio (A)*		Legg Mason Partners Variable Aggressive Growth Portfolio (B)*†		Legg Mason Partners Variable Aggressive Growth Portfolio (B) Pro Forma Combined Fund*
	Class I				Class I**		Class II		Class II		Class II***
Stockholder Fees (fees paid directly from a stockholder’s investment):
Maximum Sales Charge (Load) imposed on purchases (as a % of offering price)	None		None		None		None		None		None
Maximum Deferred Sales Charge (Load) (as a % of the lower of net asset value at purchase or redemption)	None		None		None		None		None		None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees	0.75	%	0.75	%	0.75	%	0.75	%	0.75	%	0.75	%
Distribution and/or Service (12b-1) Fees	0.00	%	0.00	%	0.00	%	0.25	%	0.25	%	0.25	%
Other Expenses	0.09	%	0.02	%	0.02	%	0.09	%	0.03	%	0.03	%
Total Annual Fund Operating Expenses	0.84	%	0.77	%(a)	0.77	%	1.09	%	1.03	%	1.03	%

* Pre-Reorganization and Pro Forma ratios include the estimated effect of new transfer agency and custody contracts which were effective January 1, 2006, and the impact of new investment management fees for Legg Mason Partners

5

Variable Aggressive Growth Portfolio (A) that went into effect on October 1, 2005 and Legg Mason Partners Variable Aggressive Growth Portfolio (B) that went into effect on November 1, 2005.

** Prior to the Reorganization, the single class of shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B) will be redesignated as Class I shares.

*** As of the date of this Proxy Statement/Prospectus, Legg Mason Partners Variable Aggressive Growth Portfolio (B) did not issue Class II shares.

^(a) Management has agreed to voluntarily cap expenses at 1.00%. The manager may discontinue this waiver and/or reimbursement at any time.

^† Ratios are estimated as Legg Mason Partners Variable Aggressive Growth Portfolio (B) does not currently offer Class II shares.

The following examples help you compare the costs of investing in each of the Funds with the costs of investing in other mutual funds. The examples assume that you invest $10,000 for the periods shown, that your investment has a 5% return each year, that you reinvest all distributions and dividends, and that the Funds’ operating expenses (before voluntary fee waivers and/or expense reimbursements, if any) remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

SHAREHOLDER FEES:

	1 Year		3 Years		5 Years		10 Years
Legg Mason Partners Variable Aggressive Growth Portfolio (A)—Class I	$	86	$	268	$	466	$	1,038
Legg Mason Partners Variable Aggressive Growth Portfolio (B)	$	79	$	246	$	428	$	955
Legg Mason Partners Variable Aggressive Growth Portfolio (B) Pro Forma Combined Fund—Class I*	$	79	$	246	$	428	$	955

	1 Year		3 Years		5 Years		10 Years
Legg Mason Partners Variable Aggressive Growth Portfolio (A)—Class II	$	111	$	346	$	601	$	1,329
Legg Mason Partners Variable Aggressive Growth Portfolio (B)—Class II†	$	105	$	328	$	569	$	1,260
Legg Mason Partners Variable Aggressive Growth Portfolio (B) Pro Forma Combined Fund—Class II**	$	105	$	328	$	569	$	1,260

^† Amounts are estimated as Legg Mason Partners Variable Aggressive Growth Portfolio (B) currently does not offer Class II shares.

* Prior to the Reorganization, single class shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B) will be redesignated as Class I shares.

** As of the date of this Proxy Statement/Prospectus, Legg Mason Partners Variable Aggressive Growth Portfolio (B) did not issue Class II shares.

6

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

The estimated expenses of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio and Legg Mason Partners Variable Aggressive Growth Portfolio (B) as of August 31, 2006 and pro forma expenses following the proposed Reorganization are set forth below:

	Pre-Reorganization
	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio*		Legg Mason Partners Variable Aggressive Growth Portfolio (B)*		Legg Mason Partners Variable Aggressive Growth Portfolio (B) Pro Forma Combined Fund—Class I*†
Stockholder Fees (fees paid directly from a stockholder’s investment):
Maximum Sales Charge (Load) imposed on purchases (as a % of offering price)	None		None		None
Maximum Deferred Sales Charge (Load) (as a % of the lower of net asset value at purchase or redemption)	None		None		None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees	0.75	%	0.75	%	0.75	%
Distribution and/or Service (12b-1) Fees	0.00	%	0.00	%	0.00	%
Other Expenses	0.23	%	0.02	%	0.02	%
Total Annual Fund Operating Expenses	0.98	%(a)	0.77	%(b)	0.77	%

* Pre-Reorganization and Pro Forma ratios include the estimated effect of new transfer agency and custody contracts which were effective January 1, 2006, and the impact of new investment management fees for Legg Mason Partners Variable Aggressive Growth Portfolio (B) that went into effect on November 1, 2005.

† Prior to the Reorganization, the single class of shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B) will be redesignated as Class I shares.

^(a) Management has agreed to voluntarily cap expenses at 0.95%. The manager may discontinue this waiver and/or reimbursement at any time.

^(b) Management has agreed to voluntarily cap expenses at 1.00%. The manager may discontinue this waiver and/or reimbursement at any time.

The following examples help you compare the costs of investing in each of the Funds with the costs of investing in other mutual funds. The examples assume that you invest $10,000 for the periods shown, that your investment has a 5% return each year, that you reinvest all distributions and dividends, and that the Funds’ operating expenses (before voluntary fee waivers and/or expense reimbursements, if any) remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

SHAREHOLDER FEES:

	1 Year		3 Years		5 Years		10 Years
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	$	100	$	312	$	542	$	1,203
Legg Mason Partners Variable Aggressive Growth Portfolio (B)	$	79	$	246	$	428	$	955
Legg Mason Partners Variable Aggressive Growth Portfolio (B) Pro Forma Combined Fund—Class I†	$	79	$	246	$	428	$	955

† Prior to the Reorganization, the single class of shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B) will be redesignated as Class I shares.

7

Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund), Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

The estimated expenses of Legg Mason Partners Variable Aggressive Growth Portfolio (A), Legg Mason Partners Variable All Cap Growth Portfolio and Legg Mason Partners Variable Aggressive Growth Portfolio (B) as of August 31, 2006 and pro forma expenses following the proposed Reorganization are set forth below:

	Pre-Reorganization								Pre-Reorganization
	Legg Mason Partners Variable Aggressive Growth Portfolio (A)*		Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio*		Legg Mason Partners Variable Aggressive Growth Portfolio (B)*		Legg Mason Partners Variable Aggressive Growth Portfolio (B) Pro Forma Combined Fund*		Legg Mason Partners Variable Aggressive Growth Portfolio (A)*		Legg Mason Partners Variable Aggressive Growth Portfolio (B)* †		Legg Mason Partners Variable Aggressive Growth Portfolio (B) Pro Forma Combined Fund*
	Class I				Class I		Class I**		Class II		Class II		Class II***
Stockholder Fees (fees paid directly from a stockholder’s investment):
Maximum Sales Charge (Load) imposed on purchases (as a % of offering price)	None		None		None		None		None		None		None
Maximum Deferred Sales Charge (Load) (as a % of the lower of net asset value at purchase or redemption)	None		None		None		None		None		None		None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees	0.75	%	0.75	%	0.75	%	0.75	%	0.75	%	0.75	%	0.75	%
Distribution and/or Service (12b-1) Fees	0.00	%	0.00	%	0.00	%	0.00	%	0.25	%	0.25	%	0.25	%
Other Expenses	0.09	%	0.23	%	0.02	%	0.02	%	0.09	%	0.03	%	0.03	%
Total Annual Fund Operating Expenses	0.84	%	0.98	%(a)	0.77	%(b)	0.77	%	1.09	%	1.03	%	1.03	%

^* Pre-Reorganization and Pro Forma ratios include the estimated effect of new transfer agency and custody contracts which were effective January 1, 2006, and the impact of new investment management fees for Legg Mason Partners Variable Aggressive Growth Portfolio (A) that went into effect on October 1, 2005 and Legg Mason Partners Variable Aggressive Growth Portfolio (B) that went into effect on November 1, 2005.

^** Prior to the Reorganization, the single class of shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B) will be redesignated as Class I shares.

^*** As of the date of this Proxy Statement/Prospectus, Legg Mason Partners Variable Aggressive Growth Portfolio (B) did not issue Class II shares.

^(a) Management has agreed to voluntarily cap expenses at 0.95%. The manager may discontinue this waiver and/or reimbursement at any time.

^(b) Management has agreed to voluntarily cap expenses at 1.00%. The manager may discontinue this waiver and/or reimbursement at any time.

^† Ratios are estimated as Legg Mason Partners Variable Aggressive Growth Portfolio (B) does not currently offer Class II shares.

The following examples help you compare the costs of investing in each of the Funds with the costs of investing in other mutual funds. The examples assume that you invest $10,000 for the periods shown, that your investment has a 5% return each year, that you reinvest all distributions and dividends, and that the Funds’ operating expenses (before voluntary fee waivers and/or expense reimbursements, if any) remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

8

SHAREHOLDER FEES:

	1 Year		3 Years		5 Years		10 Years
Legg Mason Partners Variable Aggressive Growth Portfolio (A)—Class I	$	86	$	268	$	466	$	1,038
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	$	100	$	312	$	542	$	1,203
Legg Mason Partners Variable Aggressive Growth Portfolio (B)	$	79	$	246	$	428	$	955
Legg Mason Partners Variable Aggressive Growth Portfolio (B) Pro Forma Combined Fund—Class I*	$	79	$	246	$	428	$	955

	1 Year		3 Years		5 Years		10 Years
Legg Mason Partners Variable Aggressive Growth Portfolio (A)—Class II	$	111	$	346	$	601	$	1,329
Legg Mason Partners Variable Aggressive Growth Portfolio (B)—Class II†	$	105	$	328	$	569	$	1,260
Legg Mason Partners Variable Aggressive Growth Portfolio (B) Pro Forma Combined Fund—Class II**	$	105	$	328	$	569	$	1,260

^* Prior to the Reorganization, the single class of shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B) will be redesignated as Class I shares.

^† Amounts are estimated as Legg Mason Partners Variable Aggressive Growth Portfolio (B) currently does not offer Class II shares.

^** As of the date of this Proxy Statement/Prospectus, Legg Mason Partners Variable Aggressive Growth Portfolio (B) did not issue Class II shares.

Comparison of Distribution and Shareholder Servicing Arrangements and Purchase, Redemption and Exchange Policies and Procedures

Distribution arrangements for the Funds are substantially similar with respect to purchases, redemptions and exchanges.

More information about the distribution and shareholder servicing arrangements of Class I and II shares of the Acquiring Fund following the Reorganizations and the procedures for making purchases, redemptions and exchanges of Class I and II shares are set forth in “Purchases, Redemptions and Exchanges of Fund Shares-Other Shareholder Information” in Appendix C to this Proxy Statement/Prospectus.

COMPARISON OF INVESTMENT OBJECTIVES, STRATEGIES AND PRINCIPAL RISKS OF INVESTING IN THE FUNDS

The following discussion comparing the investment objectives, strategies and principal risks of each Acquired Fund with the Acquiring Fund is based upon, and qualified in its entirety by, the disclosure appearing in the prospectuses (as supplemented) of the Acquired Funds and the Acquiring Fund under the captions “Investments, Risks and Performance” and “More about the Fund’s Investments.” The prospectuses (each of which has been supplemented from time to time) are dated as follows:

Acquired Fund	Prospectus Dated
Legg Mason Partners Variable Aggressive Growth Portfolio (A)	May 1, 2006
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	February 28, 2006
Acquiring Fund	Prospectus Dated
Legg Mason Partners Variable Aggressive Growth Portfolio (B)	February 28, 2006

Additional information about each Fund’s investment objective and principal investment strategies may also be found in Appendix D to this Proxy Statement/Prospectus.

The investment objectives and principal investment strategies and principal risks of the Acquiring Fund will apply to the combined fund following a Reorganization.

Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

Investment Objectives

The investment objective of both Funds is to seek capital appreciation.

9

Principal Investment Policies and Strategies

The same portfolio manager manages both Funds and follows substantially similar investment policies and the same investment strategies for each Fund.

Both Funds invest primarily in common stocks of companies that the portfolio manager believes are experiencing, or will experience, growth in earnings and/or cash flow that exceeds the average rate of earnings growth of the companies that comprise the S&P 500 Index. Both Funds may invest in securities of large, well-known companies that offer prospects of long-term earnings growth. However, a significant portion of each Fund’s assets may be invested in the securities of small- to medium-sized companies because such companies often achieve higher earnings growth rates.

The portfolio manager of the Funds emphasizes individual security selection while diversifying each Fund’s investments across industries, which may help to reduce risk. The portfolio manager focuses primarily, but not exclusively, on emerging growth companies that have passed their “start-up” phase and show positive earnings and the prospect of achieving significant profit gains beginning in the two to three years after the fund acquires their stocks.

When evaluating individual stocks for possible investment, the portfolio manager considers whether the company may benefit from:

• New technologies, products or services;

• New cost reducing measures;

• Changes in management; or

• Favorable changes in government regulations.

The principal differences between the Funds are as follows:

• Legg Mason Partners Variable Aggressive Growth Portfolio (A) may invest up to 20% in securities of foreign issuers, while Legg Mason Partners Variable Aggressive Growth Portfolio (B) may invest up to 10% of its assets in foreign securities;

• Legg Mason Partners Variable Aggressive Growth Portfolio (A) may hold up to 35% in cash and short-term investments for cash management purposes;

• Legg Mason Partners Variable Aggressive Growth Portfolio (A) may not invest in a master demand note if as a result more than 10% of the value of its total assets would be invested in such notes and other illiquid securities;

• Legg Mason Partners Variable Aggressive Growth Portfolio (A) may invest in special situations involving new management, special products and techniques, unusual developments, mergers and liquidations; and

• Legg Mason Partners Variable Aggressive Growth Portfolio (A) may use derivatives to hedge its investments, as a substitute for buying and selling securities or as a cash flow management technique.

Risk Factors

Because the Funds have similar investment objectives, principal investment policies and the same portfolio manager, many of the principal risks of investing in the Funds are substantially similar. You could lose money on your investments in either Fund.

The following summarizes the principal risks of investing in the Funds:

• Stock prices decline generally.

• Investment style may fall out of favor with investors.

• The portfolio manager’s judgment about the attractiveness, growth prospects or potential appreciation of a particular stock proves to be incorrect.

• A particular product or service developed by a company in which the Funds invest is unsuccessful, the company does not meet earnings expectations or other events depress the value of the company’s stock.

• Many factors affect the stock market prices and dividend payouts of equity investments. These factors include general business conditions, investor confidence in the economy, and current conditions in a particular industry or

10

company. Each company determines whether or not to pay dividends on common stock. Equity securities are subject to financial risks relating to the issuer’s earning stability and overall financial soundness.

• Investments in securities of foreign entities and securities quoted or denominated in foreign currencies involve special risks. These include possible political and economic instability, more limited availability of accurate information about foreign issues and the possible imposition of exchange controls or other restrictions on investments. If the Funds invest in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency rates relative to the U.S. dollar will affect the U.S. dollar value of the Funds’ assets.

• Key economic trends become materially unfavorable.

Smaller Cap Company Risk

Compared to large capitalization companies, the securities of small and medium capitalization companies are more likely to:

• Have more volatile share prices

• Have more limited product lines

• Have fewer capital resources

• Have more limited management depth

• Experience sharper swings in market prices

• Be harder to sell at times and prices the manager believes appropriate

• Offer greater potential for gains and losses

Emerging Growth Company Risk (Legg Mason Partners Aggressive Growth Portfolio (A) only)

Compared to large capitalization companies, emerging growth companies are more likely to have:

• More limited product lines

• Fewer capital resources

• More limited management depth

Further, securities of emerging growth companies are more likely to:

• Experience sharper swings in market values

• Be harder to sell at times and prices the manager believes appropriate

• Offer greater potential for gains and losses.

Sector Risk (Legg Mason Partners Aggressive Growth Portfolio (A) only)

Companies in similar industries may be grouped together in broad categories called sectors. Sector risk is the possibility that a certain sector may perform differently from other sectors or from the market as a whole. As the portfolio manager allocates more of the Acquired Fund’s portfolio holdings to a particular sector, the Acquired Fund’s performance will be more susceptible to any economic, business or other developments that generally affect that sector.

Fixed Income Risk (limited extent) (Legg Mason Partners Aggressive Growth Portfolio (A) only)

The value of debt securities varies inversely with interest rates. This means generally that the value of these investments increases as interest rates fall and decreases as interest rates rise. Yields from short-term securities normally may be lower than yields from longer-term securities. A bond’s price is affected by the credit quality of its issuer. An issuer may not always make payments on a fixed income security. Some fixed income securities, such as mortgage-backed securities, are subject to prepayment risk, which occurs when an issuer can prepay the principal owed on a security before its maturity.

11

Credit Risk (Legg Mason Partners Aggressive Growth Portfolio (A) only)

If a security receives different ratings, the Acquired Fund will treat the securities as being rated in the highest of those ratings. The Acquired Fund may choose not to sell securities that are downgraded below the Acquired Fund’s minimum acceptable credit rating after their purchase.

Emerging Markets Risk (Legg Mason Partners Aggressive Growth Portfolio (A) only)

Emerging markets offer the potential of significant gains but also involve greater risks than investing in more developed countries. Political or economic instability, lack of market liquidity and government actions, such as currency controls or seizure of private business or property may be more likely in emerging markets.

Derivative Risk (Legg Mason Partners Aggressive Growth Portfolio (A) only)

Even a small investment in derivative contracts can have a big impact on the Acquired Fund’s stock market, currency and interest rate exposure. Therefore, using derivatives can disproportionately increase losses and reduce opportunities for gain when stock prices, currency rates or interest rates are changing.

Securities Lending Risk (Legg Mason Partners Aggressive Growth Portfolio (B) only)

The Acquiring Fund may engage in securities lending to increase its net investment income. The Acquiring Fund will only lend securities if the loans are callable by the Acquiring Fund at any time and the loans are continuously secured by cash or liquid securities equal to no less than the market value, determined daily, of the securities loaned. The risks in lending securities consist of possible delay in receiving additional collateral, delay in recovery of securities when the loan is called or possible loss of collateral should the borrower fail financially.

Fundamental Investment Restrictions

Shareholders of the Acquired Fund and the Acquiring Fund are being asked in a separate proxy statement to approve revised fundamental investment policies for their Funds, which are set forth below. The Boards of the Funds have adopted, and have recommended that shareholders approve, a uniform set of fundamental investment policies that cover certain broad topics as to which mutual funds, such as the Funds, must have policies that may be changed only with shareholder approval. In connection with this proposal, the Boards have also approved the elimination, or the reclassification as non-fundamental, of all other investment policies that are not required to be classified as fundamental, and the redesignation of the investment objectives of certain Funds as non-fundamental, which means they could be changed without shareholder approval.

Comparison between Fundamental Investment Restrictions

If shareholders of a Fund approve the proposed changes to the Fund’s fundamental investment restrictions, the Fund’s current fundamental restrictions with respect to borrowing, underwriting the securities of other issuers, lending money or other assets, issuing senior securities, purchasing or selling real estate, purchasing or selling commodities or contracts related to commodities and concentrating in a particular industry will be replaced by the new policies. Management of the Funds believes that adoption of the new policies will have no material effect on the manner in which the Funds are managed.

The following table lists (1) the current fundamental investment restrictions for the Acquired Fund, (2) the current fundamental investment restrictions for the Acquiring Fund and (3) the proposed changes to the fundamental investment restrictions that will be voted on by shareholders of the Funds, but in a separate proxy statement. Identical proposed fundamental investment restrictions are being voted on by shareholders of the Acquiring Fund so that if (1) shareholders of the Acquired Fund approve the Reorganization and (2) shareholders of the Acquiring Fund approve their proposed fundamental investment restrictions, shareholders of the Acquired Fund will become shareholders of a Fund with the same fundamental investment restrictions as are being proposed for their Fund. Following the table is an explanation of certain differences between (1) the Acquired Fund’s current fundamental investment restrictions and the proposed fundamental investment restrictions and (2) the Acquired Fund’s and the Acquiring Fund’s investment restrictions should shareholders of the Funds not approve the proposed changes to the fundamental investment restrictions.

12

Subject	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) and Legg Mason Partners Variable Aggressive Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Diversification	The Fund may not invest in a manner that would cause it to fail to be a “diversified company” under the 1940 Act and the rules, regulations and orders thereunder.	The Fund may not invest in a manner that would cause it to fail to be a “diversified company” under the 1940 Act and the rules, regulations and orders thereunder.	No restriction. If shareholders of the Acquired and Acquiring Funds approve this proposal, the Fund’s current fundamental policies regarding diversification will be eliminated. Despite this change, each Fund’s status as a diversified fund will continue to be changeable only with the approval of such Fund’s shareholders.
Borrowing:	The Fund may not borrow money, except that (a) the Fund may borrow from banks for temporary or emergency (not leveraging) purposes, including the meeting of redemption requests which might otherwise require the untimely disposition of securities, and (b) the Fund may, to the extent consistent with its investment policies, enter into reverse repurchase agreements, forward roll transactions or similar investment strategies and techniques. To the extent that it engages in transactions described in (a) and (b), the Fund will be limited so that no more than 33 1/3% of the value of its total assets (including the amount borrowed) valued at the lesser of cost or market, less liabilities (not including the amount borrowed) is derived from such transactions.	The Fund may not borrow money, except that (a) the Fund may borrow from banks for temporary or emergency (not leveraging) purposes, including the meeting of redemption requests which might otherwise require the untimely disposition of securities, and (b) the Fund may, to the extent consistent with its investment policies, enter into reverse repurchase agreements, forward roll transactions or similar investment strategies and techniques. To the extent that it engages in transactions described in (a) and (b), the Fund will be limited so that no more than 33 1/3% of the value of its total assets (including the amount borrowed) valued at the lesser of cost or market, less liabilities (not including the amount borrowed) is derived from such transactions.	The Fund may not borrow money except as permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. The 1940 Act generally permits a fund to borrow money in amounts of up to one-third of the fund’s total assets from banks for any purpose, and to borrow up to 5% of the fund’s total assets from banks or other lenders for temporary purposes. Certain trading practices and investments, such as reverse repurchase agreements, dollar rolls and certain derivatives, may be considered to be borrowing and thus subject to the 1940 Act restrictions. On the other hand, certain practices and investments may involve leverage but are not considered to be borrowing.

13

Subject	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) and Legg Mason Partners Variable Aggressive Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Underwriting:	The Fund may not engage in the business of underwriting securities issued by other persons, except to the extent that the Fund may technically be deemed to be an underwriter under the Securities Act of 1933, as amended, in disposing of portfolio securities.	The Fund may not engage in the business of underwriting securities issued by other persons, except to the extent that the Fund may technically be deemed to be an underwriter under the Securities Act of 1933, as amended, in disposing of portfolio securities.	The Fund may not engage in the business of underwriting the securities of other issuers except as permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. The 1940 Act generally permits a fund to have underwriting commitments of up to 25% of its assets under certain circumstances. Currently, the Funds are not permitted to engage in the business of underwriting.
Lending:	The Fund may not make loans. This restriction does not apply to: (a) the purchase of debt obligations in which the Fund may invest consistent with its investment objectives and policies; (b) repurchase agreements; and (c) loans of its portfolio securities, to the fullest extent permitted under the 1940 Act.	The Fund may not make loans. This restriction does not apply to: (a) the purchase of debt obligations in which the Fund may invest consistent with its investment objective and policies; (b) repurchase agreements; and (c) loans of its portfolio securities, to the fullest extent permitted under the 1940 Act.	The Fund may lend money or other assets to the extent permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. The 1940 Act does not prohibit a fund from making loans; however, SEC staff interpretations currently prohibit funds from lending more than one-third of their total assets, except through the purchase of debt obligations or the use of repurchase agreements. (A repurchase agreement is an agreement to purchase a security, coupled with an agreement to sell that security back to the original seller on an agreed-upon date at a price that generally depends on current interest rates. The SEC frequently treats repurchase agreements as loans.)

14

Subject	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) and Legg Mason Partners Variable Aggressive Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Senior Securities:	The Fund may not issue “senior securities” as defined in the 1940 Act and the rules, regulations and orders thereunder, except as permitted under the 1940 Act and the rules, regulations and orders thereunder.	The Fund may not issue “senior securities” as defined in the 1940 Act, and the rules, regulations and orders thereunder, except as permitted under the 1940 Act and the rules, regulations and orders thereunder.	The Fund may not issue senior securities except as permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. Senior securities are generally defined as fund obligations that have a priority over the fund’s shares with respect to the payment of dividends or distributions of fund assets. The 1940 Act prohibits a fund from issuing senior securities except that it generally permits a fund to borrow from banks for any purpose in amounts up to one-third of the fund’s total assets and to borrow up to 5% of the fund’s total assets from any source for temporary purposes. A fund’s temporary borrowings not exceeding 5% of its total assets are not considered senior securities.

15

Subject	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) and Legg Mason Partners Variable Aggressive Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Real Estate:	The Fund may not purchase or sell real estate or real estate mortgages, but this restriction shall not prevent the Fund from: (a) investing in securities of issuers engaged in the real estate business or the business of investing in real estate (including interests in limited partnerships owning or otherwise engaging in the real estate business or the business of investing in real estate) and securities which are secured by real estate or interests therein; (b) holding or selling real estate received in connection with securities it holds or held; or (c) investing in real estate investment trust securities.	The Fund may not purchase or sell real estate or real estate mortgages, but this restriction shall not prevent the Fund from: (a) investing in securities of issuers engaged in the real estate business or the business of investing in real estate (including interests in limited partnerships owning or otherwise engaging in the real estate business or the business of investing in real estate) and securities which are secured by real estate or interests therein; (b) holding or selling real estate received in connection with securities it holds or held; or (c) investing in real estate investment trust securities.	The Fund may not purchase or sell real estate except as permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. The 1940 Act does not prohibit a fund from owning real estate; however, a mutual fund is limited in the amount of illiquid assets it may hold. (Real estate is generally considered illiquid.)
Commodities:	The Fund may not purchase or sell commodities or commodity contracts but this restriction shall not prevent the Fund from trading in futures contracts and options on futures contracts (including options on currencies to the extent consistent with the Fund’s investment objective and policies).	The Fund may not purchase or sell commodities or commodity contracts but this restriction shall not prevent the Fund from trading in futures contracts and options on futures contracts (including options on currencies to the extent consistent with the Fund’s investment objective and policies).	The Fund may purchase or sell commodities or contracts related to commodities to the extent permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. The 1940 Act does not prohibit a fund from owning commodities, whether physical commodities (such as oil or grains and related futures contracts), or financial commodities and contracts related to financial commodities (such as currencies and, possibly, currencies futures). However, a mutual fund is limited in the amount of illiquid assets it may purchase. (Certain commodities (especially physical commodities) may be considered to be illiquid.)

16

Subject	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) and Legg Mason Partners Variable Aggressive Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Concentration:	The Fund may not invest more than 25% of its total assets in securities, the issuers of which conduct their principal business activities in the same industry. For purposes of this limitation, securities of the U.S. government (including its agencies and instrumentalities) and securities of state or municipal governments and their political subdivisions are not considered to be issued by members of any industry.	The Fund may not invest more than 25% of its total assets in securities, the issuers of which conduct their principal business activities in the same industry. For purposes of this limitation, securities of the U.S. government (including its agencies and instrumentalities) and securities of state or municipal governments and their political subdivisions are not considered to be issued by members of any industry.	Except as permitted by exemptive or other relief or permission from the SEC, SEC staff or other authority with appropriate jurisdiction, the Fund may not make any investment if, as a result, the Fund’s investments will be concentrated in any one industry. While the 1940 Act does not define what constitutes “concentration” in any industry, the SEC has taken the position that investment of 25% or more of a fund’s total assets in one or more issuers conducting their principal activities in the same industry constitutes concentration. It is possible that interpretations of concentration could change in the future.
Other:	The Fund’s investment objectives are “fundamental,” and therefore may be changed only by the “vote of a majority of the outstanding voting securities” as defined under the 1940 Act.	The Fund’s investment objectives are “fundamental,” and therefore may be changed only by the “vote of a majority of the outstanding voting securities” as defined under the 1940 Act.	No restriction. The Fund’s investment objectives will be made non-fundamental.

Comparison between the Acquired Fund’s Current and Proposed Fundamental Investment Restrictions

The actual investment practices of the Acquired Fund would not be expected to change as a result of the revised policies. However, these practices could change in the future and for various reasons (for instance, a change in the 1940 Act could result in an investment practice that would not be permitted under the current investment restrictions to be permitted under the proposed investment restrictions).

The primary differences between the Acquired Fund’s current and proposed fundamental investment restrictions are as follows:

• If approved by shareholders of the Acquired Fund, these proposals would result in the elimination of the fundamental policy requiring the Acquired Fund to operate as a “diversified” company under the 1940 Act. However, this difference has no practical effect because under the 1940 Act a shareholder vote is required to change a fund’s status from diversified to non-diversified.

17

• The Acquired Fund’s investment objectives are fundamental as defined under the 1940 Act, while under the proposed restrictions the investment objectives would not be fundamental.

Comparison between the Acquired Fund’s and Acquiring Fund’s Current Fundamental Investment Restrictions

There are no material differences between the Acquired Fund’s and Acquiring Fund’s current fundamental investment restrictions.

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

Investment Objectives

The investment objective of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio is long-term capital growth, while Legg Mason Partners Variable Aggressive Growth Portfolio (B)’s investment objective is capital appreciation.

Principal Investment Policies and Strategies

In pursuing their respective investment objective, each Fund invests primarily in equity securities of growth companies across all capitalization categories. In addition, both Funds are “diversified” under the 1940 Act, which means they are limited as to the percentage of assets that can be invested in the securities of a single issuer.

There are, however, several differences between the Funds:

• Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio allocates its assets among growth stocks of small, medium and large capitalizations according to specified target allocations, while Legg Mason Partners Variable Aggressive Growth Portfolio (B) has flexibility to vary its investments among the various capitalization categories.

• Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio is managed by three separate portfolio managers, with one portfolio manager managing the Large Cap Growth Segment, one portfolio manager managing the Mid Cap Growth segment and one portfolio manager managing the Small Cap Growth segment, while Legg Mason Partners Variable Aggressive Growth Portfolio (B) is managed by a single portfolio manager.

• Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio may invest up to 25% of its assets in foreign securities, while Legg Mason Partners Variable Aggressive Growth Portfolio (B) may invest up to 10% of its assets in foreign securities.

• Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio may use derivatives to hedge its investments, as a substitute for buying and selling securities, as a cash flow management technique, or to enhance its return.

• Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio is permitted to engage in short sales.

While both Funds investment primarily in growth companies across all capitalization categories, each Fund utilizes a different investment selection process.

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s strategy is to combine the efforts of three segment managers and to invest in the stock selections considered most attractive in the opinion of each segment manager. Each segment manager builds a portfolio of stocks which the segment manager believes will offer superior long-term capital growth potential. The target allocations are 40% to the Large Cap Growth segment and 30% to each of the Mid Cap Growth and Small Cap Growth segments. In connection with the execution of purchases and sales, each segment may hold temporarily more or fewer assets than represented by its designated segment of the fund’s assets.

The Large Cap Growth segment manager emphasizes individual security selection while diversifying this segment of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s investments across industries, which may help to reduce risk. The segment manager attempts to identify established large capitalization companies with the highest growth potential. The segment manager then analyzes each company in detail, ranking its management, strategy and competitive market position. Finally, the segment manager attempts to identify the best values available among the growth companies identified. In selecting individual companies for investment, the Large Cap Growth segment manager considers:

• Favorable earnings prospects;

• Technological innovation;

18

• Industry dominance;

• Competitive products and services;

• Global scope;

• Long term operating history;

• Consistent and sustainable long-term growth in dividends and earnings per share;

• Strong cash flow;

• High return on equity;

• Strong financial condition; and

• Experienced and effective management.

The Mid Cap Growth segment manager focuses on medium capitalization companies that exhibit attractive growth characteristics. The segment manager selects individual “growth” stocks for investment in two ways: (1) by identifying those companies thought to have the most favorable growth prospects and (2) by identifying those companies in the Mid Cap Growth segment’s size range which have favorable valuations relative to their growth characteristics. This strategy is commonly known as “growth at a reasonable price” and offers investors style diversification. In selecting individual companies for investment, the segment manager considers:

• Growth characteristics, including high historic growth rates and high relative growth compared with companies in the same industry or sector;

• Increasing profits and sales;

• Competitive advantages that could be more fully exploited by a company;

• Skilled management committed to long-term growth; and

• Potential for a long-term investment by this segment of the fund.

The Small Cap Growth segment manager focuses on small capitalization companies that exhibit attractive growth characteristics. The segment manager selects individual stocks for investment by identifying those companies thought to have the most favorable growth prospects. In selecting individual companies for investment, the segment manager considers:

• Growth characteristics, including high historic growth rates and high forecasted growth of sales and profits and a high return on equity;

• Innovative companies at the cutting edge of positive and dynamic demographic and economic trends;

• Products and services that give a company a competitive advantage;

• Skilled management committed to long-term growth; and

• Potential for a long-term investment by this segment of the fund.

Legg Mason Partners Variable Aggressive Growth Portfolio (B) invest primarily in common stocks of companies that the portfolio manager believes are experiencing, or will experience, growth in earnings and/or cash flow that exceeds the average rate of earnings growth of the companies that comprise the S&P 500 Index. The Fund may invest in securities of large, well-known companies that offer prospects of long-term earnings growth. However, a significant portion of the Fund’s assets may be invested in the securities of small to medium-sized companies because such companies often achieve higher earnings growth rates.

Legg Mason Partners Variable Aggressive Growth Portfolio (B)’s investment selection process emphasizes individual security selection while diversifying the Fund’s investments across industries, which may help to reduce risk. The portfolio manager focuses primarily, but not exclusively, on emerging growth companies that have passed their “start-up” phase and show positive earnings and the prospect of achieving significant profit gains in the two to three years after the fund acquires their stocks. When evaluating an individual stock, the portfolio manager considers whether the company may benefit from:

• New technologies, products or services

• New cost reduction measures

19

• Changes in management, or

• Favorable changes in government regulations.

Risk Factors

The Funds’ investment objectives, principal investment policies and principal investment risks are similar. You could lose money on your investments in either Fund.

The following summarizes the principal risks of investing in the Funds:

• Stock prices decline generally.

• Investment style may fall out of favor with investors.

• The portfolio manager’s judgment about the attractiveness, growth prospects or potential appreciation of a particular stock proves to be incorrect.

• Key economic trends become materially unfavorable.

• A particular product or service developed by a company in which the Funds invest is unsuccessful, the company does not meet earnings expectations or other events depress the value of the company’s stock.

• Many factors affect the stock market prices and dividend payouts of equity investments. These factors include general business conditions, investor confidence in the economy, and current conditions in a particular industry or company. Each company determines whether or not to pay dividends on common stock. Equity securities are subject to financial risks relating to the issuer’s earning stability and overall financial soundness. Smaller and emerging growth companies are particularly sensitive to these factors.

• Compared to large capitalization companies, the securities of small and medium capitalization companies are more likely to:

• Have more volatile share prices

• Have more limited product lines

• Have fewer capital resources

• Have more limited management depth

• Experience sharper swings in market prices

• Be harder to sell at times and prices the manager believes appropriate

• Offer greater potential for gains and losses

• Investments in securities of foreign entities and securities quoted or denominated in foreign currencies involve special risks. These include possible political and economic instability, more limited availability of accurate information about foreign issues and the possible imposition of exchange controls or other restrictions on investments. If the Funds invest in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency rates relative to the U.S. dollar will affect the U.S. dollar value of the fund’s assets.

Derivative Risk (Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio only)

A derivative contract will obligate or entitle the Acquired Fund to deliver or receive an asset or cash payment based on the change in value of one or more securities, currencies or indices. Even a small investment in derivative contracts can have a big impact on the Acquired Fund’s stock market, currency and interest rate exposure. Therefore, using derivatives can disproportionately increase losses and reduce opportunities for gains when stock prices, currency rates or interest rates are changing. The Acquired Fund may not fully benefit from or may lose money on derivatives if changes in their value do not correspond accurately or as anticipated to changes in the value of the Acquired Fund’s holdings. The other parties to certain derivative contracts present the same types of default risk as issuers of fixed income securities. Derivatives can also make the Acquired Fund less liquid and harder to value, especially in declining markets.

20

Short Sales Risk (Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio only)

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio may engage in short sales which may result in unlimited losses.

Growth Securities Risk (Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio only)

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s growth-oriented investment style may increase the risks of investing in the Acquired Fund. Growth securities typically are quite sensitive to market movements because their market prices tend to reflect future expectations. When it appears those expectations will not be met, the prices of growth securities typically fall. Growth securities may also be more volatile than other investments because they often do not pay dividends. The Acquired Fund may underperform certain other stock funds (those emphasizing value stocks, for example) during periods when growth stocks are out of favor.

Securities Lending Risk (Legg Mason Partners Variable Aggressive Growth Portfolio (B) only)

The Acquiring Fund may engage in securities lending to increase its net investment income. The Acquiring Fund will only lend securities if the loans are callable by the Acquiring Fund at any time and the loans are continuously secured by cash or liquid securities equal to no less than the market value, determined daily, of the securities loaned. The risks in lending securities consist of possible delay in receiving additional collateral, delay in recovery of securities when the loan is called or possible loss of collateral should the borrower fail financially.

Fundamental Investment Restrictions

Shareholders of the Acquired Fund and the Acquiring Fund are being asked in a separate proxy statement to approve revised fundamental investment policies for their Funds, which are set forth below. The Boards of the Funds have adopted, and recommended that shareholders approve, a uniform set of fundamental investment policies that cover certain broad topics as to which mutual funds, such as the Funds, must have policies that may be changed only with shareholder approval. In connection with this proposal, the Boards have also approved the elimination, or the reclassification as non-fundamental, of all other investment policies that are not required to be classified as fundamental, and the redesignation of the investment objectives of certain Funds as non-fundamental, which means they could be changed without shareholder approval.

Comparison between Fundamental Investment Restrictions

If shareholders of a Fund approve the proposed changes to the Fund’s fundamental investment restrictions, the Fund’s current fundamental restrictions with respect to borrowing, underwriting the securities of other issuers, lending money or other assets, issuing senior securities, purchasing or selling real estate, purchasing or selling commodities or contracts related to commodities and concentrating in a particular industry will be replaced by the new policies. Management of the Funds believes that adoption of the new policies will have no material effect on the manner in which the Funds are managed.

21

The following table lists (1) the current fundamental investment restrictions for the Acquired Fund, (2) the current fundamental investment restrictions for the Acquiring Fund and (3) the proposed changes to the fundamental investment restrictions that will be voted on by shareholders of the Funds, but in a separate proxy statement. Identical proposed fundamental investment restrictions are being voted on by shareholders of the Acquiring Fund so that if (1) shareholders of the Acquired Fund approve the Reorganization and (2) shareholders of the Acquiring Fund approve their proposed fundamental investment restrictions, shareholders of the Acquired Fund will become shareholders of a Fund with the same fundamental investment restrictions as are being proposed for their Fund. Following the table is an explanation of certain differences between (1) the Acquired Fund’s current fundamental investment restrictions and the proposed fundamental investment restrictions and (2) the Acquired Fund’s and the Acquiring Fund’s investment restrictions should shareholders of the Funds not approve the proposed changes to the fundamental investment restrictions.

Subject	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Diversification	No restriction.	The Fund may not invest in a manner that would cause it to fail to be a “diversified company” under the 1940 Act and the rules, regulations and orders thereunder.	No restriction. If shareholders of the Acquiring Fund approve this proposal, the Fund’s current fundamental policies regarding diversification will be eliminated. Despite this change, the Fund’s status as a diversified fund will continue to be changeable only with the approval of such Fund’s shareholders.

22

Subject	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Borrowing:	The Fund may not borrow money except to the extent such borrowing is not prohibited by the 1940 Act and exemptive orders granted under such Act.	The Fund may not borrow money, except that (a) the Fund may borrow from banks for temporary or emergency (not leveraging) purposes, including the meeting of redemption requests which might otherwise require the untimely disposition of securities, and (b) the Fund may, to the extent consistent with its investment policies, enter into reverse repurchase agreements, forward roll transactions and similar investment strategies and techniques. To the extent that it engages in transactions described in (a) and (b), the Fund will be limited so that no more than 33 1/3% of the value of its total assets (including the amount borrowed), valued at the lesser of cost or market, less liabilities (not including the amount borrowed), is derived from such transactions.	The Fund may not borrow money except as permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. The 1940 Act generally permits a fund to borrow money in amounts of up to one-third of the fund’s total assets from banks for any purpose, and to borrow up to 5% of the fund’s total assets from banks or other lenders for temporary purposes. Certain trading practices and investments, such as reverse repurchase agreements, dollar rolls and certain derivatives, may be considered to be borrowing and thus subject to the 1940 Act restrictions. On the other hand, certain practices and investments may involve leverage but are not considered to be borrowing.

23

Subject	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Underwriting:	The Fund may not underwrite securities issued by other persons, except that all or any portion of the assets of the Fund may be invested in one or more investment companies, to the extent not prohibited by the 1940 Act and exemptive orders granted under such Act, and except insofar as the Fund may technically be deemed an underwriter under the Securities Act of 1933, as amended, in selling a security.	The Fund may not engage in the business of underwriting securities issued by other persons, except to the extent that the Fund may technically be deemed to be an underwriter under the Securities Act of 1933, as amended, in disposing of portfolio securities.	The Fund may not engage in the business of underwriting the securities of other issuers except as permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. The 1940 Act generally permits a fund to have underwriting commitments of up to 25% of its assets under certain circumstances. Currently, some funds are not permitted to engage in the business of underwriting, while other funds are not permitted to underwrite securities of other issuers.

24

Subject	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Lending:	The Fund may not make loans except to the extent not prohibited by the 1940 Act and exemptive orders granted under such Act.	The Fund may not make loans. This restriction does not apply to: (a) the purchase of debt obligations in which the Fund may invest consistent with its investment objective and policies; (b) repurchase agreements; and (c) loans of its portfolio securities, to the fullest extent permitted under the 1940 Act.	The Fund may lend money or other assets to the extent permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. The 1940 Act does not prohibit a fund from making loans; however, SEC staff interpretations currently prohibit funds from lending more than one-third of their total assets, except through the purchase of debt obligations or the use of repurchase agreements. (A repurchase agreement is an agreement to purchase a security, coupled with an agreement to sell that security back to the original seller on an agreed-upon date at a price that generally depends on current interest rates. The SEC frequently treats repurchase agreements as loans.)

25

Subject	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Senior Securities:	The Fund may not issue any senior securities except to the extent not prohibited by the 1940 Act and exemptive orders granted under such Act. For purposes of this restriction, collateral arrangements with respect to any type of swap, option, forward contract and futures contract and collateral arrangements with respect to initial and variation margin are not deemed to be the issuance of a senior security.	The Fund may not issue “senior securities” as defined in the 1940 Act, and the rules, regulations and orders thereunder, except as permitted under the 1940 Act and the rules, regulations and orders thereunder.	The Fund may not issue senior securities except as permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. Senior securities are generally defined as fund obligations that have a priority over the fund’s shares with respect to the payment of dividends or distributions of fund assets. The 1940 Act prohibits a fund from issuing senior securities except that it generally permits a fund to borrow from banks for any purpose in amounts up to one-third of the fund’s total assets and to borrow up to 5% of the fund’s total assets from any source for temporary purposes. A fund’s temporary borrowings not exceeding 5% of its total assets are not considered senior securities.
Real Estate:	The Fund may not purchase or sell real estate (excluding securities secured by real estate or interests therein and securities of companies, such as real estate investment trusts, which deal in real estate or interests therein) in the ordinary course of its business. The Fund reserves the freedom of action to hold and to sell real estate or mineral leases acquired as a result of the ownership of securities.	The Fund may not purchase or sell real estate or real estate mortgages, but this restriction shall not prevent the Fund from: (a) investing in securities of issuers engaged in the real estate business or the business of investing in real estate (including interests in limited partnerships owning or otherwise engaging in the real estate business or the business of investing in real estate) and securities which are secured by real estate or interests therein; (b) holding or selling real estate received in connection with securities it holds or held; or (c) investing in real estate investment trust securities.	The Fund may not purchase or sell real estate except as permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. The 1940 Act does not prohibit a fund from owning real estate; however, a mutual fund is limited in the amount of illiquid assets it may hold. (Real estate is generally considered illiquid.)

26

Subject	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Commodities:	The Fund may not purchase or sell interests in oil, gas or mineral leases, commodities or commodity contracts (excluding currencies and any type of option, futures contract and forward contract) in the ordinary course of its business. The Fund reserves the freedom of action to hold and to sell commodities or commodity contracts (including currencies and any type of option, futures contract and forward contract) acquired as a result of the ownership of securities.	The Fund may not purchase or sell commodities or commodity contracts but this restriction shall not prevent the Fund from trading in futures contracts and options on futures contracts (including options on currencies to the extent consistent with the Fund’s investment objective and policies).	The Fund may purchase or sell commodities or contracts related to commodities to the extent permitted by (i) the 1940 Act or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority. The 1940 Act does not prohibit a fund from owning commodities, whether physical commodities (such as oil or grains and related futures contracts), or financial commodities and contracts related to financial commodities (such as currencies and, possibly, currencies futures). However, a mutual fund is limited in the amount of illiquid assets it may purchase. (Certain commodities (especially physical commodities) may be considered to be illiquid.)

27

Subject	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) Current Restrictions	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Current Restrictions	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) Proposed Restrictions and Brief Discussion
Concentration:	The Fund may not purchase any securities of an issuer in a particular industry if as a result 25% or more of its total assets (taken at market value at the time of purchase) would be invested in securities of issuers whose principal business activities are in the same industry.	The Fund may not invest more than 25% of its total assets in securities, the issuers of which conduct their principal business activities in the same industry. For purposes of this limitation, securities of the U.S. government (including its agencies and instrumentalities) and securities of state or municipal governments and their political subdivisions are not considered to be issued by members of any industry.	Except as permitted by exemptive or other relief or permission from the SEC, SEC staff or other authority with appropriate jurisdiction, the Fund may not make any investment if, as a result, the Fund’s investments will be concentrated in any one industry. While the 1940 Act does not define what constitutes “concentration” in any industry, the SEC has taken the position that investment of 25% or more of a fund’s total assets in one or more issuers conducting their principal activities in the same industry constitutes concentration. It is possible that interpretations of concentration could change in the future.
Other	No restriction.	The Fund’s investment objectives are “fundamental,” and therefore may be changed only by the “vote of a majority of the outstanding voting securities” as defined under the 1940 Act.	No restriction. The Fund’s investment objectives will be made non-fundamental.

Comparison between the Acquired Fund’s Current and Proposed Fundamental Investment Restrictions

The actual investment practices of the Acquired Fund would not be expected to change as a result of the revised policies. However, these practices could change in the future and for various reasons (for instance, a change in the 1940 Act could result in an investment practice that would not be permitted under the current investment restrictions to be permitted under the proposed investment restrictions).

If approved by shareholders of the Acquired Fund, these proposals would result in the Acquired Fund being able to purchase or sell commodities or commodity contracts. However, this amount will be limited to the amount of illiquid assets (i.e., 15%) in which the Acquired Fund may invest.

28

Comparison between the Acquired Fund’s and Acquiring Fund’s Current Fundamental Investment Restrictions

The primary difference between the two Funds with respect to their fundamental investment restrictions, should shareholders of the Funds not approve the proposed changes to the fundamental investment restrictions, is that the Acquiring Fund’s investment objective is fundamental, as defined under the 1940 Act, while the Acquired Fund’s investment objective is not.

INFORMATION ABOUT THE PROPOSED REORGANIZATIONS

The Reorganization Agreements

The following summary of each Reorganization Agreement is qualified in its entirety by reference to the form of Reorganization Agreement attached as Appendix B to this Proxy Statement/Prospectus. Each Reorganization Agreement provides for (1) the transfer of all of the assets and the assumption of all of the liabilities of the applicable Acquired Fund in exchange for shares of the Acquiring Fund, having an aggregate net asset value equal to the aggregate net asset value of the shares of the Acquired Fund, (2) the distribution of shares of the Acquiring Fund to the shareholders of the Acquired Fund, and (3) the subsequent redemption of Acquired Fund shares and the termination of the Acquired Fund. Subject to the satisfaction of the conditions described below, the Reorganizations are scheduled to occur as of the close of business on April 27, 2007, or on such later date as the parties may agree (“Closing Date”). The net asset value of each Acquired Fund shall be computed using the valuation procedures established by the Acquired Fund’s Board. The net asset value per share of each class of the Acquiring Fund shall be determined using the valuation procedures established by the Acquiring Fund’s Board. The number of shares of each class of the Acquiring Fund to be issued in exchange for the Acquired Fund’s assets shall be determined, with respect to each such class, by dividing the net asset value of each class (or single class) of the Acquired Fund by the net asset value per share of the corresponding class of the Acquiring Fund. Each Acquired Fund’s Board will adopt the valuation procedures of the Acquiring Fund’s Board before the Reorganizations.

The number of full and fractional shares of the Acquiring Fund to be received by each Acquired Fund shareholder in the Reorganization will be equal in aggregate net asset value to the aggregate net asset value of the shares of the Acquired Fund held by such shareholder as of the close of regularly scheduled trading on the New York Stock Exchange (“NYSE”) on the Closing Date or such later time as the Acquired Fund’s net asset value is calculated. As promptly as practicable after the Closing Date, each Acquired Fund will terminate and distribute pro rata to its shareholders of record, as of the close of regularly scheduled trading on the NYSE on the Closing Date, the shares of the Acquiring Fund received by the Acquired Fund in the Reorganization. The distribution of Acquiring Fund shares with respect to each class (if applicable) of each Acquired Fund’s shares will be accomplished by the transfer of the Acquiring Fund shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of the Acquired Fund’s shareholders.

If the Reorganizations are approved:

• Shareholders of Class I and Class II of Legg Mason Partners Variable Aggressive Growth Portfolio (A) will receive Class I and II shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B), respectively; and

• Shareholders of the single share class of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio will receive Class I shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B).

All issued and outstanding shares of the Acquired Funds will be canceled on the books of the Acquired Funds, and any share certificates representing shares of the Acquired Funds will be null and void. The Acquiring Fund will not issue certificates representing the Class I and Class II shares issued in connection with such Reorganization.

After such distribution, each Acquired Fund will take any necessary steps under Massachusetts law, its respective declaration of trust and any other applicable law to effect its termination.

The Board of each Acquired Fund and the Board of the Acquiring Fund has determined with respect to its Fund that the interests of the Fund’s shareholders will not be diluted as a result of the Reorganization and that participation in the Reorganization is in the best interests of its Fund. In making these determinations, the Board of each Fund took into account

29

that management has agreed to pay all the printing, proxy solicitation, mailing and postage costs of each Reorganization, 75% of the costs attributable to the other proxy materials being sent to shareholders of all the Legg Mason Partners Funds, the Salomon Brothers Funds and CitiFunds (the “Legacy CAM Funds”) and 50% of the additional out-of-pocket costs, such as legal fees, expenses relating to the preparation and filing of various regulatory documents, expenses of preparing and distributing prospectus and SAI supplements, and auditor fees. The transaction costs associated with repositioning the Funds’ portfolios in connection with the Reorganization will be borne by the Funds, as is consistent with industry practice.

Each Reorganization Agreement may be terminated and the Reorganization abandoned at any time prior to the Closing Date, if circumstances should develop that, in the opinion of either Fund’s Board, make proceeding with that Reorganization inadvisable. Each Reorganization Agreement provides that the Acquired Fund and the Acquiring Fund may waive compliance with any of the covenants or conditions made therein for the benefit of either Fund, other than the requirements that: (a) a Reorganization Agreement be approved by shareholders of the Acquired Fund; and (b) the Funds receive the legal opinion of Dechert LLP that the transaction contemplated by a Reorganization Agreement will constitute a tax-free reorganization for Federal income tax purposes. A Board may waive such compliance only if it finds such waiver to be in the best interest of its respective Fund.

Approval of each Reorganization Agreement will require the affirmative vote of a majority of the outstanding voting securities of the Acquired Fund as defined in the 1940 Act, with all classes voting together as a single class. See “Voting Information” below.

Description of the Acquiring Fund’s Shares

Acquired Fund shareholders of record as of the Closing Date will receive full and fractional shares of the Acquiring Fund in accordance with the procedures provided for in the applicable Reorganization Agreement, as described above. Each such share will be fully paid and non-assessable when issued and will have no pre-emptive or conversion rights as more fully described in “Purchases, Redemptions and Exchanges of Fund Shares—Other Shareholder Information” attached as Appendix C to this Proxy Statement/Prospectus. The Acquiring Fund will not issue share certificates.

Reasons for the Reorganizations and Board Considerations

The Reorganizations are among a series of initiatives that the Boards of the respective Acquired Funds approved following the December 2005 acquisition by Legg Mason, Inc. (“Legg Mason”) of Citigroup Asset Management (“CAM”), which included the Funds’ investment managers. The Reorganizations are part of a broad set of initiatives, including a comprehensive review of Legg Mason’s various products, undertaken by Legg Mason with the goal of integrating and streamlining the Legacy CAM Funds.

At meetings held in June and July 2006, each Board approved a series of initiatives that are designed to: (1) integrate the operations of the Legacy CAM Funds; (2) streamline the operations and product offerings of the Legacy CAM Funds; (3) take advantage of potential economies of scale; and (4) leverage Legg Mason’s broad investment management capabilities and expertise by appointing, for a limited number of Legacy CAM Funds, new portfolio managers from different Legg Mason advisory subsidiaries whose core competency, in the opinion of Legg Mason, is better suited to manage those Legacy CAM Funds. The integration of the Legacy CAM Funds will include, among other things: (1) eliminating overlapping or duplicative funds; (2) reducing the number of registrants and changing the form of organization of all the Funds such that all Funds within the same complex are organized within a single jurisdiction and have a single form of declaration of trust; (3) electing Boards so that each Board oversees Funds generally of a single asset class or form of investment company; (4) proposing a standardized set of fundamental investment policies for the Funds; (5) changing investment strategies of certain Acquiring Funds; (6) rationalizing share classes; and (7) approving a new manager/subadviser structure.

These initiatives, certain of which require additional shareholder approvals, are being implemented over a period of time. If approved by shareholders, the “shell” reorganizations, as discussed below, and the other proposed changes to investment strategies and share classes are expected to be effective by the end of the first half of 2007.

The proposed Reorganizations were presented to the Boards for consideration with supporting information prepared by Legg Mason and Lipper Inc., an independent provider of investment company data, at Board meetings held in June, July and October 2006, and were approved at those meetings or by written consent of the Board. Each Acquired Fund Board,

30

including all of its Independent Board Members, following discussion of the advantages and any disadvantages to each Acquired Fund under its supervision, determined that: (1) the proposed Reorganization would be in the best interests of such Fund; and (2) the proposed Reorganization would not result in the dilution of the interests of such Fund or its shareholders.

In approving the Reorganizations of the Funds under their supervision, the Boards, based on information provided by Legg Mason and Lipper, considered a number of factors, including the following:

• the benefits to the Funds that are expected to be derived from the integration of the Funds, as described below;

• the objective of management to eliminate comparable or duplicative product offerings among the Legacy CAM Funds to reduce the potential for investor confusion;

• the compatibility of the investment objectives, strategies, policies, and risks of the Acquired Funds in the Reorganizations with those of the Acquiring Fund;

• the portfolio managers of the Acquiring Fund as compared to those of the Acquired Funds;

• greater marketing and distribution focus on a smaller number of funds, which may promote asset growth over time;

• the relative size of the Acquiring Fund and the Acquired Funds;

• the expense ratios of the Funds and information as to specific fees and expenses of the Acquiring Fund and each Acquired Fund;

• the absence of a dilutive effect on interests of current shareholders of the Acquired Funds;

• the Federal tax consequences of each Reorganization to each Acquired Fund and its shareholders, including that each Reorganization has been structured to qualify as a Federal tax-free transaction;

• benefits that may be derived by Legg Mason and its affiliates as a result of the Reorganizations as well as from various relationships with the Funds;

• the allocation of expenses associated with the Reorganizations among the Funds and Legg Mason (as noted above, Legg Mason will pay for all printing, proxy solicitation, mailing and postage costs of each Reorganization, 75% of the costs attributable to the other proxy materials being sent to shareholders of all the Legacy CAM Funds and 50% of the additional out-of-pocket costs, such as legal fees, expenses relating to the preparation and filing of various regulatory documents, expenses of preparing and distributing prospectus and SAI supplements, and auditor fees); and

• the potential for greater economies of scale and lower expenses, resulting from greater asset growth over time.

If a Reorganization is approved by shareholders and is consummated, Legg Mason is expected to achieve higher profitability due to decreased costs and increased revenue including from a potential increase in assets under management. Legg Mason is expected to reduce the level of its operational expenses for administrative, compliance and portfolio management services as the number of separate funds declines. In addition, to the extent that the Reorganizations help to streamline the fund family, encourage a more focused marketing and distribution effort, reduce investor confusion, produce better performance, and generally make the funds more attractive investment vehicles to the investing public, Legg Mason will benefit from the increased revenues from rising asset levels. Legg Mason will also benefit from no longer having to waive fees and/or reimburse expenses for Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio under its voluntary fee cap.

More specifically, with respect to the Reorganizations proposed in this Proxy Statement/Prospectus, the Boards of the respective Acquired Funds made the following determinations, among others:

Legg Mason Partners Variable Aggressive Growth Portfolio (A): The Board noted that the proposed Reorganization would combine two substantially similar variable annuity funds which have the same portfolio managers and substantially similar investment objectives and investment strategies. The Board also noted that management fees and total annual operating expenses would not increase as a result of the Reorganization and that a larger variable annuity fund will have a greater potential for future economies of scale.

The Board further noted that after the product integration is complete, Legg Mason Partners will no longer market its variable annuity funds under multiple brands (e.g., Smith Barney and Salomon Brothers) and that all variable annuity funds will fall under the Legg Mason Partners brand. Any product duplication that existed as a result of multiple brands is proposed to be eliminated in order to focus sales and marketing efforts on a single fund.

31

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio: The Board noted that the proposed Reorganization would combine two similar variable annuity funds which have similar investment objectives and investment policies. The Board also noted that total annual operating expenses would decrease as a result of the Reorganization and that a larger variable annuity fund will have a greater potential for future economies of scale. In addition, the Acquiring Fund has outperformed the Acquired Fund on an annual basis for the 1-, 3- and 5-year periods through August 31, 2006.

The Board further noted that after the product integration is complete, Legg Mason Partners will no longer market its variable annuity funds under multiple brands (e.g., Smith Barney and Salomon Brothers) and that all variable annuity funds will fall under the Legg Mason Partners brand. Any product duplication that existed as a result of multiple brands is proposed to be eliminated in order to focus sales and marketing efforts on a single fund.

Federal Income Tax Consequences

Each of the Reorganizations is conditioned upon the receipt by each of the Acquired Funds of an opinion from Dechert LLP, substantially to the effect that, based upon certain facts, assumptions and representations of the parties, for federal income tax purposes:

(i) The acquisition by the Acquiring Fund of all of the assets of each of the Acquired Funds solely in exchange for shares of the Acquiring Fund and the assumption by the Acquiring Fund of all of the liabilities of each of the respective Acquired Funds, followed by the distribution by each of the Acquired Funds to its shareholders of shares of the Acquiring Fund and termination of each of the Acquired Funds, all pursuant to each of the Plans, each constitutes a reorganization within the meaning of Section 368(a) of the Code;

(ii) Each of the Acquired Funds will not recognize gain or loss upon the transfer of its assets to the Acquiring Fund in exchange for shares of the Acquiring Fund and the assumption of all of the liabilities of each of the Acquired Funds by the Acquiring Fund; and each of the Acquired Funds will not recognize gain or loss upon the distribution to its shareholders of shares of the Acquiring Fund and termination of each of the Acquired Funds;

(iii) Shareholders will not recognize gain or loss on the receipt of shares of the Acquiring Fund solely in exchange for shares of each of the Acquired Funds pursuant to each of the Reorganizations;

(iv) The aggregate basis of the shares of the Acquiring Fund received by each Shareholder pursuant to the Reorganization will be the same as the aggregate basis of the shares of each of the Acquired Funds exchanged therefor;

(v) The holding period of the shares of the Acquiring Fund received by each Shareholder pursuant to each of the Reorganizations will include the holding period of the shares of each of the Acquired Funds exchanged therefor, provided that the Shareholder held the shares of each of the Acquired Funds as a capital asset at the time of the Reorganization;

(vi) The Acquiring Fund will not recognize gain or loss upon the receipt of the assets of each of the Acquired Funds in exchange for shares of the Acquiring Fund and the assumption by the Acquiring Fund of all of the liabilities of each of the Acquired Funds;

(vii) The basis of the assets of each of the Acquired Funds transferred to the Acquiring Fund in each of the Reorganizations will be the same in the hands of the Acquiring Fund as the basis of such assets in the hands of each of the Acquired Funds immediately prior to the transfer; and

(viii) The holding periods of the assets of each of the Acquired Funds transferred to the Acquiring Fund in the reorganization in the hands of the Acquiring Fund will include the periods during which such assets were held by each of the Acquired Funds (except to the extent that the investment activities of the Acquiring Fund acts to reduce or eliminate such holding period).

While neither the Acquired Funds nor the Acquiring Fund are aware of any adverse state or local tax consequences of the proposed Reorganization, they have not requested any ruling or opinion with respect to such consequences and shareholders should consult their own tax adviser with respect to such matters.

Immediately prior to the Reorganization, each of the Acquired Funds, to the extent necessary, will pay a dividend or dividends, which together with all previous dividends, are intended to have the effect of distributing to its shareholders all of its investment company taxable income for taxable years ending on or prior to the Closing Date (computed without regard to

32

any deduction for dividends paid) and all of its net capital gain, if any, realized in taxable years ending on or prior to the Closing Date (after reduction for any available capital loss carryforward).

Information Regarding Tax Capital Loss Carryforwards:

Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

Legg Mason Partners Variable Aggressive Growth Portfolio (B) did not have any capital loss carryforwards as of its prior fiscal year end. As of the date indicated below, Legg Mason Partners Variable Aggressive Growth Portfolio (A) had the following unused capital loss carryforwards:

Legg Mason Partners Variable Aggressive Growth Portfolio (A)
(As of December 31, 2005)
Fiscal Year Generated	Amount of Carryforward			Fiscal Year of Expiration Prior to Reorganization
12/31/2002	$	(577,590	)	12/31/2010
Total	$	(577,590	)

The Reorganization would impact the use of these loss carryforwards by benefiting the shareholders of the combined fund, rather than only the shareholders of Legg Mason Partners Variable Aggressive Growth Portfolio (A).

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

Legg Mason Partners Variable Aggressive Growth Portfolio (B) did not have any capital loss carryforwards as of its prior fiscal year end. As of the date indicated below, Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio had the following unused capital loss carryforwards:

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio
(As of October 31, 2005)
Fiscal Year Generated	Amount of Carryforward			Fiscal Year of Expiration Prior to Reorganization
10/31/2001	$	(997,566	)	10/31/2009
10/31/2002		(6,363,962	)	10/31/2010
10/31/2003		(2,644,926	)	10/31/2011
Total	$	(10,006,454	)

The Reorganization would impact the use of these loss carryforwards by benefiting the shareholders of the combined fund, rather than only the shareholders of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio. Additionally, the use of these loss carryforwards is limited to approximately $2,400,000 per year based on a limitation from an ownership change that took place in a prior year.

Information Applicable to All Funds with Capital Loss Carryforwards:

Since each of the Reorganizations is not expected to close until 2007, the capital loss carryforwards and limitations described above may change significantly between now and the completion of the Reorganizations. Further, the ability of each of the Funds to use these losses (even in the absence of a Reorganization) depends on factors other than loss limitations, such as the future realization of capital gains or losses. The combination of these factors on the use of loss carryforwards may result in some portion of the loss carryforwards of each of the Funds, or both, expiring unused.

33

Effect of Proposed “Shell” Reorganizations of the Funds

In a separate proxy statement, shareholders of each Fund are being asked to approve a number of governance-related matters, including the consolidation of the Boards, so that each of the Funds would be overseen by one of two boards, with one board focusing generally on equity funds and the other board focusing generally on fixed income funds. In conjunction with this board consolidation, shareholders of certain Funds are also being asked to approve an agreement and plan of reorganization, in connection with a two-step restructuring initiative, that is intended to reduce the number of separate legal entities in the Legacy CAM Fund complex that are registered with the SEC and to adopt the Maryland business trust form of organization for all the Funds.

If shareholders of an Acquired Fund approve the Reorganization Agreement for that Fund, it is intended that the Reorganization be effective before these restructurings. In such event, the Acquired Fund would not go through the two-step restructuring mentioned above.

As noted in Appendix E, the Acquiring Fund is organized as a series of a Maryland corporation. Assuming all required approvals with regard to the restructurings are obtained and the shareholders of an Acquired Fund approve the Reorganization Agreement, then the Acquiring Fund would become a series of a Maryland business trust and the Acquired Fund’s shareholders would become shareholders of that series of a Maryland business trust following the closing of the Reorganization and restructurings. On the other hand, if shareholders of an Acquired Fund approve the Reorganization Agreement but all required approvals with regard to the restructurings applicable to the Acquiring Fund are not obtained, then the Acquiring Fund will remain a series of a Maryland corporation, if the first step of the Acquiring Fund restructuring is not approved, or will become a series of a Massachusetts business trust, if the second step is not approved, and the shareholders of the Acquired Fund would become shareholders of that entity as a result of the Reorganization and restructurings.

A comparison of Maryland corporations, Massachusetts business trusts and Maryland business trusts is attached to this Proxy Statement/Prospectus in Appendix F.

TERMINATION OF THE ACQUIRED FUNDS

If the Reorganizations are effected, each of the Acquired Fund’s issued and outstanding shares will be canceled.

PORTFOLIO SECURITIES

If each of the Reorganizations is effected, management will analyze and evaluate the portfolio securities of each of the Acquired Funds being transferred to the Acquiring Fund. Consistent with the Acquiring Fund’s investment objectives and policies, any restrictions imposed by the Code and in the best interests of the Acquiring Fund’s shareholders (including former shareholders of each of the Acquired Funds), management will determine the extent and duration to which the portfolio securities of each of the Acquired Funds will be maintained by the Acquiring Fund. It is possible that there may be some dispositions of the portfolio securities of each of the Acquired Funds in connection with the Reorganization. Subject to market conditions at the time of any such disposition, the disposition of the portfolio securities of each of the Acquired Funds may result in a capital gain or loss. The actual tax consequences of any disposition of portfolio securities will vary depending upon the specific security(ies) being sold and the Acquiring Fund’s ability to use any available loss carryforwards.

No securities of either Acquired Fund need to be sold in order for the Acquiring Fund to comply with its investment restrictions or policies. The Funds may buy and sell securities in the normal course of their operations.

INFORMATION ABOUT MANAGEMENT OF THE ACQUIRING FUND

Investment Manager and Sub-Advisers

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) has served as the Acquiring Fund’s investment manager since August 1, 2006. LMPFA, a subsidiary of Legg Mason located at 399 Park Avenue, New York, New York 10022, is a newly-organized investment adviser that provides administrative and compliance oversight services to the Funds. Other than the

34

cash management services it provides for certain equity funds, LMPFA does not provide day-to-day portfolio management services. Rather, portfolio management is provided by ClearBridge Advisors, LLC (“ClearBridge”), a subsidiary of Legg Mason located at 399 Park Avenue, New York, New York 10022. ClearBridge is a newly-organized investment adviser that has assumed certain equity management functions of CAM.

Management and sub-advisory fees are paid to LMPFA and ClearBridge at the following rates as a percentage of the Acquiring Fund’s average daily net assets:

Acquiring Fund	Investment Manager	Effective Fee Rate Paid to Investment Manager	Sub-Adviser	Fee Received by Sub-Adviser
Legg Mason Partners Variable Aggressive Growth Portfolio (B)	LMPFA	0.750% on assets up to and including $1 billion; 0.725% on assets over $1 billion and up to and including $2 billion; 0.70% on assets over $2 billion and up to and including $5 billion; 0.675% on assets over $5 billion and up to and including $10 billion; and 0.65% on assets over $10 billion.	ClearBridge	70% of the management fee paid to LMPFA, net of expense waivers and reimbursements.

During the last fiscal year, management fees were paid to the prior investment manager at the following effective rates as a percentage of the Acquiring Fund’s average daily net assets:

Acquiring Fund (Fiscal Year End)	Investment Manager	Actual Management Fee
Legg Mason Partners Variable Aggressive Growth Portfolio (B) (10/31/05)	Smith Barney Fund Management LLC (“SBFM”)	0.75%

Additional information about the factors considered by the Board of the Acquiring Fund in approving the Investment Management Agreement with SBFM is contained in the shareholder reports for the Fund as shown in the chart below. A discussion of the factors considered by the Board in approving the new Investment Management Agreement with LMPFA and sub-advisory agreement with ClearBridge will be disclosed in future reports to shareholders following Board approval.

Acquiring Fund	Shareholder Report
Legg Mason Partners Variable Aggressive Growth Portfolio (B)	Annual report for fiscal year ended October 31, 2005

Certain Legal Proceedings

Beginning in June 2004, class action lawsuits alleging violations of the federal securities laws were filed against Citigroup Global Markets Inc. (“CGMI”) and a number of its then affiliates, including SBFM and Salomon Brothers Asset Management Inc (“SaBAM”), which were then investment adviser or manager to certain of the Funds (the “Investment Managers”), substantially all of the mutual funds then managed by the Investment Managers (the “Defendant Funds”), and Board Members of the Defendant Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGMI created various undisclosed incentives for its brokers to sell Smith Barney and Salomon Brothers funds. In addition, according to the complaints, the Investment Managers caused the Defendant Funds to pay excessive brokerage commissions to CGMI for steering clients towards proprietary funds. The complaints also alleged that the defendants breached their fiduciary duty to the Defendant 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 Defendant Funds failed to adequately disclose certain of the allegedly wrongful conduct. The complaints sought injunctive relief and compensatory and punitive damages, rescission of the Defendant Funds’ contracts with the Investment Managers, recovery of all fees paid to the Investment Managers 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. On May 27, 2005, all of the Defendants filed motions to dismiss the Complaint. On July 26, 2006, the court

35

issued a decision and order (1) finding that plaintiffs lacked standing to sue on behalf of the shareholders of the Funds in which none of the plaintiffs had invested (including Legg Mason Partners Variable Aggressive Growth Portfolio (B)) and dismissing those Funds from the case (although stating that they could be brought back into the case if standing as to them could be established), and (2) other than one stayed claim, dismissing all of the causes of action against the remaining Defendants, with prejudice, except for the cause of action under Section 36(b) of the 1940 Act which the court granted plaintiffs leave to replead as a derivative claim. On October 16, 2006, plaintiffs filed their Second Consolidated Amended Complaint (“Second Amended Complaint”) which alleges derivative claims on behalf of nine funds identified in the Second Amended Complaint, under Section 36(b) of the 1940 Act, against Citigroup Asset Management, SaBAM, SBFM and CGMI as investment advisers to the identified funds, as well as CGMI as a distributor for the identified funds (collectively, the “Second Amended Complaint Defendants”). None of the Funds were identified in the Second Amended Complaint.] The Second Amended Complaint alleges no claims against any of the Funds or any of their Board Members. Under Section 36(b), the Second Amended Complaint alleges similar facts and seeks similar relief against the Second Amended Complaint Defendants as the Complaint.

Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Defendant Funds in the future.

On May 31, 2005, the SEC issued an order in connection with the settlement of an administrative proceeding against SBFM, the then-investment adviser or manager to certain of the Funds and CGMI, relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Affected Funds”).

The SEC order found that SBFM and CGMI willfully violated Section 206(1) of the Investment Advisers Act of 1940, as amended, and the rules promulgated thereunder (the “Advisers Act”). Specifically, the order found that SBFM and CGMI knowingly or recklessly failed to disclose to the boards of the Affected Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Affected Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that CAM, the Citigroup business unit that, at the time, included SBFM and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange, among other things, for a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGMI. The order also found that SBFM and CGMI willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Affected Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Affected Funds’ best interests and that no viable alternatives existed. SBFM and CGMI do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

The SEC censured SBFM and CGMI and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order required Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Affected Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan submitted for the approval of the SEC. At this time, there is no certainty as to how the above-described proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. The order also required that transfer agency fees received from the Affected Funds since December 1, 2004, less certain expenses, be placed in escrow and provided that a portion of such fees might be subsequently distributed in accordance with the terms of the order. On April 3, 2006, an aggregate amount of approximately $9 million held in escrow was distributed to the Affected Funds.

The order required SBFM to recommend a new transfer agent contract to the Funds’ boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGMI would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Affected Funds’ Boards selected a new transfer agent for the Affected Fund. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Affected Funds.

36

On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason.

Certain of the Funds are not Affected Funds, and therefore did not implement the transfer agent arrangements described above. Those Funds have not and will not receive any portion of the distributions.

On or about May 30, 2006, John Halebian, a purported shareholder of Citi New York Tax Free Reserves, a series of CitiFunds Trust III (the “Subject Trust”), filed a complaint in the United States District Court for the Southern District of New York against the independent trustees of the Subject Trust. (Elliot J. Ben, Donald M. Carlton, A. Benton Cocanaugher, Mark T. Finn, Stephen Randolph Gross, Diana R. Harrington, Susan B. Kerley, Alan G. Merten and R. Richardson Pettit). The Independent Trustees of the Subject Trust are members of the Board of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio. The Subject Trust is also named in the complaint as a nominal defendant.

The complaint alleges both derivative claims on behalf of the Subject Trust and class claims on behalf of a putative class of shareholders of the Subject Trust in connection with the 2005 sale of Citigroup’s asset management business to Legg Mason and the related approval of new investment advisory agreements by the trustees and shareholders. In the derivative claim, the plaintiff alleges, among other things, that the independent trustees breached their fiduciary duty to the Subject Trust and its shareholders by failing to negotiate lower fees or seek competing bids from other qualified investment advisers in connection with Citigroup’s sale to Legg Mason. In the claims brought on behalf of the putative class of shareholders, the plaintiff alleges that the independent trustees violated the proxy solicitation requirements of the 1940 Act, and breached their fiduciary duty to shareholders, by virtue of the voting procedures, including “echo voting,” used to obtain approval of the new investment advisory agreements and statements made in a proxy statement regarding those voting procedures. The plaintiff alleges that the proxy statement was misleading because it failed to disclose that the voting procedures violated the 1940 Act. The relief sought includes an award of damages, rescission of the advisory agreement, and an award of costs and attorney fees.

In advance of filing the complaint, Mr. Halebian’s lawyers made written demand for relief on the Board of the Subject Trust, and the Board’s independent trustees formed a demand review committee to investigate the matters raised in the demand, and subsequently in the complaint, and recommend a course of action to the Board. The committee, after a thorough review, has determined that the independent trustees did not breach their fiduciary duties as alleged by Mr. Halebian, and that the action demanded by Mr. Halebian would not be in the best interests of the Subject Trust. The Board of the Subject Trust (the trustee who is an “interested person” of the Subject Trust, within the meaning of the 1940 Act, having recused himself from the matter), after receiving and considering the committee’s report and based upon the findings of the committee, subsequently also has so determined and, adopting the recommendation of the committee, has directed counsel to move to dismiss Mr. Halebian’s complaint. A motion to dismiss was filed on October 23, 2006. No assurance can be given as to the outcome of this matter.

The foregoing speaks only as of the date of this Proxy Statement/Prospectus. Additional lawsuits presenting allegations and requests for relief arising out of or in connection with any of the foregoing matters may be filed against these and related parties in the future.

Portfolio Manager of the Acquiring Fund

Information about the portfolio manager of the Acquiring Fund is listed below. The Fund SAI for the Acquiring Fund provides information about the portfolio manager’s compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of securities in the Acquiring Fund. Similar information with respect to portfolio manager compensation is also included in Appendix G.

Legg Mason Partners Variable Aggressive Growth Portfolio (B)

Richard A. Freeman has been responsible for the day-to-day management of the Fund’s portfolio since its inception. Mr. Freeman has more than 29 years of securities business experience, 21 years of which has been with ClearBridge or its predecessors. He is also Managing Director of ClearBridge and an Investment Officer of certain other mutual funds associated with ClearBridge.

Performance of the Funds

Historical performance of each Fund is detailed in Appendix J of this Proxy Statement/Prospectus.

37

ADDITIONAL INFORMATION ABOUT THE ACQUIRED FUNDS AND THE ACQUIRING FUND

Legg Mason and certain of the Acquiring Fund’s service providers, which include Legg Mason affiliated service providers, have a financial interest in the Reorganizations because their respective fees under agreements with the Acquiring Fund generally increase as the amount of the assets of the Acquiring Fund increase and the amount of those assets will increase as a result of the Reorganization (although this increase in assets is expected to be offset by the concomitant loss of the Acquired Funds’ assets).

Information about the Acquired Funds and the Acquiring Fund is included in the Prospectuses and SAIs, annual reports and semi-annual reports filed with the SEC and dated as listed in Appendix A. Copies of these documents, the SAI related to this Proxy Statement/Prospectus and any subsequently released shareholder reports are available upon request and without charge by calling the Acquired Funds at 800-451-2010 or by writing to the Funds at 125 Broad Street, New York, New York 10004.

The Funds are subject to the informational requirements of the Securities Exchange Act of 1934, and in accordance therewith file reports and other information including proxy material, reports and charter documents with the SEC. These reports and other information can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, NE, Washington, DC 20549. Reports and other information about each Fund are available on the Edgar Database on the SEC’s website at www.sec.gov. Copies of such material can also be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, SEC, 100 F Street, NE, Washington, DC 20549 at prescribed rates. You may obtain information about the operation of the Public Reference Room by calling the SEC at (202) 551-8090.

Financial Highlights

The fiscal year ends of the Funds are as follows:

Fund	Fiscal Year End
Legg Mason Partners Variable Aggressive Growth Portfolio (A)	December 31
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	October 31
Legg Mason Partners Variable Aggressive Growth Portfolio (B)	October 31

The financial highlights of the Acquiring Fund that are contained in Appendix H have been derived from financial statements audited by KPMG LLP, the Fund’s independent registered public accounting firm.

Discussions regarding “Management’s Discussion of Fund Performance for the Acquiring Fund” are contained in Appendix I and the historical performance of each Acquiring Fund is contained in Appendix J.

Distributors

Legg Mason Investor Services, LLC (“LMIS”), located at 100 Light Street, Baltimore, Maryland 21202, and CGMI, located at 388 Greenwich Street, New York, New York 10013, serve as the Acquiring Fund’s co-distributors. LMIS is a wholly owned subsidiary of Legg Mason.

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 to dealers for marketing, promotional or related expenses. The amount of these payments is determined by the distributor and may be substantial. Legg Mason or an affiliate may make similar payments under similar arrangements.

The payments described above are often referred to as “revenue sharing payments.” The recipients of such payments may include the Funds’ distributors, affiliates of Legg Mason, broker-dealers, financial institutions and other financial intermediaries through which investors may purchase shares of the Funds. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to recommend or sell shares of a Fund to you. Please contact your financial intermediary for details about revenue sharing payments it may receive.

FORM OF ORGANIZATION

As discussed above under “Effect of Proposed ‘Shell’ Reorganizations of the Funds,” it is proposed that the Funds be reorganized as series of Massachusetts business trusts aligned by asset class in order to reduce the number of registrants and

38

that the surviving Massachusetts business trusts be reorganized as Maryland business trusts. A comparison of Maryland corporations, Massachusetts business trusts and Maryland business trusts is attached to this Proxy Statement/Prospectus as Appendix F. In addition, each Fund’s current form of organization is set out in Appendix E.

It is being proposed, in separate proxy materials, that shareholders of each Fund approve the consolidation of the Funds’ current Boards into one of two boards, generally one for equity funds and one for fixed income funds. If the consolidated Boards are elected by Fund shareholders and the transactions described in the preceding paragraph are consummated, all of the Funds will be overseen by the Equity Board.

A comparison of the current composition of the Funds’ Boards and their proposed composition is attached to this Proxy Statement/Prospectus as Appendix K.

CAPITALIZATION

The following table sets forth the unaudited capitalization of each Acquired Fund and Acquiring Fund as of the date set out below, and on a pro forma basis as of that date, giving effect to the proposed acquisition of assets at net asset value. The pro forma capitalization information is for informational purposes only. No assurance can be given as to how many shares of the Acquiring Fund will be received by shareholders of the Acquired Funds on the Closing Date, and the information should not be relied upon to reflect the number of shares of the Acquiring Fund that actually will be received. As of October 31, 2006, the net asset value of each Acquired Fund did not exceed 10% of the net asset value of Legg Mason Partners Variable Aggressive Growth Portfolio (B).

Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund), Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund), and Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)

The following table sets out the effect of the proposed acquisition of assets at net asset value on a pro forma basis:

Pro Forma Combined Capitalization Table

Legg Mason Partners Variable Aggressive Growth Portfolio (A), Legg Mason Partners Variable Premier Selections

All Cap Growth Portfolio and Legg Mason Partners Variable Aggressive Growth Portfolio (B)

As of April 30, 2006 (Unaudited)

	Legg Mason Partners Variable Aggressive Growth Portfolio (A)		Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio		Legg Mason Partners Variable Aggressive Growth Portfolio (II)		Pro Forma Adjustments	Pro Forma Combined Legg Mason Partners Variable Aggressive Growth Portfolio (II)
Class I:
Net Assets	$	34,037,400	$	47,414,903	$	1,163,121,475	—	$	1,244,573,778
Shares Outstanding		1,366,942		3,617,333		74,865,116	258,468		80,107,859
Net Asset Value Per Share	$	24.90	$	13.11	$	15.54		$	15.54
Class II:(a)
Net Assets	$	37,379,741		—		—	—	$	37,379,741
Shares Outstanding		1,520,359		—		—	885,618		2,405,977
Net Asset Value Per Share	$	24.59		—		—		$	15.54

(a) Initial net asset value per share of Legg Mason Partners Variable Aggressive Growth Portfolio (B) Class II shares will be based upon the net asset value per share of Legg Mason Partners Variable Aggressive Growth Portfolio (B) Class I shares.

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes income and capital gains, if any, annually.

The Funds pay dividends and distributions on a per-share basis. This means that the value of your shares will be reduced by the amount of the payment. If you purchase shares shortly before the record date for a dividend or a distribution of capital

39

gains, you will pay the full price for the shares and receive some portion of the price back as a taxable dividend or distribution.

For more information on the distribution policies of the Acquiring Fund, see “Purchases, Redemptions and Exchanges of Fund Shares—Other Shareholder Information” at Appendix C to this Proxy Statement/Prospectus.

OTHER BUSINESS

The Boards of the Acquired Funds do not intend to present any other business at the Meeting. If, however, any other matters are properly brought before the Meeting or any adjournment or postponement thereof, the persons named as proxies will vote thereon in accordance with their discretion.

SHAREHOLDER COMMUNICATIONS WITH THE BOARDS

Shareholders who want to communicate with the Boards or any individual Board member should write their Fund to the attention of Robert I. Frenkel, Secretary, 125 Broad St., 10th Floor, New York, New York 10004. The letter should indicate that you are a Fund shareholder. If the communication is intended for a specific Board member and so indicates, it will be sent only to that Board member. If a communication does not indicate a specific Board member it will be sent to the chair of the nominating and governance committee of the Board and the outside counsel to the Independent Board Members for further distribution as deemed appropriate by such persons.

VOTING INFORMATION

This Proxy Statement/Prospectus is furnished in connection with a solicitation of proxies by the Boards of the Acquired Funds to be used at the Meeting. This Proxy Statement/Prospectus, along with the Notice of Special Meeting and a voting instruction card, are first being mailed to shareholders of each Acquired Fund on or about December [28], 2006 or as soon as practicable thereafter. Only shareholders of record as of the close of business on December 15, 2006 (the “Record Date”) will be entitled to notice of, and to vote at, the Meeting, and at any adjournments or postponements thereof. If the enclosed form of voting instruction card is properly completed, signed and dated and returned in time to be voted at the Meeting, the proxies named thereon will vote the shares represented by the proxy in accordance with the instructions marked thereon. Unmarked but properly signed and dated voting instruction cards will be voted “FOR” approval of the relevant Reorganization Agreement and “FOR” any other matters the proxies deem appropriate. Please see Appendix L to this Proxy Statement for instructions on how to sign your voting instruction card.

A shareholder may revoke a proxy at any time on or before the Meeting by either (1) submitting to the applicable Acquired Fund a subsequently dated proxy, (2) delivering to the applicable Acquired Fund a written notice of revocation (addressed to the Secretary at the principal executive office of the Acquired Fund at the address shown at the beginning of this Proxy Statement/Prospectus) or (3) otherwise giving notice of revocation at the Meeting, at all times prior to the exercise of the authority granted in the voting instruction card. Merely attending the Meeting, however, will not revoke any previously executed proxy. Unless revoked, all valid and executed proxies will be voted in accordance with the specifications thereon or, in the absence of such specifications, for approval of the Reorganization Agreement and the Reorganization contemplated thereby. Contract Owners should consult their Participating Insurance Company regarding their ability to revoke voting instructions after such instructions have been provided to the Participating Insurance Company.

Shares of the Funds are offered only to variable annuity and variable life insurance separate accounts established by a Participating Insurance Companies to fund variable annuity contracts and variable life insurance policies. The rights accompanying shares of the Variable Annuity Funds are legally vested in the variable annuity contracts and variable life insurance products offered by the separate accounts of Participating Insurance Companies. However, in accordance with current law and interpretations thereof, Participating Insurance Companies will vote shares held in the separate accounts in a manner consistent with voting instructions timely received from the holders of variable annuity contracts and variable life insurance policies. A signed and dated voting instruction form or other authorization by a holder that does not specify how the holder’s shares should be voted on a proposal may be deemed an instruction to vote such shares in favor of the applicable proposal. Those persons who have a voting interest at the close of business on December 15, 2006 will be entitled to submit

40

instructions to their Participating Insurance Company. Each Participating Insurance Company will vote Variable Annuity Fund shares held in separate accounts for which no timely instructions are received from the holders of variable annuity contracts and variable life insurance policies, as well as shares it owns, in the same proportion as those shares for which such insurance company receives voting instructions .

If you hold shares through a variable annuity contract or a variable life insurance policy, and if you do not give specific voting instructions for your shares, they may not be voted at all or, as described above, they may be voted in a manner that you may not intend. Therefore, you are strongly encouraged to give your Participating Insurance Company specific instructions as to how you want your shares to be voted.

Even if you plan to attend the Meeting, we ask that you sign, date and return the enclosed voting instruction card or vote by telephone or through the Internet. This will help us ensure that an adequate number of shares are present for the Meeting to be held.

Photographic identification will be required for admission to the Meeting.

Proxy Solicitation

The cost of printing and mailing the enclosed Proxy Statement/Prospectus, accompanying Notice of Special Meeting and voting instruction card, along with postage and proxy solicitation costs will be borne by Legg Mason and will not be borne by the Funds. These costs will be borne by Legg Mason whether or not the Reorganizations are approved. Solicitation may be made by letter or telephone by officers or employees of Legg Mason, or by dealers and their representatives. Brokerage houses, banks and other fiduciaries and others may be requested to forward proxy solicitation material to the beneficial owner of shares of the applicable Fund to obtain authorization for the execution of proxies. Legg Mason will reimburse brokerage firms, custodians, banks and fiduciaries for their expenses in forwarding the Proxy Statement/Prospectus and proxy materials to the beneficial owners of each Acquired Fund’s shares. In addition, Legg Mason, on behalf of each Fund, has retained Computershare Fund Services, Inc. (“Computershare”), a proxy solicitation firm, to assist in the solicitation of proxies. It is anticipated that Computershare will be paid approximately $10,000 for such solicitation services (plus reimbursements of out-of-pocket expenses), to be borne by Legg Mason. Computershare may solicit proxies personally and by telephone.

Quorum

The chart below shows the quorum requirement for each Acquired Fund. A Fund’s shareholders may hold a meeting for that Fund if the quorum requirement for that Fund is met, regardless of whether any other Fund’s quorum requirement is met.

Acquired Fund	Quorum
Legg Mason Partners Variable Aggressive Growth Portfolio (A) (formerly Salomon Brothers Variable Aggressive Growth Fund)	Majority of shares entitled to vote
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (formerly Smith Barney Premier Selections All Cap Growth Portfolio)	30% of voting power entitled to vote

Vote Required

For each Acquired Fund, approval of a Reorganization Agreement will require, if a quorum is present at the Meeting, the affirmative vote of a majority of the outstanding voting securities of such Acquired Fund, which under applicable law means the lesser of (a) 67% or more of the voting power of the voting securities present at the Meeting, if the holders of more than 50% of the outstanding voting securities of the Acquired Fund are present at the Meeting or represented by proxy, or (b) more than 50% of the voting power of the outstanding voting securities of the Acquired Fund. Shareholders of Legg Mason Partners Variable Aggressive Growth Portfolio (A) are entitled to one vote for each share and fractional shares are entitled to proportional voting rights. Shareholders of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio are entitled to vote based on the dollar value of shares held by the shareholders on the record date, so called “dollar-weighted” voting.

41

Effect of Abstentions

For purposes of determining the presence of a quorum for transacting business at the Meeting, executed proxies marked as abstentions will be treated as shares that are present for quorum purposes but which have not been voted.

Adjournments

If the necessary quorum to transact business or the vote required to approve a proposal is not obtained at the Meeting, the persons named as proxies may propose one or more adjournments of the Meeting in accordance with applicable law to permit further solicitation of proxies. Any such adjournment due to insufficient votes will require an affirmative vote by the holders of a majority of the shares present in person or by proxy and voted at the Meeting. If in the judgment of persons named as proxies, it is advisable to defer action on one or more proposals, the persons named as proxies may propose one or more adjournments of the Meeting with respect to such proposal or proposals for a reasonable period or periods. In the event of an adjournment, no further notice is needed. The persons named as proxies will vote upon such adjournment in their discretion.

Future Shareholder Proposals

The Acquired Funds do not hold annual meetings of shareholders. A shareholder proposal intended to be presented at a future special meeting of shareholders of an Acquired Fund must be received at the offices of the Fund, 125 Broad Street, 10th Floor, New York, New York 10004, at a reasonable time before the Fund begins to print and mail its proxy materials. Timely submission of a proposal does not guarantee that such proposal will be included in a proxy statement.

Record Date and Outstanding Shares

Only shareholders of record of each Acquired Fund at the close of business on December 15, 2006 are entitled to notice of and to vote at the Meeting and at any postponement or adjournment thereof. The chart below lists the number of shares of each class of each Acquired Fund that were outstanding and entitled to vote as of the close of business on the Record Date:

Acquired Fund	Share Class	Number of Shares
Legg Mason Partners Variable Aggressive Growth Portfolio (A)	Class I
	Class II
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	Single Class

To the knowledge of the Acquired Funds and the Acquiring Fund, as of December 15, 2006, except as set forth in Appendix M, no person owned beneficially or of record 5% or more of any class of an Acquired Fund’s or an Acquiring Fund’s outstanding shares.

[As of December 15, 2006, less than 1% of the outstanding shares of each class of each Acquired Fund and the Acquiring Fund were owned directly or beneficially in the aggregate by the Board members and officers of each Acquired Fund and the Acquiring Fund.]

LEGAL MATTERS

Certain legal matters concerning the issuance of shares of the Acquiring Fund will be passed upon by Willkie Farr & Gallagher LLP.

THE BOARDS OF THE ACQUIRED FUNDS, INCLUDING THE INDEPENDENT BOARD MEMBERS, UNANIMOUSLY RECOMMEND APPROVAL OF THE REORGANIZATION AGREEMENTS. ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE RELEVANT REORGANIZATION AGREEMENT.

By order of the Boards of Trustees,

Robert I. Frenkel

Secretary

42

INDEX OF APPENDICES

Appendix A:	Dates of Prospectuses, SAIs and Shareholder Reports
Appendix B:	Form of Agreement and Plan of Reorganization
Appendix C:	Purchases, Redemptions and Exchanges of Fund Shares—Other Shareholder Information
Appendix D:	Comparison of Investment Objectives, Principal Investment Strategies and Management
Appendix E:	Form of Organization
Appendix F:	Similarities and Differences in the Forms of Organization of the Acquired Funds and the Acquiring Fund
Appendix G:	Portfolio Manager Compensation
Appendix H:	Financial Highlights of the Acquiring Fund
Appendix I:	Management’s Discussion of Fund Performance for the Acquiring Fund
Appendix J:	Historical Performance for the Funds
Appendix K:	Comparison of Board Composition
Appendix L:	Instructions for Signing Voting Instruction Card
Appendix M:	5% Shareholders of the Acquired and Acquiring Funds

43

APPENDIX A

Dates of Prospectuses, SAIs and Shareholder Reports

Fund	Prospectus Dated	Annual Reports	Semi-Annual Reports
Legg Mason Partners Variable Aggressive Growth Portfolio (A) (formerly Greenwich Street Series Fund—Salomon Brothers Variable Aggressive Growth Fund)	May 1, 2006 (Filed on May 1, 2006)	December 31, 2005 (Filed on March 13, 2006)	June 30, 2006 (Filed on September 8, 2006)
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (formerly Smith Barney Premier Selections All Cap Growth Portfolio)	February 28, 2006 (Filed on February 28, 2006)	October 31, 2005 (Filed on January 9, 2006)	April 30, 2006 (Filed on July 10, 2006)
Legg Mason Partners Variable Aggressive Growth Portfolio (B) (formerly Smith Barney Aggressive Growth Portfolio)	February 28, 2006 (Filed on February 28, 2006)	October 31, 2005 (Filed on January 9, 2006)	April 30, 2006 (Filed on July 10, 2006)

A-1

APPENDIX B

FORM OF AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION (“Agreement”) is made as of this      day of                 , 2006, by and among [                    ], a [Massachusetts business trust/Maryland corporation] (the “Acquiring Entity”), with its principal place of business at [125 Broad Street, New York, New York 10004/100 Light Street, Baltimore, Maryland 21202], on behalf of its series [name of series] (the “Acquiring Fund”), [                    ], a [Massachusetts business trust/Maryland corporation] (the “Acquired Entity”), with its principal place of business at [125 Broad Street, New York, New York 10004/100 Light Street, Baltimore, Maryland 21202], [on behalf of its series [name of series]] (the “Acquired Fund”), and, solely for purposes of paragraph 10.2 hereof, Legg Mason Partners Fund Advisor, LLC.

WHEREAS, each of the Acquired Fund and the Acquiring Fund is a series or the sole series of an open-end management investment company registered pursuant to the Investment Company Act of 1940, as amended (the ^“1940 Act”);

WHEREAS, it is intended that, for United States federal income tax purposes (i) the transactions contemplated by this Agreement shall qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) this Agreement shall constitute a plan of reorganization within the meaning of Treasury Regulation Section 1.368-2(g);

WHEREAS, the reorganization will consist of (1) the sale, assignment, conveyance, transfer and delivery of all of the property and assets of the Acquired Fund to the Acquiring Fund in exchange solely for classes of shares of [beneficial interest/common stock] of the Acquiring Fund (the “Acquiring Fund Shares”) corresponding to the classes of outstanding shares of [beneficial interest/common stock] of the Acquired Fund (the “Acquired Fund Shares”), as described herein, (2) the assumption by the Acquiring Fund of all liabilities of the Acquired Fund, and [(3) the distribution of the Acquiring Fund Shares to the shareholders of the Acquired Fund and termination of the Acquired Fund] [(3) the subsequent distribution of the Acquiring Fund Shares and any of the remaining properties and assets to the shareholders of the Acquired Fund and the termination of the Acquired Fund], as provided herein (the “Reorganization”), all upon the terms and conditions hereinafter set forth in this Agreement;

[Include if Acquired Entity will have no remaining series after the Reorganization:] WHEREAS, following the Reorganization, the Acquired Entity will deregister as an investment company in accordance with the rules of the Securities and Exchange Commission (the “Commission”);]

[Include if Acquired Entity is organized in Massachusetts and will have no remaining series after the Reorganization: WHEREAS, following the effective date of its deregistration, the Acquired Entity shall voluntarily dissolve in accordance with Massachusetts law;]

WHEREAS, the Acquired Fund currently owns securities that are generally assets of the character in which the Acquiring Fund is permitted to invest;

WHEREAS, the Board of [Trustees/Directors] of the Acquiring Entity (the “Acquiring Entity Board”) has determined, with respect to the Acquiring Fund, that the sale, assignment, conveyance, transfer and delivery of all of the property and assets of the Acquired Fund for Acquiring Fund Shares and the assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in the best interests of the Acquiring Fund and its shareholders and that the interests of the existing shareholders of the Acquiring Fund will not be diluted as a result of this transaction;

WHEREAS, the Board of [Trustees/Directors] of the Acquired Entity (the “Acquired Entity Board”) has determined, with respect to the Acquired Fund, that the sale, assignment, conveyance, transfer and delivery of all of the property and assets of the Acquired Fund for Acquiring Fund Shares and the assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in the best interests of the Acquired Fund and its shareholders and that the interests of the existing shareholders of the Acquired Fund will not be diluted as a result of this transaction;

B-1

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:

1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE FOR ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND

1.1. Subject to requisite approvals and the other terms and conditions herein set forth and on the basis of the representations and warranties contained herein, the Acquired Entity, on behalf of the Acquired Fund, agrees to sell, assign, convey, transfer and deliver all of its property and assets, as set forth in paragraph 1.2, to the Acquiring Fund, and the Acquiring Entity, on behalf of the Acquiring Fund, agrees in exchange therefor: (a) to deliver to the Acquired Fund the number of full and fractional Acquiring Fund Shares corresponding to each class of the Acquired Fund Shares as of the time and date set forth in paragraph 3.1, determined by dividing the value of the Acquired Fund’s net assets with respect to each class of the Acquired Fund (computed in the manner and as of the time and date set forth in paragraph 2.1) by the net asset value of one share of the corresponding class of Acquiring Fund Shares (computed in the manner and as of the time and date set forth in paragraph 2.2); and (b) to assume all liabilities of the Acquired Fund. Such transactions shall take place on a closing date as provided for in paragraph 3.1 (the “Closing Date”). [Add as appropriate: For purposes of this Agreement, the Class [    ] shares of the Acquired Fund correspond to the Class [    ] shares of the Acquiring Fund, and the term “Acquiring Fund Shares” should be read to include each such class of shares of the Acquiring Fund.]

1.2. The property and assets of the Acquired Entity, attributable to the Acquired Fund, to be sold, assigned, conveyed, transferred and delivered to and acquired by the Acquiring Entity, on behalf of the Acquiring Fund, shall consist of all assets and property of every kind and nature of the Acquired Fund, including, without limitation, all rights, receivables (including dividend, interest and other receivables), cash, cash equivalents, claims (whether absolute or contingent, known or unknown), securities, commodities and futures interests, good will and other intangible property, any deferred or prepaid expenses and all interests, rights, privileges and powers, the Acquired Fund owns at the Valuation Date (as defined in paragraph 2.1) (collectively, “Assets”). The Acquiring Entity, on behalf of the Acquiring Fund, shall assume all of the liabilities and obligations of the Acquired Fund, including, without limitation, all indemnification obligations of the Acquired Fund with respect to the current and former members of the Acquired Entity Board and officers of the Acquired Entity, whether accrued or contingent, known or unknown, existing at the Valuation Date (collectively, ^“Liabilities”). The Acquired Fund will sell, assign, convey, transfer and deliver to the Acquiring Entity, on behalf of the Acquiring Fund, any rights, stock dividends, or other securities received by the Acquired Fund after the Closing Date as stock dividends or other distributions on or with respect to the property and assets transferred, which rights, stock dividends, and other securities shall be deemed included in the property and assets transferred to the Acquiring Entity, on behalf of the Acquiring Fund, at the Closing Date and shall not be separately valued, in which case any such distribution that remains unpaid as of the Closing Date shall be included in the determination of the value of the assets of the Acquired Fund acquired by the Acquiring Entity on behalf of the Acquiring Fund.

1.3. The Acquired Fund will make reasonable efforts to discharge all of its known Liabilities prior to the Valuation Date.

1.4. On or as soon as practicable prior to the Closing Date, the Acquired Fund will declare and pay to its shareholders of record one or more dividends and/or other distributions so that it will have distributed substantially all of its investment company taxable income as defined in the Code (computed without regard to any deduction for dividends paid) and realized net capital gain as defined in the Code (after deduction for any available capital loss carryover), if any, for all tax periods ending on or before the Closing Date (and treating the current taxable year as ending on the Closing Date) such that the Acquired Fund will have no tax liability under Section 852 or Section 4982 for the current and any prior tax periods.

1.5. Immediately following the actions contemplated by paragraph 1.1, the Acquired Entity shall [take such actions necessary to complete the reorganization of the Acquired Fund. To complete the reorganization, the Acquired Entity, on behalf of the Acquired Fund, shall] (a) distribute to the latter’s shareholders of record with respect to each class of Acquired Fund Shares as of the Closing Date (“Acquired Fund Shareholders”), on a pro rata basis within that class, the Acquiring Fund Shares of the corresponding class received by the Acquired Entity, on behalf of the Acquired Fund, pursuant to paragraph 1.1 [and (b) completely liquidate and dissolve in accordance with Massachusetts law] [and (b) thereafter, redeem or cancel, as the case may be, shares of the Acquired Fund in accordance with Maryland law and (c) terminate the Acquired Fund]. Such distribution [and liquidation] shall be accomplished, with respect to each class of Acquired Fund Shares, by the transfer of the corresponding Acquiring Fund Shares then credited to the account of the Acquired Fund on the books of the

B-2

Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of the Acquired Fund Shareholders. The aggregate net asset value of each class of Acquiring Fund Shares to be so credited to each corresponding class of Acquired Fund Shareholders shall, with respect to each class, be equal to the aggregate net asset value of the Acquired Fund Shares of each corresponding class owned by Acquired Fund Shareholders on the Closing Date. [All issued and outstanding Acquired Fund Shares will be canceled on the books of the Acquired Fund.] The Acquiring Fund shall not issue certificates representing any class of Acquiring Fund Shares in connection with such exchange.

1.6. Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund’s transfer agent.

1.7. Any reporting responsibility of the Acquired Fund, including, but not limited to, the responsibility for filing regulatory reports, tax returns, or other documents with the [Securities and Exchange Commission (“Commission”)] [if already defined: Commission], any state securities commission, and any federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Acquired Entity, on behalf of the Acquired Fund. [The Acquiring Entity shall fully cooperate to the extent necessary or desirable for these responsibilities to be discharged.]

[Include if the Acquired Entity is organized in Massachusetts and has no remaining series following the Reorganization: 1.8 As promptly as practicable following the Reorganization, the Acquired Entity will take all necessary action to effect its deregistration as an investment company in accordance with the rules and regulations of the Commission and shall subsequently voluntarily dissolve in accordance with the requirements of Massachusetts law.]

2. VALUATION

2.1. The value of the Assets and the amount of the Liabilities shall be determined as of the time for calculation of net asset value as set forth in the then-current prospectus for the Acquired Fund, and after the declaration of any dividends by the Acquired Fund, on the Closing Date (such time and date being hereinafter called the “Valuation Date”), computed using the valuation procedures established by the Acquired Entity Board. All computations of value and amounts shall be made by (a) State Street Bank and Trust Company, in its capacity as accounting agent for the Acquired Fund, or (b) in the case of securities subject to fair valuation, in accordance with the valuation procedures of the Acquired Entity adopted in good faith by the Acquired Entity Board. All computations of value and amounts pursuant to this paragraph 2.1 shall be subject to confirmation by the Acquiring Fund’s independent registered public accounting firm.

2.2. The net asset value per share of each class of Acquiring Fund Shares shall be determined to the nearest full cent on the Valuation Date, using the valuation procedures established by the Acquiring Entity Board. All computations of value shall be made by (a) State Street Bank and Trust Company, in its capacity as accounting agent for the Acquiring Fund, or (b) in the case of securities subject to fair valuation, in accordance with the valuation procedures of the Acquiring Entity adopted in good faith by the Acquiring Entity Board. All computations of value pursuant to this paragraph 2.2 shall be subject to confirmation by the Acquired Fund’s independent registered public accounting firm.

2.3. The number of Acquiring Fund Shares of each class to be issued in exchange for the Assets shall be determined with respect to each such class by dividing the value of the net assets with respect to each class of Acquired Fund Shares, determined using the same valuation procedures referred to in paragraph 2.1, by the net asset value of an Acquiring Fund Share of the corresponding class, determined using the same valuation procedures referred to in paragraph 2.2.

3. CLOSING AND CLOSING DATE

3.1. Subject to the terms and conditions set forth herein, the Closing Date shall be [                    ], 2007, or such other date as the parties may agree. All acts taking place at the closing of the transactions provided for in this Agreement (“Closing”) shall be deemed to take place simultaneously as of the “close of business” on the Closing Date unless otherwise agreed to by the parties. The close of business on the Closing Date shall be as of 4:00 p.m., Eastern Time or such later time on that date as the Acquired Fund’s net asset value and/or the net asset value per share of each class of shares of the Acquiring Fund is calculated in accordance with paragraph 2.2 and after the declaration of any dividends. The Closing shall be held at the offices of [    ] or at such other time and/or place as the parties may agree.

3.2. The Acquired Entity shall direct State Street Bank and Trust Company (the “Custodian”) to transfer ownership of the Assets from the accounts of the Acquired Fund that the Custodian maintains as custodian for the Acquired Fund to the accounts of the Acquiring Fund that the Custodian maintains as custodian for the Acquiring Fund and to deliver to the

B-3

Acquiring Entity, at the Closing, a certificate of an authorized officer stating that (i) the Assets of the Acquired Fund have been so transferred as of the Closing Date, and (ii) all necessary taxes in connection with the delivery of the Assets of the Acquired Fund, including all applicable federal and state stock transfer stamps, if any, have been paid or provision for payment has been made.

3.3. The Acquired Entity shall direct [                    ], in its capacity as transfer agent for the Acquired Fund (“Transfer Agent”), to deliver to the Acquiring Entity at the Closing a certificate of an authorized officer stating that its records contain the name and address of each Acquired Fund Shareholder and the number and percentage ownership of each outstanding class of Acquired Fund Shares owned by each such shareholder immediately prior to the Closing. The Acquiring Fund shall deliver to the Secretary of the Acquired Fund a confirmation evidencing that (a) the appropriate number of Acquiring Fund Shares have been credited to the Acquired Fund’s account on the books of the Acquiring Fund pursuant to paragraph 1.1 prior to the actions contemplated by paragraph 1.4 and (b) the appropriate number of Acquiring Fund Shares have been credited to the accounts of the Acquired Fund Shareholders on the books of the Acquiring Fund pursuant to paragraph 1.4. At the Closing, each party shall deliver to the other party such bills of sale, checks, assignments, share certificates, if any, receipts or other documents as the other party or its counsel may reasonably request.

3.4. In the event that on the Valuation Date (a) the New York Stock Exchange or another primary trading market for portfolio securities of the Acquiring Fund or the Acquired Fund (each, an “Exchange”) shall be closed to trading or trading thereupon shall be restricted, or (b) trading or the reporting of trading on such Exchange or elsewhere shall be disrupted so that accurate appraisal of the value of the net assets of the Acquired Fund or the Acquiring Fund is impracticable (in the judgment of the Acquiring Entity Board with respect to the Acquiring Fund and the Acquired Entity Board with respect to the Acquired Fund), the Closing Date shall be postponed until the first Friday (that is also a business day) after the day when trading shall have been fully resumed and reporting shall have been restored.

4. REPRESENTATIONS AND WARRANTIES

4.1. Except as has been fully disclosed to the Acquiring Entity in Schedule 4.1 of this Agreement, the Acquired Entity, on behalf of the Acquired Fund, represents and warrants to the Acquiring Entity and the Acquiring Fund as follows:

(a) The Acquired Fund is duly established as a series of the Acquired Entity, which is a [business trust/corporation] duly organized, validly existing and in good standing under the laws of the [Commonwealth of Massachusetts/State of Maryland], with power under its [Declaration of Trust/Articles of Incorporation], as amended and/or supplemented (the “Acquired Entity Charter”), to own all of its assets and to carry on its business as it is being conducted as of the date hereof. The Acquired Entity is duly qualified to do business as a foreign [trust/corporation] in each jurisdiction in which the conduct of its business makes such qualification necessary except where the failure to so qualify would not have a material adverse effect on the condition (financial or otherwise), business, properties, net assets or results of operations of the Acquired Entity. The Acquired Entity has all necessary federal, state and local authorization to carry on its business as now being conducted and to fulfill the terms of this Agreement, except as set forth in paragraph 4.1(c).

(b) The Acquired Entity is a registered open-end management investment company, and its registration with the Commission as an investment company under the 1940 Act, and the registration of each class of Acquired Fund Shares under the Securities Act of 1933, as amended (“1933 Act”), is in full force and effect.

(c) No consent, approval, authorization, or order of any court or governmental authority is required for the consummation by the Acquired Fund of the transactions contemplated herein, except such as may be required under the 1933 Act, the Securities Exchange Act of 1934 (“1934 Act”), the 1940 Act, state securities laws and the Hart-Scott-Rodino Act.

(d) The current prospectus and statement of additional information of the Acquired Fund (true and correct copies of which have been delivered to the Acquiring Entity) and each prospectus and statement of additional information of the Acquired Fund used during the three (3) years prior to the date of this Agreement conforms or conformed at the time of its use in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and does not or did not at the time of its use include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading.

(e) On the Closing Date, the Acquired Entity, on behalf of the Acquired Fund, will have good and marketable title to the Assets and full right, power and authority to sell, assign, convey, transfer and deliver such Assets hereunder free

B-4

of any liens or other encumbrances, and upon delivery and payment for the Assets, the Acquiring Entity, on behalf of the Acquiring Fund, will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, excluding such restrictions as might arise under the 1933 Act.

(f) The Acquired Fund is not engaged currently, and the execution, delivery and performance of this Agreement by the Acquired Entity, on behalf of the Acquired Fund, will not result, in a material violation of [Massachusetts/Maryland] law or of the Acquired Entity Charter or the by-laws of the Acquired Entity, or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Acquired Entity, on behalf of the Acquired Fund, is a party or by which it is bound, and the execution, delivery and performance of this Agreement by the Acquired Entity, on behalf of the Acquired Fund, will not result in the acceleration of any material obligation, or the imposition of any material penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Acquired Entity, on behalf of the Acquired Fund, is a party or by which it is bound.

(g) All material contracts or other commitments of the Acquired Fund (other than this Agreement, certain investment contracts, including options, futures, swaps and forward contracts, the indemnification agreements of the current and former members of the Acquired Entity Board, and those contracts listed in Schedule 4.1) will terminate without liability to the Acquired Fund on or prior to the Closing Date. Each contract listed in Schedule 4.1 is a valid, binding and enforceable obligation of the Acquired Fund and, to the Acquired Fund’s knowledge, the other parties thereto (assuming due authorization, execution and delivery by the other parties thereto) and the assignment by the Acquired Fund to the Acquiring Fund of each such contract will not result in the termination of such contract, any breach or default thereunder by the Acquired Fund or the imposition of any penalty thereunder.

(h) No litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to the Acquired Entity’s knowledge, threatened against the Acquired Entity, with respect to the Acquired Fund or any of its properties or assets, that, if adversely determined, would materially and adversely affect its financial condition or the conduct of the Acquired Fund’s business. The Acquired Entity, on behalf of the Acquired Fund, is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects the Acquired Fund’s business or the Acquired Entity’s ability to consummate the transactions herein contemplated on behalf of the Acquired Fund.

(i) The Statement of Assets and Liabilities, Statements of Operations and Changes in Net Assets and Schedule of Investments of the Acquired Fund as at the last day of and for the most recently completed fiscal year of the Acquired Fund prior to the date of this Agreement, have been audited by [                    ], an independent registered public accounting firm, and are in accordance with accounting principles generally accepted in the United States of America (“GAAP”) consistently applied, and such statements (true and correct copies of which have been furnished to the Acquiring Entity) present fairly, in all material respects, the financial condition of the Acquired Fund as of such date and for such period in accordance with GAAP, and there are no known contingent, accrued or other liabilities of the Acquired Fund required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP as of such date that are not disclosed therein. [Add if the Acquired Fund has issued a more recent semi-annual report or will issue a semi-annual report prior to closing: The Statement of Assets and Liabilities, Statements of Operations and Changes in Net Assets and Schedule of Investments (unaudited) of the Acquired Fund as at the last day of and for the most recently completed fiscal half year of the Acquired Fund following the date of the audited annual statements referenced above [are/will be when sent to Acquired Fund shareholders in the regular course] in accordance with GAAP consistently applied, and such statements (true and correct copies of which [have been/will be] furnished to the Acquiring Entity) [present/will present] fairly, in all material respects, the financial condition of the Acquired Fund, and all known contingent, accrued or other liabilities of the Acquired Fund required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP as of such date [are/will be] disclosed therein.]

(j) Since the last day of the most recently completed fiscal year of the Acquired Fund prior to the date of this Agreement, there has not been any material adverse change in the Acquired Fund’s financial condition, assets, liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by the Acquired Fund of indebtedness for money borrowed maturing more than one year from the date such indebtedness was incurred. For the purposes of this subparagraph (j), a decline in net asset value per share of Acquired Fund Shares due to declines in market values of securities held by the Acquired Fund, the discharge of Acquired Fund liabilities, or the redemption of Acquired Fund Shares by shareholders of the Acquired Fund shall not constitute a material adverse change.

(k) On the Closing Date, all federal and other tax returns, dividend reporting forms and other tax-related reports of the Acquired Fund required by law to have been filed by such date (including any extensions) shall have been filed and are or will be correct in all material respects, and all federal and other taxes shown as due or required to be shown as due

B-5

on said returns and reports shall have been paid or provision shall have been made for the payment thereof and, to the best of the Acquired Entity’s knowledge, no such return is currently under audit and no assessment has been asserted with respect to such returns.

(l) For each taxable year of its operation (including the current taxable year, assuming such year ends on the Closing Date), the Acquired Fund has met (or will meet) the requirements of Subchapter M of Chapter 1 of the Code for qualification and treatment as a “regulated investment company,” has elected to be treated as such, and has been (or will be) eligible to compute and has computed (or will compute) its federal income tax under Section 852 of the Code, and on or before the Closing Date, will have distributed or will have declared dividends intended to be sufficient to distribute substantially all of (i) the excess of (x) its investment income excludible from gross income under Section 103 of the Code over (y) its deductions disallowed under Sections 265 and 171 of the Code (“net tax-exempt income”), (ii) its investment company taxable income (as defined in the Code) (computed without regard to any deduction for dividends paid) and (iii) any net capital gain (after reduction for any allowable capital loss carryover) (as defined in the Code) that has accrued or been recognized, respectively, through the Closing Date such that for all tax periods ending on or before the Closing Date (and treating the current tax year as ending on the Closing Date) the Acquired Fund will not have any tax liability under Section 852 or Section 4982.

(m) All issued and outstanding Acquired Fund Shares are, and on the Closing Date will be, duly authorized and validly and legally issued and outstanding, fully paid and non-assessable by the Acquired Entity and have been offered and sold in any state, territory or the District of Columbia in compliance in all material respects with applicable registration requirements of all applicable federal and state securities laws. All of the issued and outstanding Acquired Fund Shares will, at the time of Closing, be held by the persons and in the amounts set forth in the records of the Transfer Agent, on behalf of the Acquired Fund, as provided in paragraph 3.3. The Acquired Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the Acquired Fund Shares, nor is there outstanding any security convertible into any of the Acquired Fund Shares.

(n) The Acquired Fund will review its assets to ensure that at any time after its shareholders have approved this Agreement and prior to the Closing Date its assets do not include any assets that the Acquiring Fund is not permitted, or reasonably believes to be unsuitable for it, to acquire, including without limitation any security that, prior to its acquisition by the Acquired Fund, is unsuitable for the Acquiring Fund to acquire.

(o) The execution, delivery and performance of this Agreement, and the transactions contemplated herein, have been duly authorized by all necessary action on the part of the Acquired Entity Board, on behalf of the Acquired Fund, and this Agreement constitutes a valid and binding obligation of the Acquired Entity, on behalf of the Acquired Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles.

(p) The combined proxy statement and prospectus (“Proxy Statement”) to be included in the Registration Statement (as defined in paragraph 5.6), insofar as it relates to the Acquired Fund, from the effective date of the Registration Statement through the date of the meeting of shareholders of the Acquired Fund contemplated therein and on the Closing Date, will (i) not contain any statement which, at the time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading (provided that this representation and warranty shall not apply to statements in or omissions from the Proxy Statement made in reliance upon and in conformity with information that was furnished by the Acquiring Entity for use therein) and (ii) comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder. The information to be furnished by the Acquired Fund for use in registration statements and other documents filed or to be filed with any federal, state or local regulatory authority, which may be necessary in connection with the transactions contemplated hereby, shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations thereunder applicable thereto.

4.2. Except as has been fully disclosed to the Acquired Entity in Schedule 4.2 to this Agreement, the Acquiring Entity, on behalf of the Acquiring Fund, represents and warrants to the Acquired Entity and the Acquired Fund as follows:

(a) The Acquiring Fund is duly established as a series of the Acquiring Entity, which is a [business trust/corporation] duly organized, validly existing and in good standing under the laws of the [Commonwealth of Massachusetts/State of Maryland], with the power under its [Declaration of Trust/Articles of Incorporation], as amended and/or supplemented (the “Acquiring Entity Charter”), to own all of its assets and to carry on its business as it is being conducted as of the date hereof. The Acquiring Entity is duly qualified to do business as a foreign [trust/corporation] in

B-6

each jurisdiction in which the conduct of its business makes such qualification necessary except where the failure to so qualify would not have a material adverse effect on the condition (financial or otherwise), business, properties, net assets or results of operations of the Acquiring Entity. The Acquiring Entity has all necessary federal, state and local authorization to carry on its business as now being conducted and to fulfill the terms of this Agreement except as described in paragraph 4.2(c).

(b) The Acquiring Entity is a registered open-end management investment company, and its registration with the Commission as an investment company under the 1940 Act, and the registration of each class of Acquiring Fund Shares under the 1933 Act, is in full force and effect or will be in full force and effect as of the Closing Date.

(c) No consent, approval, authorization, or order of any court or governmental authority is required for the consummation by the Acquiring Fund of the transactions contemplated herein, except such as may be required under the 1933 Act, the 1934 Act, the 1940 Act, state securities laws and the Hart-Scott-Rodino Act.

(d) The current prospectus and statement of additional information of the Acquiring Fund (true and correct copies of which have been delivered to the Acquired Entity) and each prospectus and statement of additional information of the Acquiring Fund used during the three (3) years prior to the date of this Agreement conforms or conformed at the time of its use in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and does not or did not at the time of its use include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading.

(e) The Acquiring Fund is not engaged currently, and the execution, delivery and performance of this Agreement by the Acquiring Entity, on behalf of the Acquiring Fund, will not result, in a material violation of [Massachusetts/Maryland] law or of the Acquiring Entity Charter or the by-laws of the Acquiring Entity, or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Acquiring Entity, on behalf of the Acquiring Fund, is a party or by which it is bound, and the execution, delivery and performance of this Agreement by the Acquiring Entity, on behalf of the Acquiring Fund, will not result in the acceleration of any material obligation, or the imposition of any material penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Acquiring Entity, on behalf of the Acquiring Fund, is a party or by which it is bound.

(f) No litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to the Acquiring Entity’s knowledge, threatened against the Acquiring Entity, with respect to the Acquiring Fund, or any of its properties or assets, that, if adversely determined, would materially and adversely affect its financial condition or the conduct of such Acquiring Fund’s business. The Acquiring Entity, on behalf of the Acquiring Fund, is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects the Acquiring Fund’s business or the Acquiring Entity’s ability to consummate the transactions herein contemplated on behalf of the Acquiring Fund.

(g) The Statement of Assets and Liabilities, Statements of Operations and Changes in Net Assets and Schedule of Investments of the Acquiring Fund as at the last day of and for the most recently completed fiscal year of the Acquiring Fund prior to the date of this Agreement, have been audited by [                    ], an independent registered public accounting firm, and are in accordance with GAAP consistently applied, and such statements (true and correct copies of which have been furnished to the Acquired Entity) present fairly, in all material respects, the financial condition of the Acquiring Fund as of such date and for such period in accordance with GAAP, and there are no known contingent, accrued or other liabilities of the Acquiring Fund required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP as of such date that are not disclosed therein. [Add if the Acquiring Fund has issued a more recent semi-annual report or will issue a semi-annual report prior to closing: The Statement of Assets and Liabilities, Statements of Operations and Changes in Net Assets and Schedule of Investments (unaudited) of the Acquiring Fund as at the last day of and for the most recently completed fiscal half year of the Acquiring Fund following the date of the audited annual statements referenced above [are/will be when sent to Acquiring Fund shareholders in the regular course] in accordance with GAAP consistently applied, and such statements (true and correct copies of which [have been/will be] furnished to the Acquired Entity) [present/will present] fairly, in all material respects, the financial condition of the Acquiring Fund, and all known contingent, accrued or other liabilities of the Acquiring Fund required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP as of such date [are/will be] disclosed therein.]

(h) Since the last day of the most recently completed fiscal year of the Acquiring Fund prior to the date of this Agreement, there has not been any material adverse change in the Acquiring Fund’s financial condition, assets, liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by the

B-7

Acquiring Fund of indebtedness for money borrowed maturing more than one year from the date such indebtedness was incurred. For the purposes of this subparagraph (h), a decline in net asset value per share of Acquiring Fund Shares due to declines in market values of securities held by the Acquiring Fund, the discharge of Acquiring Fund liabilities, or the redemption of Acquiring Fund Shares by shareholders of the Acquiring Fund shall not constitute a material adverse change.

(i) On the Closing Date, all federal and other tax returns, dividend reporting forms and other tax-related reports of the Acquiring Fund required by law to have been filed by such date (including any extensions) shall have been filed and are or will be correct in all material respects, and all federal and other taxes shown as due or required to be shown as due on said returns and reports shall have been paid or provision shall have been made for the payment thereof and, to the best of the Acquiring Entity’s knowledge, no such return is currently under audit and no assessment has been asserted with respect to such returns.

(j) For each taxable year of its operation (including the taxable year that includes the Closing Date), the Acquiring Fund has met (or will meet) the requirements of Subchapter M of Chapter 1 of the Code for qualification and treatment as a “regulated investment company,” has elected to be treated as such, and has been (or will be) eligible to compute and has computed (or will compute) its federal income tax under Section 852 of the Code, and will have distributed (or will distribute pursuant to the provisions of Section 855 of the Code) substantially all of (i) its net tax-exempt income, (ii) its investment company taxable income (computed without regard to any deduction for dividends paid) (as defined in the Code) and (iii) any net capital gain (after reduction for any capital loss carryover) (as defined in the Code) for taxable years ending prior to the Closing Date such that for all those years the Acquiring Fund will have no tax liability under Section 852 or Section 4982.

(k) All issued and outstanding Acquiring Fund Shares are, and on the Closing Date will be, duly authorized and validly and legally issued and outstanding, fully paid and non-assessable by the Acquiring Entity and will have been offered and sold in any state, territory or the District of Columbia in compliance in all material respects with applicable registration requirements of all applicable federal and state securities laws. The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquiring Fund Shares, nor is there outstanding any security convertible into any Acquiring Fund Shares. All of the Acquiring Fund Shares to be issued and delivered to the Acquired Entity, for the account of the Acquired Fund Shareholders, pursuant to this Agreement, will on the Closing Date have been duly authorized and, when so issued and delivered, will be duly and validly and legally issued Acquiring Fund Shares and be fully paid and non-assessable by the Acquiring Entity.

(l) The execution, delivery and performance of this Agreement, and the transactions contemplated herein, have been duly authorized by all necessary action on the part of the Acquiring Entity Board, on behalf of the Acquiring Fund, and this Agreement constitutes a valid and binding obligation of the Acquiring Entity, on behalf of the Acquiring Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles.

(m) The Proxy Statement to be included in the Registration Statement, insofar as it relates to the Acquiring Fund and the Acquiring Fund Shares, from the effective date of the Registration Statement through the date of the meeting of shareholders of the Acquired Fund contemplated therein and on the Closing Date, will (i) not contain any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary to make the statements therein not false or misleading (provided that this representation and warranty shall not apply to statements in or omissions from the Proxy Statement made in reliance upon and in conformity with information that was furnished by the Acquired Entity for use therein) and (ii) comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder. The information to be furnished by the Acquiring Fund for use in registration statements and other documents filed or to be filed with any federal, state or local regulatory authority, which may be necessary in connection with the transactions contemplated hereby, shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations applicable thereto.

5. COVENANTS

The Acquired Entity, on behalf of the Acquired Fund, and the Acquiring Entity, on behalf of the Acquiring Fund, respectively, hereby further covenant as follows:

5.1. The Acquired Fund and the Acquiring Fund each will operate its business in the ordinary course and shall comply in all material respects with all applicable laws, rules and regulations between the date hereof and the Closing Date, it being

B-8

understood that such ordinary course of business will include the declaration and payment of customary dividends and other distributions, and any other distribution that may be advisable.

5.2. The Acquired Entity will call and hold a meeting of the shareholders of the Acquired Fund to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated herein.

5.3. The Acquiring Fund Shares to be acquired by the Acquired Fund hereunder are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms of this Agreement.

5.4. The Acquired Entity, on behalf of the Acquired Fund, will assist the Acquiring Entity in obtaining such information as the Acquiring Entity reasonably requests concerning the beneficial ownership of the Acquired Fund Shares.

5.5. Subject to the provisions of this Agreement, the Acquiring Entity, on behalf of the Acquiring Fund, and the Acquired Entity, on behalf of the Acquired Fund, each will take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement.

5.6. The Acquiring Entity, on behalf of the Acquiring Fund, shall prepare and file a Registration Statement on Form N-14 in compliance with the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder with respect to the Reorganization (the “Registration Statement”). The Acquired Entity, on behalf of the Acquired Fund, will provide to the Acquiring Entity such information regarding the Acquired Fund as may be reasonably necessary for the preparation of the Registration Statement.

5.7. The Acquiring Entity, on behalf of the Acquiring Fund, and the Acquired Entity, on behalf of the Acquired Fund, each will use its reasonable best efforts to fulfill or obtain the fulfillment of the conditions precedent to effect the transactions contemplated by this Agreement as promptly as practicable.

5.8. The Acquired Entity, on behalf of the Acquired Fund, will, from time to time, as and when reasonably requested by the Acquiring Entity, execute and deliver or cause to be executed and delivered all such assignments and other instruments and will take or cause to be taken such further action as the Acquiring Entity, on behalf of the Acquiring Fund, may reasonably deem necessary or desirable in order to vest in and confirm (a) the Acquired Entity’s title to and possession of the Acquiring Fund Shares to be delivered hereunder and (b) the Acquiring Entity’s title to and possession of all the Assets and to otherwise to carry out the intent and purpose of this Agreement.

5.9. The Acquiring Entity, on behalf of the Acquiring Fund, will use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such of the state blue sky or securities laws as may be necessary in order to continue its operations after the Closing Date.

5.10. The Acquiring Entity shall not change the Acquiring Entity Charter, prospectus or statement of additional information so as to restrict permitted investments for the Acquiring Fund, except as required by the Commission prior to the Closing.

5.11. Prior to the Valuation Date, the Acquired Entity Board shall adopt the valuation procedures of the Acquiring Entity with respect to the Acquired Fund.

6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED ENTITY

The obligations of the Acquired Entity, on behalf of the Acquired Fund, to consummate the transactions provided for herein shall be subject, at the Acquired Entity’s election, to the following conditions:

6.1. All representations and warranties of the Acquiring Entity, on behalf of the Acquiring Fund, contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date.

B-9

6.2. The Acquiring Entity, on behalf of the Acquiring Fund, shall have performed all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by the Acquiring Entity, on behalf of the Acquiring Fund, on or before the Closing Date.

6.3. The Acquiring Entity, on behalf of the Acquiring Fund, shall have executed and delivered an assumption of the Liabilities and all such other agreements and instruments as the Acquired Entity may reasonably deem necessary or desirable in order to vest in and confirm (a) the Acquired Fund’s title to and possession of the Acquiring Fund Shares to be delivered hereunder and (b) the Acquiring Entity’s assumption of all of the Liabilities and to otherwise to carry out the intent and purpose of this Agreement.

6.4. The Acquiring Entity, on behalf of the Acquiring Fund, shall have delivered to the Acquired Fund a certificate executed in the name of the Acquiring Entity on behalf of the Acquiring Fund, by the Acquiring Entity’s President or Vice President and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to the Acquired Entity and dated as of the Closing Date, as to the matters set forth in paragraphs 6.1 and 6.2 and as to such other matters as the Acquired Entity shall reasonably request.

6.5. The Acquiring Entity, on behalf of the Acquiring Fund, and the Acquired Entity, on behalf of the Acquired Fund, shall have agreed on the number of full and fractional Acquiring Fund Shares to be issued in connection with the Reorganization after such number has been calculated in accordance with paragraph 1.1.

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING ENTITY

The obligations of the Acquiring Entity, on behalf of the Acquiring Fund, to consummate the transactions provided for herein shall be subject, at the Acquiring Entity’s election, to the following conditions:

7.1. All representations and warranties of the Acquired Entity, on behalf of the Acquired Fund, contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date.

7.2. The Acquired Entity, on behalf of the Acquired Fund, shall have performed all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by the Acquired Entity, on behalf of the Acquired Fund, on or before the Closing Date.

7.3. The Acquired Entity shall have delivered to the Acquiring Entity, on behalf of the Acquiring Fund, a Statement of Assets and Liabilities of the Acquired Fund as of the Closing Date, including a schedule of investments, certified by the Treasurer of the Acquired Entity on behalf of the Acquired Fund. The Acquired Entity, on behalf of the Acquired Fund, shall have executed and delivered all such assignments and other instruments of transfer as the Acquiring Entity may reasonably deem necessary or desirable in order to vest in and confirm (a) the Acquired Fund’s title to and possession of the Acquiring Fund Shares to be delivered hereunder and (b) the Acquiring Fund’s title to and possession of all the Assets and to otherwise to carry out the intent and purpose of this Agreement.

7.4. The Acquired Entity, on behalf of the Acquired Fund, shall have delivered to the Acquiring Entity a certificate executed in the name of the Acquired Entity, on behalf of the Acquired Fund, by the Acquired Entity’s President or Vice President and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to the Acquiring Entity and dated as of the Closing Date, as to the matters set forth in paragraphs 7.1 and 7.2 and as to such other matters as the Acquiring Entity shall reasonably request.

7.5. The Acquired Entity, on behalf of the Acquired Fund, and the Acquiring Entity, on behalf of the Acquiring Fund, shall have agreed on the number of full and fractional Acquiring Fund Shares to be issued in connection with the Reorganization after such number has been calculated in accordance with paragraph 1.1.

8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING ENTITY AND ACQUIRED ENTITY

If any of the conditions set forth below have not been satisfied on or before the Closing Date with respect to the Acquired Entity, on behalf of the Acquired Fund, or the Acquiring Entity, on behalf of the Acquiring Fund, the other party to

B-10

this Agreement shall be entitled on behalf of the Acquired Fund or Acquiring Fund, as applicable, at its option, to refuse to consummate the transactions contemplated by this Agreement:

8.1. This Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the holders of the outstanding shares of the Acquired Fund, in accordance with the provisions of the Acquired Entity Charter, the by-laws of the Acquired Entity, and [Massachusetts/Maryland] law, [Include for Massachusetts Acquired Entity that has no remaining series after the Reorganization: which approval shall include approval of the dissolution of the Acquired Entity under Massachusetts law], and certified copies of the resolutions evidencing such approval shall have been delivered to the Acquiring Entity. Notwithstanding anything herein to the contrary, neither the Acquiring Entity nor the Acquired Entity may waive the condition set forth in this paragraph 8.1.

8.2. On the Closing Date, no court or governmental agency of competent jurisdiction shall have issued any order that remains in effect and that restrains or enjoins the Acquired Entity, with respect to the Acquired Fund, or the Acquiring Entity, with respect to the Acquiring Fund, from completing the transactions contemplated by this Agreement.

8.3. All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities deemed necessary by the Acquiring Entity or the Acquired Entity to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of the Acquiring Fund or the Acquired Fund, provided that either party hereto may for itself waive any of such conditions.

8.4. The Registration Statement shall have become effective under the 1933 Act and no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending.

8.5. The parties shall have received the opinion of Dechert LLP, dated the Closing Date, substantially to the effect that, based upon certain facts, assumptions and representations made by the Acquired Entity, on behalf of the Acquired Fund, the Acquiring Entity, on behalf of the Acquiring Fund, and their respective authorized officers, (i) the transactions contemplated by this Agreement will constitute a reorganization within the meaning of Section 368(a) of the Code; (ii) no gain or loss will be recognized by the Acquiring Fund upon receipt of the Assets in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the Acquired Fund Liabilities; (iii) the basis in the hands of the Acquiring Fund in the Assets will be the same as the basis of the Acquired Fund in the Assets immediately prior to the transfer thereof; (iv) the holding periods of the Assets in the hands of the Acquiring Fund will include the periods during which the Assets were held by the Acquired Fund (except where investment activities of the Acquiring Fund have the effect of reducing or eliminating the holding period with respect to an asset); (v) no gain or loss will be recognized by the Acquired Fund upon the transfer of the Assets to the Acquiring Fund in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the Acquired Fund Liabilities, or upon the distribution of the Acquiring Fund Shares by the Acquired Fund to its shareholders except for gain or loss that may be recognized with respect to contracts subject to Section 1256 of the Code and/or stock in a “passive foreign investment company” as defined in Section 1297(a) of the Code; (vi) no gain or loss will be recognized by the Acquired Fund shareholders upon the exchange of their Acquired Fund Shares for the Acquiring Fund Shares; (vii) the aggregate basis of the Acquiring Fund Shares that each Acquired Fund shareholder receives in connection with the transaction will be the same as the aggregate basis of his or her Acquired Fund Shares exchanged therefor; and (viii) an Acquired Fund shareholder’s holding period for his or her Acquiring Fund Shares will be determined by including the period for which he or she held the Acquired Fund Shares exchanged therefor, provided that he or she held the Acquired Fund Shares as capital assets. The delivery of such opinion is conditioned upon the receipt by Dechert LLP of representations it shall request of the Acquiring Entity and the Acquired Entity. Notwithstanding anything herein to the contrary, neither the Acquiring Entity nor the Acquired Entity may waive the condition set forth in this paragraph 8.5.

8.6. The Acquiring Entity, on behalf of the Acquiring Fund, shall have received on the Closing Date an opinion of [Acquired Fund Counsel], in a form reasonably satisfactory to the Acquiring Entity, and dated as of the Closing Date, substantially to the effect that, based upon certain facts and certifications made by the Acquired Entity, on behalf of the Acquired Fund, and its authorized officers: (a) the Acquired Entity is a [business trust/corporation] existing under the laws of the [Commonwealth of Massachusetts/State of Maryland]; (b) the Acquired Entity, with respect to the Acquired Fund, has the [power as a business trust/corporate power] to carry on its business as an open-end investment company registered under the 1940 Act; (c) this Agreement has been duly authorized, executed and, so far as known to such counsel, delivered by the Acquired Entity, on behalf of the Acquired Fund, and assuming due authorization, execution and delivery of this Agreement

B-11

by the Acquiring Entity, on behalf of the Acquiring Fund, constitutes a valid and legally binding obligation of the Acquired Entity, on behalf of the Acquired Fund, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and laws of general applicability relating to or affecting creditors’ rights and to general equity principles (whether in a proceeding under equity or at law); provided that such counsel shall be entitled to state that it expresses no opinion with respect to the validity, binding effect or enforceability of any contractual provisions purporting to provide indemnification of any person for any claims, damages, liabilities or expenses which may be limited by any applicable federal or state securities laws or as a matter of public policy; (d) the execution and delivery of this Agreement did not, and the transfer of the Assets for Acquiring Fund Shares and the assumption by the Acquiring Fund of the Liabilities pursuant to this Agreement will not, violate the Acquired Entity Charter or the by-laws of the Acquired Entity or any contracts or other documents known to [Acquired Fund Counsel] which can affect the rights or obligations of the Acquired Entity; (e) to the knowledge of such counsel, all regulatory or court consents, authorizations, approvals, orders or filings required to be obtained or made by the Acquired Entity, on behalf of the Acquired Fund, under the federal laws of the United States or the laws of the [Commonwealth of Massachusetts/State of Maryland] for the transfer of the Assets for Acquiring Fund Shares and the assumption by the Acquiring Fund of the Liabilities pursuant to this Agreement have been obtained or made, except such as may be required under state securities or blue sky laws as to which such counsel need express no opinion; and (f) to the knowledge of such counsel, and without any independent investigation, other than as disclosed on the schedule provided by the Acquired Entity pursuant to paragraph 4.1 of this Agreement, the Acquired Fund is not subject to any litigation or administrative proceeding that could reasonably be expected to have a materially adverse effect on the operations of the Acquired Fund. Such opinion may state that it is solely for the benefit of the Acquiring Entity and the Acquiring Entity Board. Such opinion may contain such assumptions and limitations as shall be in the opinion of [Acquired Fund Counsel] appropriate to render the opinions expressed therein. Such opinion also shall include such other matters incident to the transactions contemplated hereby as the Acquiring Entity, on behalf of the Acquiring Fund, may reasonably request. With respect to all matters of [Massachusetts/Maryland] law, such counsel shall be entitled to state that, with the approval of the Acquiring Entity, they have relied on the opinion of [                    ] and that their opinion is subject to the same assumptions, qualifications and limitations with respect to such matters as are contained in the opinion of [                    ].

8.7. The Acquired Entity, on behalf of the Acquired Fund, shall have received on the Closing Date an opinion of [Acquiring Fund Counsel], in a form reasonably satisfactory to the Acquired Entity, and dated as of the Closing Date, substantially to the effect that, based upon certain facts and certifications made by the Acquiring Entity, on behalf of the Acquiring Fund and its authorized officers: (a) the Acquiring Entity is a [business trust/corporation] existing under the laws of the [Commonwealth of Massachusetts/State of Maryland]; (b) the Acquiring Entity, with respect to the Acquiring Fund, has the [power as a business trust/corporate power] to carry on its business as an open-end investment company registered under the 1940 Act; (c) this Agreement has been duly authorized, executed and, so far as is known to such counsel, delivered by the Acquiring Entity, on behalf of the Acquiring Fund, and assuming due authorization, execution and delivery of this Agreement by the Acquired Entity, on behalf of the Acquired Fund, constitutes a valid and legally binding obligation of the Acquiring Entity, on behalf of the Acquiring Fund, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and laws of general applicability relating to or affecting creditors’ rights and to general equity principles (whether in a proceeding under equity or at law); provided that such counsel shall be entitled to state that it expresses no opinion with respect to the validity, binding effect or enforceability of any contractual provisions purporting to provide indemnification of any person for any claims, damages, liabilities or expenses which may be limited by any applicable federal or state securities laws or as a matter of public policy; (d) the execution and delivery of this Agreement did not, and the issuance of the Acquiring Fund Shares and the assumption of the Liabilities in exchange for the transfer of the Assets pursuant to this Agreement will not, violate the Acquiring Entity Charter or the by-laws of the Acquiring Entity or any contracts or other documents known to [Acquiring Fund Counsel] which can affect the rights and obligations of the Acquiring Entity; (e) to the knowledge of such counsel, all regulatory or court consents, authorizations, approvals, orders or filings required to be obtained or made by the Acquiring Entity, on behalf of the Acquiring Fund, under the federal laws of the United States or the laws of the [Commonwealth of Massachusetts/State of Maryland] with respect to the issuance of the Acquiring Fund Shares and the assumption of the Liabilities in exchange for the transfer of the Assets pursuant to this Agreement have been obtained or made, except such as may be required under state securities or blue sky laws, as to which such counsel need express no opinion; and (f) to the knowledge of such counsel, and without any independent investigation, other than as disclosed on the schedule provided by the Acquiring Entity pursuant to paragraph 4.2 of this Agreement, the Acquiring Fund is not subject to any litigation or administrative proceeding that could reasonably be expected to have a materially adverse effect on the operations of the Acquiring Fund. Such opinion may state that it is solely for the benefit of the Acquired Entity and the Acquired Entity Board. Such opinion may contain such assumptions and limitations as shall be in the opinion of [Acquiring Fund Counsel] appropriate to render the opinions

B-12

expressed therein. Such opinion also shall include such other matters incident to the transactions contemplated hereby as the Acquired Entity, on behalf of the Acquired Fund, may reasonably request. With respect to all matters of [Massachusetts/Maryland] law, such counsel shall be entitled to state that, with the approval of the Acquired Entity, they have relied on the opinion of [                    ] and that their opinion is subject to the same assumptions, qualifications and limitations with respect to such matters as are contained in the opinion of [                    ].

8.8. The Assets will include no assets which the Acquiring Fund, by reason of limitations contained in the Acquiring Entity Charter or in investment restrictions in effect on the Closing Date, may not properly acquire.

9. INDEMNIFICATION

9.1. The Acquiring Entity, out of the Acquiring Fund’s assets and property (including any amounts paid to the Acquiring Fund pursuant to any applicable liability insurance policies or indemnification agreements) agrees to indemnify and hold harmless the Acquired Entity and the members of the Acquired Entity Board and its officers from and against any and all losses, claims, damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable costs of investigation) to which the Acquired Entity and those board members and officers may become subject, insofar as such loss, claim, damage, liability or expense (or actions with respect thereto) arises out of or is based on (a) any breach by the Acquiring Entity, on behalf of the Acquiring Fund, of any of its representations, warranties, covenants or agreements set forth in this Agreement or (b) any act, error, omission, neglect, misstatement, materially misleading statement, breach of duty or other act wrongfully done or attempted to be committed by the Acquiring Entity or the members of the Acquired Entity Board or its officers prior to the Closing Date, provided that such indemnification by the Acquiring Entity is not (i) in violation of any applicable law or (ii) otherwise prohibited as a result of any applicable order or decree issued by any governing regulatory authority or court of competent jurisdiction.

9.2. The Acquired Entity, out of the Acquired Fund’s assets and property (including any amounts paid to the Acquired Fund pursuant to any applicable liability insurance policies or indemnification agreements) agrees to indemnify and hold harmless the Acquiring Entity and the members of the Acquiring Entity Board and its officers from and against any and all losses, claims, damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable costs of investigation) to which the Acquiring Entity and those board members and officers may become subject, insofar as such loss, claim, damage, liability or expense (or actions with respect thereto) arises out of or is based on (a) any breach by the Acquired Entity, on behalf of the Acquired Fund, of any of its representations, warranties, covenants or agreements set forth in this Agreement or (b) any act, error, omission, neglect, misstatement, materially misleading statement, breach of duty or other act wrongfully done or attempted to be committed by the Acquired Entity or the members of the Acquired Entity Board or its officers prior to the Closing Date, provided that such indemnification by the Acquired Entity is not (i) in violation of any applicable law or (ii) otherwise prohibited as a result of any applicable order or decree issued by any governing regulatory authority or court of competent jurisdiction.

10. BROKER FEES AND EXPENSES

10.1. The Acquiring Entity, on behalf of the Acquiring Fund, and the Acquired Entity, on behalf of the Acquired Fund, represent and warrant to each other that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein.

10.2. Legg Mason Partners Fund Advisor, LLC will pay the printing, proxy solicitation, mailing and postage costs of the Reorganization. Additional costs, including expenses related to the preparation and filing of the Registration Statement, legal fees and auditor fees, shall be divided equally between Legg Mason Partners Fund Advisor, LLC, on the one hand, and the Acquiring Entity and the Acquired Entity, on the other hand. Notwithstanding any of the foregoing, expenses will in any event be paid by the party directly incurring such expenses if and to the extent that the payment by another person of such expenses would result in the disqualification of such party as a “regulated investment company” within the meaning of Section 851 of the Code or would prevent the Reorganization from qualifying as a tax-free reorganization.

11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES

11.1. The Acquiring Entity and the Acquired Entity agree that neither party has made any representation, warranty or covenant, on behalf of either the Acquiring Fund or the Acquired Fund, respectively, not set forth herein and that this Agreement constitutes the entire agreement between the parties.

B-13

11.2. The covenants to be performed after the Closing by both the Acquiring Entity and the Acquired Entity, and the obligations of the Acquiring Entity, on behalf of the Acquiring Fund, in Article 9, shall survive the Closing. All other representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall not survive the consummation of the transactions contemplated hereunder and shall terminate on the Closing.

12. TERMINATION

This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date by resolution of either the Acquiring Entity Board or the Acquired Entity Board, if circumstances should develop that, in the opinion of that Board, make proceeding with the Agreement inadvisable with respect to the Acquiring Fund or the Acquired Fund, respectively. Any such termination resolution to be effective shall be promptly communicated to the other party and, in any event, prior to the Closing Date.

13. AMENDMENTS

This Agreement may be amended, modified or supplemented in such manner as may be deemed necessary or advisable by the authorized officers of the Acquired Entity and the Acquiring Entity; provided, however, that following the meeting of the Acquired Fund shareholders called by the Acquired Fund pursuant to paragraph 5.2 of this Agreement, no such amendment may have the effect of changing the provisions for determining the number of Acquiring Fund Shares to be issued to Acquired Fund shareholders under this Agreement to the detriment of such shareholders without their further approval.

14. NOTICES

Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by facsimile, electronic delivery (i.e., e-mail), personal service or prepaid or certified mail addressed to the Acquiring Entity or the Acquired Entity, at its address set forth in the preamble to this Agreement, in each case to the attention of its President.

15. HEADINGS; COUNTERPARTS; GOVERNING LAW; SEVERABILITY; ASSIGNMENT; LIMITATION OF LIABILITY

15.1. The Article headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

15.2. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.

15.3. This Agreement shall be governed by and construed and interpreted in accordance with the internal laws of the State of New York.

15.4. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.

Add the following provision if any party is a Mass. business trust:

15.5. The [Acquired Entity Charter] [Acquiring Entity Charter] is [are] on file with the Secretary of State of the Commonwealth of Massachusetts. Consistent with the [Acquired Entity Charter] [Acquiring Entity Charter], the obligations of the [Acquired Entity] [Acquiring Entity] with respect to the [Acquired Fund] [Acquiring Fund] entered into in the name or on behalf the [Acquired Entity] [Acquiring Entity] by any of its Trustees, officers, employees or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, officers, employees, agents or shareholders of the [Acquired Entity] [Acquiring Entity], personally, but bind only the assets of the [Acquired Entity] [Acquiring Entity] belonging to the [Acquired Fund] [Acquiring Fund], and all persons dealing with any series or funds of [Acquired Entity] [Acquiring Entity] must look solely to the assets of the [Acquired Entity] [Acquiring Entity] belonging to such series or fund for the enforcement of any claims against the [Acquired Entity] [Acquiring Entity].

B-14

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officer.

[ACQUIRING ENTITY], on behalf of its series [ACQUIRING FUND]		[ACQUIRED ENTITY], on behalf of its series [ACQUIRED FUND]
By:		By:
	Name: Title:		Name: Title:

Solely for purposes of paragraph 10.2 of this Agreement:

LEGG MASON PARTNERS FUND ADVISOR, LCC
By:
	Name: Title:

B-15

SCHEDULE 4.1

B-16

SCHEDULE 4.2

B-17

APPENDIX C

Purchases, Redemptions and Exchanges of Fund Shares—

Other Shareholder Information

This section describes the classes of shares that the Acquiring Fund will make available after the Reorganizations are effected and how shareholders may buy and sell Fund shares. It also describes how the Fund values its securities and the Fund’s policies on frequent trading of Fund shares.

SHARE TRANSACTIONS

Availability of the Fund

Individuals may not purchase shares directly from the Fund. You should read the prospectus for your insurance company’s variable contract to learn how to purchase a variable contract based on the Fund.

The Fund may sell its shares directly to separate accounts established and maintained by insurance companies for the purpose of funding variable annuity and variable life insurance contracts and to certain qualified pension and retirement plans. The variable insurance products and qualified plans may or may not make investments in the Fund described in this Proxy Statement/Prospectus. Shares of the Fund are sold at net asset value.

The interests of different variable insurance products and qualified plans investing in the Fund could conflict due to differences of tax treatment and other considerations. The Fund cur^rently does not foresee any disadvantages to investors arising from the fact that the Fund may offer its shares to different insurance company separate accounts that serve as the investment medium for their variable annuity and variable life products and to qualified plans. Nevertheless, the Board of Directors of the Fund intends to monitor events to identify any material irreconcilable conflicts which may arise, and to determine what action, if any, should be taken in response to these conflicts. If a conflict were to occur, one or more insurance companies’ separate accounts or qualified plans might be required to withdraw their investments in the Fund and shares of another fund may be substituted.

In addition, the sale of shares may be suspended or terminated if required by law or regulatory authority or if it is in the best interests of the Fund’s shareholders. The Fund reserves the right to reject any specific purchase order.

Class II shares of the Fund are subject to a distribution fee and are offered through a separate prospectus to separate accounts established and maintained by insurance companies for the purpose of funding variable annuity and variable life insurance contracts and to certain qualified pension and retirement plans.

Certain insurance companies may have selected, and the distributors may have made available, Class II shares with service and distribution related fees that are higher than Class I shares. As a result of any higher fees paid by investors in Class II shares, the amount of fees that may otherwise need to be paid by the distributors or their affiliates to such insurance company would decrease.

Redemption of shares

Redemption requests may be placed by separate accounts of participating insurance companies and by qualified plans. The redemption price of the shares of the Fund will be the net asset value next determined after receipt by the Fund or its agent of a redemption request in good order. The value of redeemed shares may be more or less than the price paid for the shares. Sales proceeds will normally be forwarded by bank wire to the selling insurance company or qualified plan on the next business day after receipt of a redemption request in good order but in no event later than 7 days following receipt of instructions. The Fund may suspend sales or postpone payment dates during any period in which any of the following conditions exist:

• The New York Stock Exchange (the “NYSE”) is closed;

• Trading on the NYSE is restricted;

• An emergency exists as a result of which disposal by the Fund of securities is not reasonably practicable or it is not reasonably practicable for the Fund to fairly determine the value of its net assets; or

• As permitted by an Securities and Exchange Commission (“SEC”) order in extraordinary circumstances.

C-1

Frequent purchases and sales of Fund shares

Frequent purchases and redemptions of mutual fund shares may interfere with the efficient management of a fund’s portfolio by its portfolio manager, increase portfolio transaction costs, and have a negative effect on a fund’s long-term shareholders. For example, in order to handle large flows of cash into and out of a fund, the portfolio manager may need to allocate more assets to cash or other short-term investments or sell securities, rather than maintaining full investment in securities selected to achieve the fund’s investment objective. Frequent trading may cause a fund to sell securities at less favorable prices. Transaction costs, such as brokerage commissions and market spreads, can detract from the fund’s performance. In addition, the return received by long term shareholders may be reduced when trades by other shareholders are made in an effort to take advantage of certain pricing discrepancies, when, for example, it is believed that the fund’s share price, which is determined at the close of the NYSE on each trading day, does not accurately reflect the value of the fund’s portfolio securities. Funds investing in foreign securities have been particularly susceptible to this form of arbitrage, but other funds could also be affected.

Because of the potential harm to the Fund and its long-term shareholders, the Board of Directors of the Fund (the “Board”) has approved policies and procedures that are intended to discourage and prevent excessive trading and market timing abuses through the use of various surveillance techniques. Under these policies and procedures, the Fund may limit additional exchanges or purchases of Fund shares by shareholders who are believed by the manager to be engaged in these abusive trading activities. The intent of the policies and procedures is not to inhibit legitimate strategies, such as asset allocation, dollar cost averaging, or similar activities that may nonetheless result in frequent trading of fund shares. For this reason, the Board has not adopted any specific restrictions on purchases and sales of Fund shares, but the Fund reserves the right to reject any exchange or purchase of Fund shares with or without prior notice to the account holder. In cases where surveillance of a particular account establishes what the manager believes to be obvious market timing, the manager will seek to block future purchases and exchanges of fund shares by that account.

Where surveillance of a particular account indicates activity that the manager believes could be either abusive or for legitimate purposes, the Fund may permit the account holder to justify the activity.

The Fund’s shares are offered exclusively to insurance company separate accounts that fund certain insurance contracts, and insurance companies typically hold shares for a number of insurance contracts in a single account. Although the policies and procedures discussed above apply to any account, including such insurance companies separate accounts, the Fund’s ability to monitor trading in these accounts may be severely limited due to the lack of access to an individual investor’s trading activity when orders are placed through these types of accounts. There may also be operational and technological limitations on the ability of the Fund’s service providers to identify or terminate frequent trading activity within the various types of omnibus accounts.

The Fund’s policies and procedures also require personnel such as portfolio managers and investment staff to report any abnormal or otherwise suspicious investment activity, and prohibits short-term trades by such personnel for their own account in mutual funds managed by the manager and its affiliates, other than money market funds. Additionally, the Fund has adopted policies and procedures to prevent the selective release of information about its portfolio holdings, as such information may be used for market timing and similar abusive practices.

The Fund’s policies and procedures provide for ongoing assessment of the effectiveness of current policies and surveillance tools, and the Board reserves the right, with notification to shareholders, to modify these or adopt additional policies and restrictions in the future. Shareholders should be aware, however, that any surveillance techniques currently employed by the funds or other techniques that may be adopted in the future, may not be effective, particularly where the trading takes place through certain types of omnibus accounts. As noted above, if the Fund is unable to detect and deter trading abuses, its performance, and long-term shareholders, may be harmed. In addition, because the Fund has not adopted any specific limitations or restrictions on the trading of Fund shares, shareholders may be harmed by the extra costs and portfolio management inefficiencies that result from frequent trading of Fund shares, even when the trading is not for abusive purposes. The Fund will provide advance notice to its shareholders and prospective investors of any specific restrictions on the trading of Fund shares that the Board may adopt in the future.

Share price

The price of Fund shares is based on the Fund’s net asset value. The Fund’s net asset value is the value of its assets minus its liabilities. The Fund calculates its net asset value every day the NYSE is open and when regular trading closes on the NYSE (normally 4:00 p.m., Eastern time).

C-2

The Board of Directors has approved procedures to be used to value the Fund’s securities for the purposes of determining the Fund’s net asset value. The valuation of the securities of the Fund is determined in good faith by or under the direction of the Board of Directors. The Board of Directors has delegated certain valuation functions for the Fund to the manager.

The Fund generally values its securities based on market prices determined at the close of regular trading on the NYSE. The Fund’s currency valuations, if any, are done as of when the London stock exchange closes, which is usually at 12 noon Eastern time. For equity securities that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of securities not traded on an exchange, or if such closing prices are not otherwise available, the market price is typically determined by independent third party pricing vendors approved by the fund’s Board using a variety of pricing techniques and methodologies. The market price for debt obligations is generally the price supplied by an independent third party pricing service approved by the Fund’s board, which may use a matrix, formula or other objective method that takes into consideration market indices, yield curves and other specific adjustments. Short-term debt obligations that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. If vendors are unable to supply a price, or if the price supplied is deemed by the manager to be unreliable, the market price may be determined using quotations received from one or more broker/dealers that make a market in the security.

When such prices or quotations are not available, or when the manager believes that they are unreliable, the manager will price securities using fair value procedures approved by the Board. Funds that invest in securities that may be thinly traded, for which market quotations may not be readily available or may be unreliable-such as securities of small capitalization companies, securities of issuers located in emerging markets or high yield securities (junk bonds)-may use the fair valuation procedures more frequently than funds that invest primarily in securities that are more liquid-such as securities of large capitalization domestic issuers. The Fund may also use fair value procedures if the manager determines that a significant event has occurred between the time at which a market price is determined and the time at which the Fund’s net asset value is calculated. In particular, the value of foreign securities may be materially affected by events occurring after the close of the market on which they are valued, but before the Fund prices its shares. The Fund uses a fair value model developed by an independent third party pricing service to price foreign equity securities on days when there is a certain percentage change in the value of a domestic equity security index, as such percentage may be determined by the manager from time to time.

Valuing securities at fair value involves greater reliance on judgment than valuation of securities based on readily available market quotations. A fund that uses fair value to price securities may value those securities higher or lower than another fund using market quotations or its own fair value methodologies to price the same securities. There can be no assurance that the fund could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the fund determines its net asset value.

The Fund may invest in securities that are listed on foreign exchanges that trade on weekends and other days when the Fund does not price its shares. Therefore, the value of the Fund’s shares may change on days when you will not be able to purchase or redeem the Fund’s shares.

In order to buy, redeem or exchange shares at that day’s price, an insurance company separate account or a qualified plan, as agent for the Fund, must receive the orders from its underlying account holders before the NYSE closes. If the NYSE closes early, the orders must be received prior to the actual closing time. Otherwise, the investor will receive the next business day’s price. The insurance company separate account or qualified plan must then transmit orders received prior to the NYSE close to the Fund’s transfer agent before the transfer agent’s close of business.

Distributions and taxes

The Fund has elected to be treated, and intends to qualify each year, as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986 (the “Code”), as amended. In order to qualify to be taxed as a regulated investment company, the Fund must meet certain income and diversification tests and distribution requirements. As a regulated investment company meeting these requirements, the Fund will not be subject to federal income tax on its net investment income and net capital gains that it distributes to its shareholders. All income and capital gain distributions are automatically reinvested in additional shares of the Fund at net asset value and are includable in gross income of the separate accounts holding such shares. See the contract prospectus for information regarding the federal income tax treatment of distributions to the separate accounts and to holders of the contracts.

Participating insurance companies should consult their tax advisors about federal, state and local tax consequences.

C-3

APPENDIX D

Comparison of Investment Objectives, Principal Investment Strategies and Management

The following chart lists the investment objective, principal investment policies, manager and portfolio manager. The chart provides a side-by-side comparison for shareholders of the Acquired Funds. For a more detailed analysis, including risk factors, please review the section “Comparison of Investment Objectives, Strategies and Principal Risks of Investing in the Fund” in the Proxy Statement/Prospectus.

Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) and Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund)

	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund)
Investment Objective	Capital appreciation.	Capital appreciation.
Principal Investment Policies	The Fund invests primarily in common stocks of companies the manager believes are experiencing, or will experience, growth in earnings that exceeds the average rate of earnings growth of the companies comprising the S&P 500 Index. The Fund may invest in the securities of large, well-known companies that offer prospects of long-term earnings growth. However, because higher earnings growth rates are often achieved by small to medium-sized companies, a significant portion of the Fund’s assets may be invested in the securities of such companies. The Fund may invest up to 15% of its net assets in restricted securities, as defined under the 1933 Act. The Fund may invest up to 10% of its assets in foreign securities, including securities denominated other than in U.S. dollars. The Fund is diversified.	The Fund invests primarily in common stocks of companies the manager believes are experiencing, or will experience, growth in earnings and/or cash flow that exceeds the average rate of earnings growth of the companies that comprise the S&P 500 Index. The Fund may invest in the securities of large, well-known companies that offer prospects of long-term earnings growth. However, a significant portion of the Fund’s assets may be invested in the securities of small to medium-sized companies because such companies often achieve higher earnings growth rates. The Fund may invest in special situations involving new management, special products and techniques, unusual developments, mergers or liquidations. The Fund may invest up to 20% of its total assets in securities of foreign issuers. The Fund may use derivatives to hedge its investments, as a substitute for buying and selling securities or as a cash flow management technique. For cash management purposes, the Fund may hold up to 35% of the total value of its assets in cash and invest in short-term instruments. The Fund may not invest in a master demand note if as a result more than 10% of the value of the Fund’s total assets would be invested in such notes and other illiquid securities. The Fund may invest up to 15% of the value of its net assets in restricted securities and in other securities that are not readily marketable, including repurchase agreements maturing in more than seven days. The Fund is diversified.

D-1

	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)	Legg Mason Partners Variable Aggressive Growth Portfolio (A) (Acquired Fund)
Principal Investment Strategies	The Fund emphasizes individual security selection while diversifying the Fund’s investments across industries, which may help to reduce risk. The Fund focuses primarily, but not exclusively, on emerging growth companies that have passed their “start-up” phase and show positive earnings and the prospect of achieving significant profit gains in the two to three years after the Fund acquires their stocks. When evaluating an individual stock, the manager considers whether the company may benefit from: •      New technologies, products or services; •      New cost reduction measures; •      Changes in management; or Favorable changes in government regulations.	The Fund emphasizes individual security selection while diversifying the Fund’s investments across industries, which may help to reduce risk. The Fund focuses primarily, but not exclusively, on emerging growth companies that have passed their “start-up” phase and show positive earnings and the prospect of achieving significant profit gains in the two to three years after the Fund acquires their stocks. When evaluating an individual stock, the manager considers whether the company may benefit from: •      New technologies, products or services; •      New cost reducing measures; or •      Changes in management.
Investment Manager/ Sub-Adviser	LMPFA/ClearBridge	LMPFA/ClearBridge
Portfolio Manager	Richard A. Freeman	Richard A. Freeman

D-2

Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund) and Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund)

	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund)
Investment Objective	Capital appreciation.	Long-term capital growth.
Principal Investment Policies	The Fund invests primarily in common stocks of companies the manager believes are experiencing, or will experience, growth in earnings that exceeds the average rate of earnings growth of the companies comprising the S&P 500 Index. The Fund may invest in the securities of large, well-known companies that offer prospects of long-term earnings growth. However, because higher earnings growth rates are often achieved by small to medium-sized companies, a significant portion of the Fund’s assets may be invested in the securities of such companies. The Fund may invest up to 15% of its net assets in restricted securities, as defined under the 1933 Act. The Fund may invest up to 10% of its assets in foreign securities, including securities denominated other than in U.S. dollars. The Fund is diversified.	The Fund invests in the equity securities of growth companies. It is made up of a large cap growth segment, a mid cap growth segment and a small cap growth segment. Target allocations are 40% to the large cap growth segment and 30% to each of the mid cap and small cap growth segments. The Large Cap Growth segment invests primarily in equity securities of companies with large market capitalizations. Large capitalization companies are those whose market capitalizations are within the market capitalization range of companies in the Russell 1000 Growth Index at the time of this segment’s investment. The Mid Cap Growth segment invests primarily in equity securities of medium sized companies. Medium sized companies are those whose market capitalizations are within the market capitalization range of companies in the S&P MidCap 400 Index at the time of this segment’s investment. The Small Cap Growth segment invests primarily in equity securities of companies with small market capitalizations. Small capitalization companies are those whose market capitalizations are within the market capitalization range of companies in the Russell 2000 Growth Index at the time of this segment’s investment. The Fund may invest up to 25% of its assets in foreign securities, including those of issuers in emerging market countries and without regard to denomination. The Fund may use derivative contracts to hedge its investments, as a substitute for buying or selling securities, as a cash flow management technique, or to enhance its return. The Fund may engage in short sales (the losses from which may be unlimited). While the Fund intends to be substantially fully invested in equity securities, it may maintain a portion of its assets (normally not more than 10%) in money market instruments and/or cash to pay expenses and meet redemption requests. The Fund is diversified.

D-3

	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund)
Principal Investment Strategies	The Fund emphasizes individual security selection while diversifying the Fund’s investments across industries, which may help to reduce risk. The Fund focuses primarily, but not exclusively, on emerging growth companies that have passed their “start-up” phase and show positive earnings and the prospect of achieving significant profit gains in the two to three years after the Fund acquires their stocks. When evaluating an individual stock, the manager considers whether the company may benefit from: •      New technologies, products or services; •      New cost reduction measures; •      Changes in management; or Favorable changes in government regulations.	The Fund’s strategy is to combine the efforts of three segment managers and to invest in the stock selections considered most attractive in the opinion of each segment manager. Each segment manager builds a portfolio of stocks which the segment manager believes will offer superior long-term capital growth potential. The amount to be invested by the Fund in any particular security will be determined by the Fund’s manager, based on the recommendation of the segment managers. The manager will take steps to maintain the target allocations, which may result in additional transaction costs. The large cap growth segment manager emphasizes individual security selection while diversifying this segment of the Fund’s investments across industries, which may help to reduce risk. The segment manager attempts to identify established large capitalization companies with the highest growth potential. The segment manager then analyzes each company in detail, ranking its management, strategy and competitive market position (as well as its earnings prospects, cash flow, financial condition, and return on equity). Finally, the segment manager attempts to identify the best values available among the growth companies identified. The mid cap growth segment manager focuses on medium capitalization companies that exhibit attractive growth characteristics. The segment manager selects individual “growth” stocks for investment in two ways: by identifying those companies thought to have the most favorable growth prospects and by identifying those companies in the Mid Cap Growth segment’s size range which have favorable valuations relative to their growth characteristics. This strategy is commonly known as “growth at a reasonable price” and offers investors style diversification. The segment manager uses fundamental research to find stocks with strong growth potential and also uses quantitative analysis to determine whether these stocks are relatively undervalued or overvalued compared to stocks with similar fundamental characteristics. The segment manager considers, among other things, the growth characteristics and management of an issuer.

D-4

	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (Acquiring Fund)	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (Acquired Fund)
		•   The small cap growth segment manager focuses on small capitalization companies that exhibit attractive growth characteristics. The segment manager uses a disciplined investment process to identify small growth companies believed to be financially sound and that exhibit the potential to become much larger and more successful. Elements of this process include fundamental research, evaluation of key management and screening techniques. The segment manager examines, among other things, the growth characteristics and management of an issuer.
Investment Manager/ Sub-Adviser	LMPFA/ClearBridge	LMPFA/ClearBridge
Portfolio Manager	Richard A. Freeman	Alan Blake (Large Cap Growth segment), Brian M. Angerame and Derek J. Deutsch (Mid Cap Growth segment) and Timothy Woods (Small Cap Growth segment)

D-5

APPENDIX E

Form of Organization

Fund	Organization
Legg Mason Partners Variable Aggressive Growth Portfolio (A)	Series of a Massachusetts business trust
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	Series of a Massachusetts business trust
Legg Mason Partners Variable Aggressive Growth Portfolio (B)	Series of a Maryland corporation

E-1

APPENDIX F

Similarities and Differences in the Forms of Organization of the Acquired Funds and the Acquiring Fund

Comparison of Maryland Corporations and Massachusetts Trusts

In General

A fund organized as a Massachusetts Trust (a “Massachusetts Trust”) is governed by its declaration of trust or similar instrument. Massachusetts law allows the trustees of a business trust to set the terms of a fund’s governance in its declaration. All power and authority to manage the fund and its affairs generally reside with the trustees, and shareholder voting and other rights are limited to those provided to the shareholders in the declaration. Because Massachusetts law governing business trusts provides so much flexibility compared to typical state corporate statutes, the Massachusetts Trust has become a common form of organization for mutual funds. However, some consider it less desirable than other entities because it relies on the terms of the applicable declaration and judicial interpretations rather than statutory provisions for substantive issues, such as the personal liability of shareholders and trustees, and does not provide the level of certitude that corporate laws like those of Maryland, or newer statutory trust laws, provide.

A fund organized as a Maryland Corporation (a “Maryland Corporation”), on the other hand, is governed both by the Maryland General Corporation Law (the “MGCL”) and the Maryland Corporation’s charter. For a Maryland Corporation, unlike a Massachusetts Trust, the MGCL prescribes many aspects of Corporate governance.

Shareholders of a Maryland Corporation generally are shielded from personal liability for the corporation’s debts or obligations. Shareholders of a Massachusetts Trust, on the other hand, are not afforded the limitation of personal liability generally afforded to shareholders of a corporation from the trust’s liabilities. Instead, a fund’s declaration of trust typically provides that a shareholder will not be liable, and further provides for indemnification to the extent that a shareholder is found personally liable, for the fund’s acts or obligations. The declaration of each Fund organized as a Massachusetts Trust (a “Massachusetts Fund”) contains such provisions.

Similarly, the trustees of a Massachusetts Trust are not afforded the protection from personal liability for the obligations of the trust by form of organization. The directors of a Maryland Corporation, on the other hand, generally are shielded from personal liability for the corporation’s acts or obligations under the corporate form of organization. Courts in Massachusetts have, however, recognized limitations of a trustee’s liability in contract actions for the obligations of a trust contained in the trust’s declaration, and declarations may also provide that trustees may be indemnified out of the assets of the trust to the extent held personally liable. The declarations for each of the Massachusetts Funds contain such provisions.

As a result of the initiatives discussed in “Effect of Proposed Shell Reorganizations of the Funds,” it is proposed that each Fund will become a series of a Maryland business trust. More information may be found under “Discussion of Maryland Trusts.”

Maryland Corporations

Each Maryland Corporation is governed by the MGCL, its charter and Bylaws. Some of the key provisions of the MGCL, the charters and Bylaws are summarized below. Although the Maryland corporations’ charters and Bylaws contain some very similar provisions, there are differences in a number of provisions. The following is a summary of the MGCL, the charter and Bylaws of each Maryland Corporation and is qualified in its entirety for each Maryland Corporation by reference to the MGCL and its charter and Bylaws.

Shareholder Voting

Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, or engage in a statutory share exchange, merger or consolidation unless approved by a vote of shareholders. Depending on the circumstances and the charter of the corporation, there may be various exceptions to these votes. Shareholders of Maryland corporations are generally entitled to one vote per share and fractional votes for fractional shares held. For each of the Maryland Corporations, shareholders of all series and classes vote together as a single class, except as otherwise required by the 1940 Act or required or permitted by their charters.

F-1

Election and Removal of Trustees

Shareholders of a Maryland corporation may vote on the election and removal of directors. Maryland law does not require a corporation registered as an open-end investment company to hold annual meetings in any year that the election of directors is not required under the 1940 Act. Each Maryland corporation will call a meeting of shareholders whenever required by the 1940 Act to elect directors.

The charter of each Maryland Corporation generally provides that its Board has the power to set the number of directors and, in most circumstances, to fill vacancies except when the 1940 Act requires that a vacancy be filled by the shareholders. Directors are elected by a plurality vote and serve until their successors are elected and qualify.

Amendments to the Charter

Under the MGCL, shareholders of corporations registered as open-end investment companies are entitled to vote on amendments to the charter. However, the board of directors of an open-end investment company is authorized, without a vote of the shareholders, to amend the charter to change the name of the corporation, to change the name or designation of any class or series of stock and to change the par value of the authorized shares. The board of directors is also authorized to supplement the charter to increase the number of authorized shares or the number of shares in any class or series.

Issuance and Redemption of Shares

The board of directors of each Maryland Corporation has the power to authorize the issuance of stock and, prior to issuance of shares of each class or series, the board of directors of each Maryland Corporation is required by Maryland law to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. A Maryland corporation registered an open-end investment company may involuntarily redeem a shareholder’s shares under certain circumstances, unless prohibited by the charter.

Series and Classes

The 1940 Act provides that an investment company may have multiple series and classes, and provides rules for the equitable treatment of holders and series and classes, including for the separate voting rights of series and classes, and for the differential fees that may be charged to different classes. The charters of the Maryland corporations generally do not restrict the authority to directors within this statutory framework to establish series and classes in addition to those currently established and to determined the rights and preferences of the shares of the series and classes.

Shareholder, Trustee and Officer Liability

Under Maryland law, shareholders generally are not personally liable for debts or obligations of a corporation. With respect to directors, the MGCL provides that a director who has met his or her statutory standard of conduct has no liability for reason of having been a director. The charter of the Acquiring Fund does contain such a provision which eliminates such liability to the maximum extent permitted by the MGCL. The charter of the Acquiring Fund generally provides for mandatory indemnification of directors and officers (including the advance of expenses) to the extent required or permitted by Maryland law. The indemnification provisions and the limitation on liability are both subject to any limitations of the 1940 Act, which generally provides that no director or officer shall be protected from liability to the corporation or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. The provisions governing the advance of expenses are subject to applicable requirements of the 1940 Act or rules thereunder.

Derivative Actions

There are no provisions relating to shareholder derivative actions in the charters of any of the Maryland Corporations. Under Maryland law, applicable case law at the time of a particular derivative action will establish any requirements or limitations with respect to shareholder derivative actions.

F-2

Massachusetts Funds

Each Massachusetts Fund is governed by its own declaration of trust (each, a “Massachusetts Fund Declaration”). Although the Massachusetts Fund Declarations contain some very similar provisions, there are differences in a number of provisions. Some of the key provisions of the Massachusetts Fund Declarations are summarized below. Each is qualified in its entirety for each Massachusetts Trust by reference to its Declaration.

Shareholder Voting

The 1940 Act requires a vote of shareholders on matters that Congress has determined might have a material effect on shareholders and their investments. For example, shareholder consent is required under the 1940 Act to approve new investment advisory agreements in many cases, an increase in an advisory fee or a 12b-1 fee, changes to fundamental policies, the election of directors or trustees in certain circumstances, and the merger or reorganization of a fund in certain circumstances, particularly where the merger or consolidation involves an affiliated party. Shareholders of the Massachusetts Funds are generally entitled to vote only on matters required by the 1940 Act or other applicable laws and certain other matters, including (i) the election and removal of trustees, (ii) with respect to certain amendments to the Massachusetts Fund Declaration; and (iii) in connection with certain mergers, consolidations or sales of assets.

The 1940 Act does not require funds to hold an annual meeting of shareholders and none of the Massachusetts Funds are required to hold such meetings. Each Massachusetts Fund will call a special meeting of shareholders whenever required by the 1940 Act or by the terms of the Massachusetts Fund Declaration. The Massachusetts Funds Declarations provide for “dollar-weighted voting” which means that a shareholder’s voting power is determined, not by the number of shares he or she owns, but by the dollar value of those shares determined on the record date. For each of the Massachusetts Funds shareholders of all series and classes vote together, except where required by the 1940 Act to vote separately by series or by class, or when the trustees have determined that a matter affects only the interests of one or more series or classes of shares.

Election and Removal of Trustees

The Massachusetts Fund Declarations provide that the trustees determine the size of the board of trustees. Each also provides that vacancies on the board of trustees may be filled by the remaining trustees, except when election by the shareholders is required under the 1940 Act. Trustees are then elected by a plurality vote of the shareholders. The Massachusetts Fund Declarations provide that trustees may be removed by vote of shareholders holding two-thirds of the voting power of the trust, or by vote of two-thirds of the remaining trustees.

Amendments to the Declaration

The trustees of each Massachusetts Fund are authorized to amend the Massachusetts Fund Declaration without the vote of shareholders only in limited circumstances. Shareholders of the Massachusetts Funds are entitled to vote only on amendments that would adversely affect the rights of shareholders to whom the amendment is applicable.

Each Massachusetts Fund Declaration places restrictions on amendments that may impair the exemption from personal liability granted in the Massachusetts Fund Declaration to the shareholders, trustees, officers, employees and agents of the Massachusetts Fund or that permit assessments upon shareholders or former shareholders. In addition, some of the Massachusetts Fund Declarations prohibit amendments that would limit the rights to indemnification or insurance provided in the Massachusetts Fund Declaration with respect to actions or omissions of persons entitled to indemnification under the Massachusetts Fund Declaration prior to the amendment.

Issuance and Redemption of Shares

The trustees of each Massachusetts Fund are permitted to issue an unlimited number of shares for such consideration and on such terms as the trustees may determine. Shareholders are not entitled to any preference, preemptive, conversion, exchange or similar rights, expect as the trustees may determine. The Massachusetts Fund Declarations provide that a shareholder may redeem his or her shares at the price determined in accordance with the Massachusetts Fund Declaration. The Massachusetts Fund Declarations provide that the Massachusetts Fund may involuntarily redeem a shareholder’s shares upon such conditions as may be determined by the trustees.

F-3

Series and Classes

The 1940 Act provides that an investment company may have multiple series and classes, and provides rules for the fair and equitable treatment of holders of series and classes, including for the separate voting rights of series and classes, and for the differential fees that may be charged to different classes. The Massachusetts Fund Declarations give broad authority to the trustees within this statutory framework to establish series and classes in addition to those currently established and to determine the rights and preferences of the shares of the series and classes, and to change those rights and preferences from time to time. The trustees are also authorized to terminate a series or a class at any time without a vote of shareholders. Each Massachusetts Fund Declaration provides that shares of a series represent an interest in that series only, and not in the assets of any other series or the Massachusetts Fund generally.

Shareholder, Trustee and Officer Liability

The Massachusetts Fund Declarations provide that shareholders have no personal liability for the obligations of the Massachusetts Fund and require the Massachusetts Fund to indemnify a shareholder from any loss or expense arising from any such liability. In addition, the Massachusetts Fund will assume the defense of any claim against a shareholder for personal liability at the request of the shareholder. Similarly, the Massachusetts Fund Declarations provide that any person who is or has been a trustee, officer or employee of the Massachusetts Fund is not personally liable to any person in connection with the affairs of the Massachusetts Fund, other than the Massachusetts Fund and its shareholders. The Massachusetts Fund Declarations also provide that trustees may rely on expert advice, and will not be liable for errors of judgment or mistakes of fact or law. The Massachusetts Fund Declarations further provide that a trustee or officer is not liable to the Massachusetts Fund or to any shareholder for any actions or failure to act, and require the Massachusetts Fund to indemnify such persons for any liability and expenses incurred by such person, except in the case of his or her own bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties involved in the conduct of the individual’s office with the Massachusetts Fund. The Massachusetts Fund Declarations provide that the Massachusetts Fund may advance to a trustee or officer the expenses of preparation and presentation of a defense to any claims brought, under certain circumstances.

Derivative Actions

The Massachusetts Fund Declarations provide that shareholders have the right to vote to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the trust or the shareholders.

Discussion of Maryland Trusts

Shareholder Voting

The 1940 Act requires a vote of shareholders on matters that Congress has determined might have a material effect on Shareholders and their investments. For example, shareholder consent is required under the 1940 Act to approve new investment advisory agreements in most cases, an increase in an advisory fee or a 12b-1 fee, changes to fundamental policies, the election of directors or trustees in certain circumstances, and the merger or reorganization of a fund in certain circumstances, particularly where the merger or consolidation involves an affiliated party. Each Declaration of a Maryland Trust provides for shareholder voting as required by the 1940 Act or other applicable laws but otherwise permits, consistent with Maryland law, actions by the trustees without seeking the consent of shareholders. For example, the trustees may amend the Declaration in any respect without shareholder approval. This provision permits the trustees to act quickly in response to competitive or regulatory conditions without the cost and delay of a shareholder meeting when the trustees believe that the amendment is in the interests of shareholders. Similarly, the trustees have broad authority to provide for the merger or consolidation of the trust into another trust or entity, to reorganize the trust, or any series or class into another trust or entity or a series or class of another entity, to sell all or substantially all of the assets of the trust or any series or class to another entity, or a series or class of another entity, or to terminate the trust or any series or class.

The 1940 Act does not require funds to hold an annual meeting of shareholders, and the Maryland Trusts do not require such meetings. Each Maryland Trust will call special meetings of shareholders whenever required by the 1940 Act or by the terms of the declaration. The Declarations provide for “dollar-weighted voting” which means that a shareholder’s voting power is determined, not by the number of shares he or she owns, but by the dollar value of those shares determined on the

F-4

Record Date. The Declarations provide that shareholders of all series and classes vote together, except where required by the 1940 Act to vote separately by series or by class, or when the trustees have determined that a matter affects only the interests of one or more series or classes of shares.

Election and Removal of Trustees

The Declarations provide that the trustees establish the number of trustees. The Declarations also provide that vacancies on the Board may be filled by the remaining trustees, except when election of trustees by the shareholders is required under the 1940 Act. Trustees are then elected by a plurality of votes cast of the shareholders at a meeting at which a quorum is present. The Declarations also provide that a mandatory retirement age may be set by action of two-thirds of the trustees and that trustees may be removed, with or without cause, by vote of shareholders holding two-thirds of the voting power of the trust, or by vote of two-thirds of the remaining trustees. The provisions of the Declarations relating to the election and removal of trustees may not be amended without the approval of two-thirds of the trustees.

Amendments to the Declaration

The trustees of each Maryland Trust are authorized to amend the Declarations in any respect without the vote of shareholders except in certain circumstances. Each Declaration prohibits amendments that impair the exemption from personal liability granted in the Declaration to persons who are or have been shareholders, trustees, officers or, employees of the Maryland Trust or that limit the rights to indemnification or insurance provided in the Declaration with respect to actions or omissions of persons entitled to indemnification under the Declaration prior to the amendment.

Issuance and Redemption of Shares

The trustees of each Maryland Trust are permitted to cause the Maryland Trust issue an unlimited number of shares for such consideration and on such terms as the trustees may determine. Shareholders are not entitled to any appraisal, preemptive, conversion, exchange or similar rights, expect as the trustees may determine. The Declarations provide that a shareholder may redeem his or her shares at the price determined in accordance with the Declaration. The Declarations also provide that a Maryland Trust may involuntarily redeem a shareholder’s shares upon such conditions as may be determined by the trustees, giving the Maryland Trust the flexibility that may be needed to comply with recently enacted legislation such as the USA PATRIOT Act. For example, a shareholder’s shares may be redeemed if the shareholder fails to provide the Maryland Trust with identification required by that Act, or if the Maryland Trust is unable to verify the information received from the shareholder.

Disclosure of Shareholder Holdings

The Declarations specifically require shareholders, upon demand, to disclose to the Maryland Trust information with respect to the direct and indirect ownership of shares in order to comply with various laws or regulations, and the Maryland Trust may disclose such ownership if required by law or regulation.

Small Accounts

Small accounts can be very costly to a fund and all of its shareholders and the Declaration gives the trustees the authority to deal with small accounts in a number of ways. Typically, the only way a fund has been able to deal with these accounts has been to close out the shareholder’s account by redeeming all of the shares in the account, even if the shareholder would like to continue his or her investment in the fund. Under the Declarations, the Maryland Trust would be permitted to assess a fee for small accounts and redeem shares in the account to cover such fees, or convert the shares into another share class that is geared to smaller accounts.

Series and Classes

The 1940 Act provides that an investment company may have multiple series and classes, and provides rules for the fair and equitable treatment of holders of series and classes, including for the separate voting rights of series and classes, and for the differential fees that may be charged to different classes. Each of the Maryland Trusts has been established as a series of a Maryland Trust. The Declarations give broad authority to the trustees within this statutory framework, and consistent with

Maryland law, to establish series and classes in addition to those currently established and to determine the rights and

F-5

preferences, limitations and restrictions, including qualifications for ownership, conversion and exchange features, minimum purchase and account size, expenses and charges, and other features of the series and classes. The Declarations also give authority to the trustees to change any of those features, to terminate any series or class, and to combine series with other series in the trust, or to combine one of more classes of a series with another class in that series. For example, if a Fund has one or more classes with few shares outstanding, the Fund may combine one or more of its classes with another of its classes, or convert shares of one class into shares of another class, thus permitting the closure of small classes, and decreasing both costs and administrative burdens.

Each share of a Fund represents an interest in that Fund only, and not in the assets of any other Fund generally.

Shareholder, Trustee and Officer Liability

The Declarations provide that shareholders are not personally liable for the obligations of a Maryland Trust and require the Maryland Trust to indemnify a shareholder from any loss or expense arising from any such liability. In addition, the Maryland Trust will assume the defense of any claim against a shareholder for personal liability at the request of the shareholder. Similarly, the Declarations provide that a trustee acting in his or her capacity of trustee is not personally liable to any person other than the Maryland Trust or theirs shareholders, for any act, omission, or obligation of the trust. Further, a trustee is held to the same standard of conduct as a director of a Maryland corporation. This requires that a trustee perform his or her duties in good faith and in a manner he or she reasonably believes to be in the best interests of the Maryland Trust, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Each Declaration also permits the limitation of a trustee’s liability to the full extent provided under Maryland law. Under Maryland law, a trustee is liable to the Maryland Trust or its shareholders for monetary damages only (i) to the extent that it is proved that he or she actually received an improper benefit or profit in money, property, or services or (ii) to the extent that a judgment or other final adjudication adverse to the trustee is entered in a proceeding based on a finding in the proceeding that the trustee’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. The Declarations require the Maryland Trust to indemnify any persons who are or who have been trustees, officers or employees of the trust for any liability for actions or failure to act except to the extent prohibited by applicable federal law. Under the 1940 Act, a trustee or officer may not be indemnified by the Trust for his or her own willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. In making any determination as to whether any person is entitled to the advancement of expenses in connection with a claim for which indemnification is sought, such person is entitled to a rebuttable presumption that he or she did not engage in conduct for which indemnification is not available.

The Declarations also clarify that any trustee who serves as chair of the board or of a committee of the board, lead independent trustee, or audit committee financial expert, or in any other similar capacity will not be subject to any greater standard of care or liability because of such position.

Derivative Actions

The Declaration provides a detailed process for the bringing of derivative actions by shareholders in order to permit legitimate inquiries and claims while avoiding the time, expense, distraction, and other harm that can be caused to a Maryland Trust or its shareholders as a result of spurious shareholder demands and derivative actions. Prior to bringing a derivative action, a demand by three unrelated shareholders must first be made on the Maryland Trust’s trustees. The Declaration details various information, certifications, undertakings and acknowledgements that must be included in the demand. Following receipt of the demand, the trustees have a period of 90 days, which may be extended by an additional 60 days, to consider the demand. If a majority of the trustees who are considered independent for the purposes of considering the demand determine that maintaining the suit would not be in the best interests of the Maryland Trust, the trustees are required to reject the demand and the complaining shareholders may not proceed with the derivative action unless the shareholders are able to sustain the burden of proof to a court that the decision of the trustees not to pursue the requested action was not a good faith exercise of their business judgment on behalf of the Maryland Trust. The Declaration further provides that shareholders owning shares representing at least 5% of the voting power of the affected Maryland Trust must join in bringing the derivative action. If a demand is rejected, the complaining shareholders will be responsible for the costs and expenses (including attorneys’ fees) incurred by the Maryland Trust in connection with the consideration of the demand, if in the judgment of the independent trustees, the demand was made without reasonable cause or for an improper purpose. If a derivative action is brought in violation of the Declaration, the shareholders bringing the action may be responsible for the Maryland Trust’s costs, including attorneys’ fees.

F-6

The Declarations also require that actions by shareholders against a Maryland Trust be brought only in federal court in Baltimore, Maryland, or if not permitted to be brought in federal court, then in state court in Baltimore, Maryland, and that the right to jury trial be waived to the full extent permitted by law.

Each of the Funds is currently a Maryland Corporation, and each operates under charter documents that cover many of the same provisions discussed above. However, in most cases it is expected that the Declarations for the Maryland Trusts will provide broader authority to the trustees than the existing charters.

F-7

APPENDIX G

Portfolio Manager Compensation

ClearBridge.    ClearBridge investment professionals receive base salary and other employee benefits and are eligible to receive incentive compensation. Base salary is fixed and typically determined based on market factors and the skill and experience of individual investment personnel. ClearBridge investment professionals who are employed concurrently by ClearBridge and also by another investment manager affiliated with Legg Mason may be compensated under that other investment manager’s compensation program.

ClearBridge has implemented an investment management incentive and deferred compensation plan (the “Plan”) for its investment professionals, including the Fund’s portfolio managers. Each investment professional works as a part of an investment team. The Plan is designed to align the objectives of ClearBridge investment professionals with those of fund shareholders and other ClearBridge clients. Under the Plan a “base incentive pool” is established for each team each year as a percentage of ClearBridge revenue attributable to the team (largely management and related fees generated by funds and other accounts). A team’s revenues are typically expected to increase or decrease depending on the effect that the team’s investment performance as well as inflows and outflows have on the level of assets in the investment products managed by the team. The “base incentive pool” of a team is reduced by base salaries paid to members of the team and employee benefits expenses attributable to the team.

The investment term’s incentive pool is then adjusted to reflect its ranking among a “peer group” of non-ClearBridge investment managers and the team’s pre-tax investment performance against the applicable product benchmark (e.g. a securities index and, with respect to a fund, the benchmark set forth in the fund’s prospectus to which the fund’s average annual total returns are compared or, if none, the benchmark set forth in the fund’s annual report). ClearBridge may also measure the team’s pre-tax investment performance against additional benchmarks, as it determines appropriate. Longer-term (5-year) performance will be more heavily weighted than shorter-term (1-year) performance in the calculation of the performance adjustment factor. The incentive pool for a team may also be adjusted to reflect other factors (e.g., severance pay to departing members of the team, and discretionary allocations by the applicable ClearBridge chief investment officer from one investment team to another). The incentive pool will be allocated by the applicable ClearBridge chief investment officer to the team leader and, based on the recommendations of the team leader, to the other members of the team.

Up to 20% of an investment professional’s annual incentive compensation is subject to deferral. Of that principal deferred award amount, 50% will accrue a return based on the hypothetical returns of the investment fund or product that is the primary focus of the investment professional’s business activities with the firm, and 50% may be received in the form of Legg Mason restricted stock shares.

ClearBridge investment professionals who are employed concurrently by ClearBridge and also by another investment adviser affiliated with Legg Mason may be compensated under that other investment adviser’s compensation program.

A list of fund holdings for the portfolio manager may be found in the SAI for the Acquiring Fund. See Appendix A for the date of the Acquiring Fund’s current SAI.

G-1

APPENDIX H

Financial Highlights of the Acquiring Fund

The financial highlights table is intended to help you understand the performance of Class I shares of the Acquiring Fund for the past five years. The Acquiring Fund is offering Class I shares to shareholders of the single class of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio and to shareholders of Class I of Legg Mason Partners Variable Aggressive Growth Portfolio (A). The Acquiring Fund will offer Class II shares to Class II shareholders of Legg Mason Partners Variable Aggressive Growth Portfolio (A). Class II shares of the Acquiring Fund have not been offered as of the date of this Proxy Statement/Prospectus. Certain information reflects financial results for a single share. Total return represents the rate that a shareholder would have earned (or lost) on a fund share assuming reinvestment of all dividends and distributions. The information in the following table has been derived from the Acquiring Fund’s financial statements, which, except for the financial highlights of the Acquiring Fund for the six months ended April 30, 2006, which are unaudited, have been audited by KPMG LLP, independent registered public accounting firm, whose report, along with the Acquiring Fund’s financial statements, is included in the annual report (available upon request).

For a share of capital stock outstanding throughout each year ended October 31, unless otherwise noted:

Legg Mason Partners Variable Aggressive Growth Portfolio (B)	2006(1)			2005(2)			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$	14.26		$	12.24		$	11.43		$	9.09		$	12.32		$	15.03
Income (Loss) From Operations:
Net investment loss		(0.02	)		(0.04	)		(0.05	)		(0.04	)		(0.05	)		(0.05	)
Net realized and unrealized gain (loss)		1.55			2.11			0.86			2.38			(3.18	)		(2.66	)
Total Income (Loss) From Operations		1.53			2.07			0.81			2.34			(3.23	)		(2.71	)
Less Distributions From:
Net realized gains		(0.00	)(3)		(0.05	)		—			—			—			—
Total Distributions		(0.00	)(3)		(0.05	)		—			—			—			—
Net Asset Value, End of Period	$	15.79		$	14.26		$	12.24		$	11.43		$	9.09		$	12.32
Total Return(4)		10.73	%		16.94	%		7.09	%		25.74	%		(26.22	)%		(18.03	)%
Net Assets, End of Period (Millions)	$	1,190		$	1,079		$	920		$	624		$	415		$	366
Ratios to Average Net Assets:
Gross expenses		0.77	%(5)		0.82	%		0.82	%		0.82	%		0.83	%		0.84	%
Net expenses(6)		0.76	(5)(7)		0.82			0.82	(7)		0.82			0.83			0.84
Net investment loss		(0.22	)(5)		(0.27	)		(0.44	)		(0.49	)		(0.50	)		(0.40	)
Portfolio Turnover Rate		0	%		0	%		4	%		0	%		9	%		3	%

⁽¹⁾ For the six months ended April 30, 2006 (unaudited).

⁽²⁾ Per share amounts have been calculated using the average shares method.

⁽³⁾ Amount represents less than $0.01 per share.

⁽⁴⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽⁵⁾ Annualized.

⁽⁶⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 1.00%.

⁽⁷⁾ The investment manager voluntarily waived a portion of its fees and/or reimbursed expenses.

H-1

APPENDIX I

Management’s Discussion of Fund Performance for the Acquiring Fund

The discussion of performance for the Acquiring Fund in this Appendix I is taken from the most recent annual report to shareholders and does not reflect developments occurring after the report was filed with the SEC and sent to shareholders. Please note in particular the name of the Fund may have changed since the date of this report.

I-1

Letter from the Chairman

R. JAY GERKEN, CFA

Chairman, President and Chief Executive Officer

Dear Shareholder,

The U.S. economy was surprisingly resilient during the fiscal year. While surging oil prices, rising interest rates, and the impact of Hurricanes Katrina and Rita threatened to derail the economic expansion, growth remained solid throughout the period. After a 3.3% advance in the second quarter of 2005, third quarter gross domestic product (“GDP”)ⁱ growth grew to 4.3%, marking the tenth consecutive quarter in which GDP growth grew 3.0% or more.

As expected, the Federal Reserve Board (“Fed”)ⁱⁱ continued to raise interest rates in an attempt to ward off inflation. After raising rates three times from June 2004 through September 2004, the Fed increased its target for the federal funds rateⁱⁱⁱ in 0.25% increments eight additional times over the reporting period. The Fed again raised rates in early November, after the Funds’ reporting period had ended. All told, the Fed’s twelve rate hikes have brought the target for the federal funds rate from 1.00% to 4.00%. This represents the longest sustained Fed tightening cycle since 1976-1979.

During the 12-month period covered by this report, the U.S. stock market generated solid results, with the S&P 500 Index^iv returning 8.72%. Generally positive economic news, relatively benign core inflation, and strong corporate profits supported the market during much of the period.

Looking at the fiscal year as a whole, mid-cap stocks generated superior returns, with the Russell Midcap^v, Russell 1000^vi, and Russell 2000^vii Indexes returning 18.09%, 10.47%, and 12.08%, respectively. From a market style perspective, value-oriented stocks significantly outperformed their growth counterparts, with the Russell 3000 Value^viii and Russell 3000 Growth^ix Indexes returning 11.96% and 8.99%, respectively.

International stocks generated strong returns over the fiscal year, with the MSCI EAFE Growth Index^x returning 17.65% during the 1-year period ended October 31, 2005.

I-2

European stocks were supported by increased confidence over the strength of corporate earnings. Japanese stocks also performed well, as investors became increasingly optimistic regarding the country’s long anemic economy. In addition, the landslide victory of Prime Minister Koizumi’s Liberal Democratic Party improved market sentiment, especially among non-Japanese investors.

Within this environment, the Funds performed as follows:

Fund Performance as of October 31, 2005 (unaudited)
	6 Months	12 Months
Smith Barney Large Cap Value Portfolio	7.43%	10.26%
S&P 500/Barra Value Index	6.44%	10.17%
Lipper Variable Large-Cap Value Funds Category Average	4.34%	9.27%
Smith Barney Large Capitalization Growth Portfolio	9.92%	10.74%
Russell 1000 Growth Index	7.59%	8.81%
Lipper Variable Large-Cap Growth Funds Category Average	9.93%	11.36%
Smith Barney Mid Cap Core Portfolio	10.81%	12.33%
S&P MidCap 400 Index	11.33%	17.65%
Lipper Variable Mid-Cap Core Funds Category Average	10.54%	16.29%
Smith Barney Aggressive Growth Portfolio	15.56%	16.94%
Russell 3000 Growth Index	8.04%	8.99%
Lipper Variable Multi-Cap Growth Funds Category Average	12.84%	14.64%
Smith Barney International All Cap Growth Portfolio	7.53%	16.21%
MSCI EAFE Growth Index	8.63%	17.65%
Lipper Variable International Growth Funds Category Average	9.60%	18.01%
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.citigroupam.com.
Fund returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the deduction of all Fund expenses.
Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the period ended October 31, 2005 and include the reinvestment of all distributions, including returns of capital, if any. Returns were calculated among the 97 funds for the six-month period and among the 94 funds for the 12-month period in the variable large-cap value funds category. Returns were calculated among the 185 funds for the six-month period and among the 184 funds for the 12-month period in the variable large-cap growth funds category. Returns were calculated among the 82 funds for the six-month period and among the 77 funds for the 12-month period in the variable mid-cap core funds category. Returns were calculated among the 117 funds for the six-month period and among the 116 funds for the 12-month period in the variable multi-cap growth funds category. Returns were calculated among the 57 funds for the six-month period and among the 50 funds for the 12-month period in the variable international growth funds category.

I-3

Please read on for a more detailed look at prevailing economic and market conditions during the Funds’ fiscal year and to learn how those conditions have affected Funds performance.

Special Shareholder Notice

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management, to Legg Mason, Inc. (“Legg Mason”). As a result, the Funds’ investment manager, Smith Barney Fund Management LLC (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a whole-owned subsidiary of Legg Mason. Completion of the sale caused the existing investment management contracts to terminate. Each Fund’s shareholders previously approved a new investment management contract between the Funds and the Manager, which became effective December 1, 2005.

Information About Your Fund

As you may be aware, several issues in the mutual fund industry have recently come under the scrutiny of federal and state regulators. The Funds’ Manager and some of its affiliates have received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the Funds’ response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The Funds have been informed that the Manager and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.

Important information concerning the Funds and their Manager with regard to recent regulatory developments is contained in the Notes to the Financial Statements included in this report.

I-4

As always, thank you for your confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.

Sincerely,

R. Jay Gerken, CFA

Chairman, President and Chief Executive Officer

December 1, 2005

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ Gross domestic product is a market value of goods and services produced by labor and property in a given country.

ⁱⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱⁱ The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.

^iv The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

^v The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index whose average market capitalization was approximately $4.7 billion as of 6/24/05.

^vi The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.

^vii The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

^viii The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.)

^ix The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

^x The MSCI EAFE Growth Index is an unmanaged index of growth stocks of companies located in Europe, Australasia and the Far East.

I-5

Manager Overview

Smith Barney Aggressive Growth Portfolio

Special Shareholder Notice

Effective November 1, 2005, the management fee payable by Smith Barney Aggressive Growth Portfolio was reduced from 0.80% to 0.75% for asset levels up to $1 billion and is calculated in accordance with the following breakpoint schedule with the management fee reduced at breakpoints beginning at asset levels over $1 billion:

Breakpoint Schedule Based on Net Assets of the Fund	Management Fee
First $1 Billion	0.750	%
Next $1 Billion	0.725	%
Next $3 Billion	0.700	%
Next $5 Billion	0.675	%
Over $10 Billion	0.650	%

Q. What were the overall market conditions during the Fund’s reporting period?

A. Despite a number of setbacks and obstacles, the domestic economy continued to expand during the 12-month reporting period. The major roadblocks to progress were the same for much of the past year: the Federal Reserve Board (“Fed”)ⁱ continued to raise interest rates; oil and energy prices reached new record highs; and the effects of the hurricanes on the Gulf Coast. The price of oil skyrocketed throughout the year, from $43 per barrel at the start of 2005 to a high of just under $70 at the end of August, as a result of tension in the Middle East, increased demand from China, labor strikes in Venezuela, and weather-related supply interruptions. Several of these factors, especially higher energy prices, have weighed heavily on the consumer resulting in some reining-in of consumer spending. The housing market continued at a torrid pace throughout the year, showing signs of cooling only in the last few months, despite increasing short-term interest rates throughout the year and recent credit tightening from banks. The war in Iraq continued to put a strain on international relations and domestic spending. The continued dual deficits (both trade and budget deficits) have become a concern to the market with regard to their effect on long-term growth.

While the market experienced some short-term volatility during the period, especially in the first quarter of 2005, the domestic stock market in general registered gains over the past twelve months. However, most of the gains occurred at the end of 2004 following the Presidential election. With the uncertainty from the election removed, the S&P 500 Indexⁱⁱ rallied over 7% from Election Day until the end of year. But in 2005, the equity market has stayed within a narrow range, with the S&P 500 Index ending the third quarter of 2005 virtually flat for the year. In general, market leadership over the period came from the mid- and small-cap stocks, as large-caps had positive returns but lagged their smaller counterparts, while value-oriented stocks continued to outperform growth-oriented stocks.

I-6

Performance Update¹

For the 12 months ended October 31, 2005, the Smith Barney Aggressive Growth Portfolio returned 16.94%. The Fund outperformed its unmanaged benchmark, the Russell 3000 Growth Index,ⁱⁱⁱ which returned 8.99% for the same period. It also outperformed the Fund’s Lipper Variable Multi-Cap Growth Funds Category Average², which increased 14.64%.

Q. What were the most significant factors affecting Fund performance?

A. Compared to the benchmark index, both the Fund’s sector allocation and stock selection had a significant positive effect. The Fund remained fairly concentrated throughout the period, with considerable overweights to the energy, health care, and financials sectors, and a sizable underweight to information technology, all of which made significant contributions to the Fund’s outperformance of the benchmark. In particular, the Fund’s overweight allocation to energy stocks—more than three times that of the benchmark index—and its focus on oil drilling, production and related services and equipment stocks, had an especially large impact on Fund outperformance due in part to the record high prices set for oil during the period. Stock selection in information technology and financials also made a very large contribution to performance for the period.

What were the leading contributors to performance?

A. In terms of individual stock holdings, the leading contributors to performance included positions in UnitedHealth Group Inc., Genzyme Corp. and Amgen Inc. in health care, Lehman Brothers Holdings Inc. in financials and Anadarko Petroleum Corp. in energy.

What were the leading detractors from performance?

A. In terms of individual stock holdings, the leading detractors from performance included positions in Biogen Idec Inc., Forest Laboratories Inc., ImClone Systems Inc., and Millennium Pharmaceuticals Inc., all in health care, and Tyco International Ltd. in industrials.

Q. Were there any significant changes to the Fund during the reporting period?

A. No significant changes were made during the period. At the close of the period, the portfolio remained overweight health care, energy, and financials, market weight consumer discretionary, underweight information technology, industrials and telecommunication services, with no significant holdings in consumer staples, materials or utilities.

¹ The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund.

² Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of distributions, including returns of capital, if any, calculated among the 116 funds in the Fund’s Lipper category.

I-7

Thank you for your investment in the Smith Barney Aggressive Growth Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.

Sincerely,

Richard Freeman

Portfolio Manager

December 1, 2005

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of October 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: UnitedHealth Group Inc. (9.0%), Lehman Brothers Holdings Inc. (6.8%), Anadarko Petroleum Corp. (6.7%), Genzyme Corp. (5.3%), Amgen Inc. (5.2%), Weatherford International Ltd. (4.3%), Forest Laboratories Inc. (3.5%), Chiron Corp. (3.5%), Comcast Corp. Special Class A Shares (3.4%) and Time Warner Inc. (3.0%). Please refer to pages 48 through 51 for a list and percentage breakdown of the fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Health Care (37.4%), Consumer Discretionary (14.6%), Energy (13.6%), Information Technology (12.8%) and Financials (11.0%). The Fund’s portfolio composition is subject to change at any time.

RISKS: The Fund may invest a significant portion of its assets in small- and mid-cap companies which may be more volatile than an investment that focuses only on large-cap companies. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱ The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

ⁱⁱⁱ The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

I-8

Fund at a Glance (unaudited)

Smith Barney Aggressive Growth Portfolio

I-9

Fund Performance

Smith Barney Aggressive Growth Portfolio

Average Annual Total Returns† (unaudited)
Twelve Months Ended 10/31/05	16.94	%
Five Years Ended 10/31/05	(0.97	)
11/1/99* through 10/31/05	6.17

Cumulative Total Return† (unaudited)
11/1/99* through 10/31/05	43.24	%

† Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

* Commencement of operations.

I-10

Historical Performance (unaudited)

Value of $10,000 Invested in Shares of the Smith Barney Aggressive Growth Portfolio vs. Russell 3000 Growth Index^† (November 1999 — October 2005)

† Hypothetical illustration of $10,000 invested in shares of the Smith Barney Aggressive Growth Portfolio on November 1, 1999 (commencement of operations), assuming reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2005. The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values as a whole. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.) The Index is unmanaged and is not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which if reflected, would reduce the total returns.

I-11

APPENDIX J

Historical Performance for the Funds

Performance Information

The information below provides an indication of the risks of investing in each Fund by showing changes in its performance from year to year for each of the past ten years (or since inception, if less) and by showing how the Fund’s average annual total returns compared with the returns of a broad-based securities market index. The bar charts below show performance of Class I shares of Legg Mason Partners Variable Aggressive Growth Portfolio (A), the single share class of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio and the single share class of Legg Mason Partners Variable Aggressive Growth Portfolio (B). Legg Mason Partners Variable Aggressive Growth Portfolio (B) did not offer Class II shares as of the date of this Proxy Statement/Prospectus. The tables below indicate the risk of investing in the Funds by comparing the average annual total return of each class of shares, as applicable, for the periods shown to that of their benchmark index. The past performance of each Fund is not necessarily an indication of how the Fund will perform in the future. Performance figures do not reflect expenses incurred from investing through a separate account; if those expenses had been reflected, performance would have been lower. Please refer to the separate account prospectus for more information on expenses.

Legg Mason Partners Variable Aggressive Growth Portfolio (A)

Total Returns for Class I Shares

Highest and Lowest Quarter Returns (for periods shown in bar chart):

Highest: 63.83% in 4th quarter 1999; Lowest: (24.76)% in 2nd quarter 2002.

Comparative Performance

The table indicates the risk of investing in the Fund by comparing the average annual total return for the periods shown to that of the Russell 3000 Growth Index. The performance indicated does not reflect policy charges which, if included, would lessen performance.

This table assumes redemption of shares at the end of the period and the reinvestment of distributions and dividends.

Average Annual Total Returns for the periods ended December 31, 2005

	1 Year		5 Years		10 Years		Since Inception		Inception Date
Class I Shares	9.89	%	1.38	%	18.65	%	N/A		N/A
Class II Shares	9.64	%	N/A		N/A		15.89	%	5/12/03
Russell 3000 Growth Index*	5.17	%	(3.15	)%	6.48	%	N/A		N/A

* The Russell 3000 Growth Index is a broad based unmanaged index of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values. It is not possible to invest directly in the index. The index does not reflect deductions for fees expenses or taxes.

J-1

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

Total Returns

Highest and Lowest Quarter Returns (for periods shown in bar chart):

Highest: 18.11% in 4th quarter 2001; Lowest: (20.75)% in 3rd quarter 2001

Year-to-Date Performance:         % as of September 30, 2006

Comparative Performance

The table indicates the risk of investing in the Fund by comparing the average annual total return for the periods shown to that of the Russell 3000 Growth Index. The performance indicated does not reflect variable policy charges which, if included, would lessen performance.

This table assumes redemption of shares at the end of the period and the reinvestment of distributions and dividends.

Average Annual Total Returns for the periods ended 12/31/2005

	1 Year		5 Years		Since Inception		Inception Date
Fund	6.31	%	(1.59	)%	4.26	%	09/15/99
S&P MidCap 400 Index(1)	12.56	%	8.60	%	11.42	%	*
Russell 1000 Growth Index(2)	5.26	%	(3.58	)%	(3.76	)%	*
Russell 2000 Growth Index(3)	4.15	%	2.28	%	2.15	%	*

⁽¹⁾ The S&P MidCap 400 Index is a market-value weighted index consisting of 400 domestic stocks chosen for market size, liquidity and industry group representation.

⁽²⁾ The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

⁽³⁾ The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.

* Index comparison begins on 09/15/99. It is not possible to invest directly in an index. An index does not reflect deductions for fees, expenses or taxes.

J-2

Legg Mason Partners Variable Aggressive Growth Portfolio (B)

Total Returns

Highest and Lowest Quarter Returns (for periods shown in bar chart):

Highest: 18.02% in 2nd quarter 2001; Lowest: (26.38)% in 2nd quarter 2002

Year-to-Date Performance: [        ]% as of September 30, 2006

Comparative Performance

The table indicates the risk of investing in the Fund by comparing the average annual total return for the periods shown to that of the Russell 3000 Growth Index. The performance indicated does not reflect variable policy charges which, if included, would lessen performance.

This table assumes redemption of shares at the end of the period and the reinvestment of distributions and dividends.

Average Annual Total Return for the periods ended December 31, 2005

	1 Year		5 Years		Since Inception		Inception Date
Fund	11.64	%	1.30	%	6.73	%	11/1/99
Russell 3000 Growth Index	5.17	%	(3.15	)%	(4.05	)%	*

* The Russell 3000 Growth Index is a broad based unmanaged index of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values. Index comparison begins on 11/1/99. It is not possible to invest directly in an index. An index does not reflect deductions for fees, expenses or taxes.

J-3

APPENDIX K

Comparison of Board Composition

Acquired Fund Board	Acquiring Fund Board
Legg Mason Partners Variable Aggressive Growth Portfolio (A)	Legg Mason Partners Variable Aggressive Growth Portfolio (B)
Herbert Barg	Paul R. Ades
Martin Brody	Andrew L. Breech
Dwight B. Crane	Dwight B. Crane
Burt N. Dorsett	Robert M. Frayn, Jr.
Elliot S. Jaffe	Frank G. Hubbard
Stephen E. Kaufman	Howard J. Johnson
Joseph McCann	David E. Maryatt
Cornelius C. Rose, Jr.	Jerome H. Miller
Interested Board Member:	Ken Miller
R. Jay Gerken	John J. Murphy
	Thomas F. Schlafly
	Jerry A. Viscione
	Interested Board Member:
	R. Jay Gerken (collectively, “Board A”)
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	Legg Mason Partners Variable Aggressive Growth Portfolio (B)
Elliott J. Berv	Board A
Donald M. Carlton
A. Benton Cocanougher
Mark T. Finn
Stephen Randolph Gross
Diana R. Harrington
Susan B. Kerley
Alan G. Merten
R. Richardson Pettit
Interested Board Member:
R. Jay Gerken

K-1

APPENDIX L

Instructions for Signing the Voting Instruction Card

The following general rules for signing the voting instruction card may be of assistance to you and avoid the time and expense involved in validating your vote if you fail to sign your voting instruction card properly.

1. Individual Accounts: Sign your name exactly as it appears in the registration on the voting instruction card.

2. Joint Accounts: Either party may sign, but the name of the party signing should conform exactly to the name shown in the registration on the voting instruction card.

3. All Other Accounts: The capacity of the individual signing the voting instruction card should be indicated unless it is reflected in the form of registration. For example:

Registration	Valid Signature
Corporate Accounts
(1) ABC Corp.	ABC Corp.
(2) ABC Corp.	John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer	John Doe
(4) ABC Corp. Profit Sharing Plan	John Doe, Trustee
Trust Accounts
(1) ABC Trust	Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78	Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA	John B. Smith
(2) Estate of John B. Smith	John B. Smith Jr., Executor

L-1

APPENDIX M

5% Shareholders of the Acquired and Acquiring Funds

M-1

SUBJECT TO COMPLETION, DATED NOVEMBER 3, 2006

Legg Mason Partners Variable Aggressive Growth Portfolio (A)

(formerly Greenwich Street Series Fund—Salomon Brothers Variable Aggressive Growth Fund)

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

STATEMENT OF ADDITIONAL INFORMATION

DECEMBER [            ], 2006

Acquisition of the Assets and Liabilities of:	By and in Exchange for Shares of:
Legg Mason Partners Variable Aggressive Growth Portfolio (A) (formerly Greenwich Street Series Fund—Salomon Brothers Variable Aggressive Growth Fund)	Legg Mason Partners Variable Aggressive Growth Portfolio (B) (formerly Smith Barney Aggressive Growth Portfolio)
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (formerly Smith Barney Premier Selections All Cap Growth Portfolio)
125 Broad Street New York, New York 10004 1-800-451-2010	125 Broad Street New York, New York 10004 1-800-451-2010

This Statement of Additional Information, which is not a prospectus, supplements and should be read in conjunction with the Proxy Statement/Prospectus dated [December     ], 2006, relating specifically to the proposed transfer of all of the assets and the assumption of all of the liabilities of each of Legg Mason Partners Variable Aggressive Growth Portfolio (A) (formerly Greenwich Street Series Fund—Salomon Brothers Variable Aggressive Growth Fund) and Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (formerly Smith Barney Premier Selections All Cap Growth Portfolio) (the “Acquired Funds”) in exchange for shares of Legg Mason Partners Variable Aggressive Growth Portfolio (B) (formerly Smith Barney Aggressive Growth Portfolio) (the “Acquiring Fund”) having an aggregate value equal to those of the Acquired Funds. To obtain a copy of the Proxy Statement/Prospectus, please write to the Acquiring Fund at the address set forth above or call 1-800-451-2010. The transfer is to occur pursuant to an Agreement and Plan of Reorganization for each Acquired Fund. Unless otherwise indicated, capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Proxy Statement/Prospectus.

TABLE OF CONTENTS

1.	General Information	2
2.	Financial Statements and Other Incorporated Documents	2
3.	Pro Forma Financial Statements	3

1

GENERAL INFORMATION

A Special Meeting of Shareholders of the Acquired Funds to consider the Reorganizations will be held at the offices of Bingham McCutchen LLP, 399 Park Avenue, 19th Floor, New York, New York 10022, on February 9, 2007, at 10:00 a.m., Eastern time. For further information about the Reorganizations, see the Proxy Statement/Prospectus.

FINANCIAL STATEMENTS

The Statement of Additional Information related to the Proxy Statement/Prospectus dated December [    ], 2006 consists of this cover page and the following documents, each of which was filed electronically with the Securities and Exchange Commission and is incorporated by reference herein:

1. The Statement of Additional Information of Legg Mason Partners Variable Aggressive Growth Portfolio, a series of Legg Mason Partners Variable Portfolios III, Inc., dated February 28, 2006, as supplemented to date. SEC FILE DATE: FEBRUARY 28, 2006 (ACCESSION NO. 0001193125-06-041195).

2. Annual report of Legg Mason Partners Variable Aggressive Growth Portfolio, a series of Legg Mason Partners Variable Portfolios III, Inc., for the year ended October 31, 2005. SEC FILE DATE: JANUARY 9, 2006 (ACCESSION NO. 0001193125-06-003424).

3. Semi-Annual report of Legg Mason Partners Variable Aggressive Growth Portfolio, a series of Legg Mason Partners Variable Portfolios III, Inc., for the period ended April 30, 2006. SEC FILE DATE: JULY 10, 2006 (ACCESSION NO. 0001193125-06-143963).

4. The Statement of Additional Information of Legg Mason Partners Variable Aggressive Growth Portfolio a series of Legg Mason Partners Variable Portfolios II, dated May 1, 2006, as supplemented to date. SEC FILE DATE: MAY 1, 2006 (ACCESSION NO. 0000950123-06-005464).

5. Annual report of Legg Mason Partners Variable Aggressive Growth Portfolio a series of Legg Mason Partners Variable Portfolios II, for the year ended December 31, 2005. SEC FILE DATE: MARCH 13, 2006 (ACCESSION NO. 0000950123-06-003025).

6. Semi-Annual report of Legg Mason Partners Variable Aggressive Growth Portfolio a series of Legg Mason Partners Variable Portfolios II, for the period ended June 30, 2006. SEC FILE DATE: SEPTEMBER 8, 2006 (ACCESSION NO. 0000950123-06-011372).

7. The Statement of Additional Information of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, a series of Legg Mason Partners Investment Series, dated February 28, 2006, as supplemented to date. SEC FILE DATE: FEBRUARY 27, 2006 (ACCESSION NO. 0001193125-06-039034).

8. Annual report of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, a series of Legg Mason Partners Investment Series, for the year ended October 31, 2005. SEC FILE DATE: JANUARY 9, 2006 (ACCESSION NO. 0001193125-06-003414).

9. Semi-Annual report of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, a series of Legg Mason Partners Investment Series, for the period ended April 30, 2006. SEC FILE DATE: JULY 10, 2006 (ACCESSION NO. 0001193125-06-143854).

2

PRO FORMA FINANCIAL STATEMENTS

No pro forma financial statements are required for the respective Reorganizations of Legg Mason Partners Variable Aggressive Growth Portfolio (A) and Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio into Legg Mason Partners Variable Aggressive Growth Portfolio (B) under current requirements of the SEC, because each of Legg Mason Partners Variable Aggressive Growth Portfolio (A)’s and Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio’s net asset value does not exceed 10% of Legg Mason Partners Variable Aggressive Growth Portfolio (B), in each case, measured as of October 31, 2006.

3

PART C

OTHER INFORMATION

ITEM 15. INDEMNIFICATION

Reference is made to ARTICLE IX of Registrant’s Charter for a complete statement of its terms.

Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Reference is made to paragraph 4 of the Distribution Agreement between the Registrant and Citigroup Global Markets Inc. (the “CGMI Distribution Agreement”), paragraph 7 of the Amendment to the CGMI Distribution Agreement and paragraph 9 of the Distribution Agreement between the Registrant and Legg Mason Investor Services, LLC.

ITEM 16. EXHIBITS

1(a) Articles of Incorporation dated as of February 18, 1994 is incorporated by reference to Exhibit 1(a) to the Registration Statement on February 23, 1994.

1(b) Amendment to Articles of Incorporation dated as of May 26, 1994 is incorporated by reference to Exhibit 1(b) to Pre-Effective Amendment No. 1 on June 10, 1994.

1(c) Amendment to Articles of Incorporation dated as of June 7, 1994 is incorporated by reference to Exhibit 1(c) to Pre-Effective Amendment No. 1 on June 10, 1994.

1(d) Amendment to Articles of Incorporation dated as of February 17, 1999 is incorporated by reference to Exhibit a.4 to Post-Effective Amendment No. 11 filed February 26, 1999.

1(e) Amendment to Articles of Incorporation dated as of February 24, 1999 is incorporated by reference to Exhibit a.5 to Post-Effective Amendment No. 11 filed February 26, 1999.

1(f) Amendment to Articles of Incorporation dated as of June 9, 1999 is incorporated by reference to Exhibit a.6 to Post-Effective Amendment No. 13 filed February 25, 2000.

1

1(g) Articles Supplementary to Articles of Incorporation dated as of October 13, 1999 is incorporated by reference to Exhibit a.7 to Post-Effective Amendment No. 13 filed February 25, 2000.

1(h) Articles Supplementary to Articles of Incorporation dated as of October 13, 1999 is incorporated by reference to Exhibit a.8 to Post-Effective Amendment No. 13 filed February 25, 2000.

1(i) Amendment to Articles of Incorporation dated as of July 28, 2000 is incorporated by reference to Exhibit a.9 to Post-Effective Amendment No. 14 filed on February 28, 2001.

1(j) Amendment to Articles of Incorporation dated as of March 14, 2002 is incorporated by reference to Exhibit 9.10 to Post-Effective Amendment No. 17 filed on February 27, 2003.

1(k) Articles Supplementary to Articles of Incorporation dated as of May 28, 2003 is incorporated by reference to Exhibit a.11 to Post-Effective Amendment No. 20 filed on July 2, 2003.

1(l) Amendment to Articles of Incorporation dated as of July 1, 2003 is incorporated by reference to Exhibit a.12 to Post Effective Amendment No. 20 filed on July 2, 2003.

1(m) Articles Supplementary to Articles of Incorporation dated as of April 6, 2005 is incorporated by reference to Post-Effective Amendment No. 24, filed on April 13, 2005.

1(n) Amendment to Articles of Incorporation dated April 24, 2006 is incorporated by reference to the Registrant’s Registration Statement on Form N-14 filed on September 22, 2006.

2(a) Bylaws of the Fund are incorporated by reference to Exhibit 2 to Pre-Effective Amendment No. 1 on June 10, 1994.

2(b) Amended and Restated By-Laws of the Fund dated as of March 21, 2003, are incorporated by reference to Post-Effective Amendment No. 24, filed on April 13, 2005.

3 Not applicable.

4 Form of Agreement and Plan of Reorganization is included in Part A of the Registration Statement on Form N-14.

5 Not applicable.

6(a) Management Agreement dated August 1, 2006 between the Registrant on behalf of Legg Mason Partners Variable Aggressive Growth Portfolio and Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is incorporated by reference to Post-Effective Amendment No. 29 to the Registrant’s Registration Statement on Form N-1A, filed on October 6, 2006.

6(b) Subadvisory Agreement dated August 1, 2006 between LMPFA and CAM North America LLC, with respect to the Registrant on behalf of Legg Mason Partners Variable

2

Aggressive Growth Portfolio, is incorporated by reference to Post-Effective Amendment No. 29 to the Registrant’s Registration Statement on Form N-1A, filed on October 6, 2006.

7(a) Form of Distribution Agreement between Registrant and Salomon Smith Barney Inc. is incorporated by reference to Exhibit e.3 to Post-Effective Amendment No. 14 to the Registrant’s Registration Statement on Form N-1A filed on February 28, 2001.

7(b) Amendment to Distribution Agreement dated December 1, 2005 between Registrant and Citigroup Global Markets Inc. is incorporated by reference to Post-Effective Amendment No. 27 to the Registrant’s Registration Statement on Form N-1A, filed on December 30, 2005.

7(c) Distribution Agreement dated December 1, 2005 between Registrant and Legg Mason Investor Services, LLC is incorporated by reference to Post-Effective Amendment No. 27 to the Registrant’s Registration Statement on Form N-1A, filed on December 30, 2005.

8 Not applicable.

9 Custodian Services Agreement with State Street Bank and Trust Company dated January 1, 2006, is incorporated by reference to Post-Effective Amendment No. 28 to the Registrant’s Registration Statement on Form N-1A filed on February 28, 2006.

10(a) Services and Distribution Plan for Class II Shares of the Legg Mason Partners Variable Aggressive Growth Portfolio is filed herewith.

10(b) Rule 18f-3 Multiple Class Plan for Legg Mason Partners Variable Aggressive Growth Portfolio is filed herewith.

11(a) Opinion and consent of Willkie Farr & Gallagher LLP as to the legality of the securities being registered is filed herewith.

11(b) Opinion and consent of Venable LLP as to the legality of the securities being registered is filed herewith.

12 Forms of Opinion of Dechert LLP supporting the tax matters and consequences to shareholders discussed in the Prospectus/Proxy Statement are filed herewith.

13 Not applicable.

14 Consent of KPMG LLP, Independent Registered Public Accounting Firm is filed herewith.

15 Not applicable.

16 Powers of Attorney are filed herewith.

17(a) Forms of Proxy Cards are filed herewith.

17(b) Statement of Additional Information of Legg Mason Partners Variable Aggressive Growth Portfolio dated February 28, 2006 is filed herewith.

3

17(c) Annual Report of Legg Mason Partners Variable Aggressive Growth Portfolio for the year ended October 31, 2005 is filed herewith.

17(d) Semi-Annual Report of Legg Mason Partners Variable Aggressive Growth Portfolio for the six months ended April 30, 2006 is filed herewith.

17(e) Prospectus and Statement of Additional Information of Legg Mason Partners Variable Aggressive Growth Portfolio, a series of Legg Mason Partners Variable Portfolios II, dated May 1, 2006 are filed herewith.

17(f) Annual Report of Legg Mason Partners Variable Aggressive Growth Portfolio, a series of Legg Mason Partners Variable Portfolios II, for the year ended December 31, 2005 is filed herewith.

17(g) Semi-Annual Report of Legg Mason Partners Variable Aggressive Growth Portfolio, a series of Legg Mason Partners Variable Portfolios II, for the six months ended June 30, 2006 is filed herewith.

17(h) Prospectus and Statement of Additional Information of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, a series of Legg Mason Partners Investment Series, dated February 28, 2006 are filed herewith.

17(i) Annual Report of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, a series of Legg Mason Partners Investment Series, for the year ended October 31, 2005 is filed herewith.

17(j) Semi-Annual Report of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, a series of Legg Mason Partners Investment Series, for the six months ended April 30, 2006 is filed herewith.

17(k) Code of Ethics of Salomon Smith Barney Inc. is incorporated by reference to Exhibit P.6 filed on February 27, 2003.

17(l) Code of Ethics—Legg Mason Investor Services, LLC dated December 1, 2005 is incorporated by reference to Post-Effective Amendment No. 27, filed on December 30, 2005.

17(m) Code of Ethics of Citigroup Asset Management-North America and Certain Registered Investment Companies as amended September 13, 2005 is incorporated by reference to Post-Effective Amendment No. 27 to the Registrant’s Registration Statement on Form N-1A, filed on December 30, 2005.

17(n) License Agreement dated December 1, 2005 between Registrant and Citigroup Inc. is incorporated by reference to Post-Effective Amendment No. 27 to the Registrant’s Registration Statement on Form N-1A, filed on December 30, 2005.

17(o) Transfer Agency and Services Agreement with PFPC, Inc., dated January 1, 2006 is incorporated by reference to Post-Effective Amendment No. 28 to the Registrant’s Registration Statement on Form N-1A filed on February 28, 2006.

4

17(p) Subscription Agreement between Registrant and The Travelers, Inc. is incorporated by reference to Exhibit 8 to Post-Effective Amendment No. 1 filed on December 29, 1994.

ITEM 17. UNDERTAKINGS

(1) The undersigned registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of

Rule 145(c) of the Securities Act [17 CFR 230.145c], the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other terms of the applicable form.

(2) The undersigned registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.

(3) The registrant hereby undertakes to file, by post-effective amendment, the final opinion of Dechert LLP supporting the tax consequences of the proposed reorganization as soon as practicable after the closing of the reorganization.

5

SIGNATURES

As required by the Securities Act of 1933, as amended, this registration statement has been signed on behalf of the registrant, in the City of New York and State of New York, on the 3rd day of November, 2006.

LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, INC. on behalf of Legg Mason Partners Variable Aggressive Growth Portfolio
By:	/S/    R. JAY GERKEN
	R. Jay Gerken Chairman of the Board, President and Chief Executive Officer

As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/S/    R. JAY GERKEN         R. Jay Gerken	Chairman of the Board, President and Chief Executive Officer	November 3, 2006
/S/    FRANCES GUGGINO       Frances Guggino	Treasurer, Chief Financial and Accounting Officer	November 3, 2006
/S/    MICHAEL GELLERT*         Michael Gellert	Director	November 3, 2006
/S/    ROBERT A. FRANKEL*         Robert A. Frankel	Director	November 3, 2006
/S/    RAINER GREEVEN*         Rainer Greeven	Director	November 3, 2006
/S/    SUSAN M. HEILBRON*         Susan M. Heilbron	Director	November 3, 2006

*By:	/S/    R. JAY GERKEN
	R. Jay Gerken, Attorney-in-Fact

6

EXHIBIT INDEX

EXHIBIT NO.	EXHIBITS
10(a)	Services and Distribution Plan for Class II Shares of Legg Mason Partners Variable Aggressive Growth Portfolio.
10(b)	Rule 18f-3 Multiple Class Plan for Legg Mason Partners Variable Aggressive Growth Portfolio.
11(a)	Opinion and consent of Willkie Farr & Gallagher LLP as to the legality of the securities being registered.
11(b)	Opinion and consent of Venable LLP as to the legality of the securities being registered.
12	Forms of Opinion of Dechert LLP supporting the tax matters and consequences to shareholders discussed in the Prospectus/Proxy Statement.
14	Consent of KPMG LLP, Independent Registered Public Accounting Firm.
16	Powers of Attorney.
17(a)	Forms of Proxy Cards.
17(b)	Statement of Additional Information of Legg Mason Partners Variable Aggressive Growth Portfolio dated February 28, 2006.
17(c)	Annual Report of Legg Mason Partners Variable Aggressive Growth Portfolio for the year ended October 31, 2005.
17(d)	Semi-Annual Report of Legg Mason Partners Variable Aggressive Growth Portfolio for the six months ended April 30, 2006.
17(e)	Prospectus and Statement of Additional Information of Legg Mason Partners Variable Aggressive Growth Portfolio, a series of Legg Mason Partners Variable Portfolios II, dated May 1, 2006.
17(f)	Annual Report of Legg Mason Partners Variable Aggressive Growth Portfolio, a series of Legg Mason Partners Variable Portfolios II, for the year ended December 31, 2005.
17(g)	Semi-Annual Report of Legg Mason Partners Variable Aggressive Growth Portfolio, a series of Legg Mason Partners Variable Portfolios II, for the six months ended June 30, 2006.

7

17(h)	Prospectus and Statement of Additional Information of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, a series of Legg Mason Partners Investment Series, dated February 28, 2006.
17(i)	Annual Report of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, a series of Legg Mason Partners Investment Series, for the year ended October 31, 2005.
17(j)	Semi-Annual Report of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, a series of Legg Mason Partners Investment Series, for the six months ended April 30, 2006.

8

EX-99.10.A

LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, INC.

AMENDED AND RESTATED SHAREHOLDER SERVICES AND DISTRIBUTION PLAN

WHEREAS, the Board of Directors of Legg Mason Partners Variable Portfolios III, Inc. (“Company”), wishes to amend and restate its Shareholder Services and Distribution Plan (“Plan”) pursuant to Rule 12b-1 (the “Rule”) under the Investment Company Act of 1940, as amended (the “1940 Act”) for each portfolio or series of the Company (each a “Fund” and collectively, the “Funds”) listed in Appendix A, as it may be amended from time to time, which are offered to life insurance companies or other eligible parties (each, a “Life Company”) for allocation to certain of their separate accounts established for the purpose of funding variable annuity contracts and variable life policies (collectively referred to herein as “Variable Contracts”), to be effective as of                     ;

NOW, THEREFORE, this Plan is adopted in accordance with the Rule with respect to those classes of shares (each a “Class”) of the Funds as listed in Appendix A, subject to the following terms and conditions:

Section 1. Annual Fee.

(a) Single Share Class Fee. The Fund may pay to one or more principal underwriters or Life Company (each a “Servicing Party”) a distribution fee, provided that the aggregate amount of all such payments with respect to Single Share Class shares does not exceed an amount calculated at the rate set forth in Appendix A (the “Single Share Class Fee”).

(a) Class II Fee. The Fund may pay to one or more Servicing Parties a distribution fee, provided that the aggregate amount of all such payments with respect to Class II shares does not exceed an amount calculated at the rate set forth in Appendix A (the “Class II Fee”, and collectively with the Single Share Class Fee, the “Distribution Fee”).

(b) Payment of Fees. The Distribution Fees described above will be calculated daily and paid monthly by the Funds with respect to the applicable class of shares as provided in Appendix A.

The Company is authorized to engage in the activities listed herein either directly by a Servicing Party or through other entities. The Distribution Fees will be deemed to be “asset-based sales charges,” as provided in NASD Conduct Rule 2830, as amended or interpreted by the NASD.

Section 2. Expenses Covered by the Plan.

With respect to fees payable by each Class, the Distribution Fee may be used by a Servicing Party for expenses related to that Class, including without limitation: (a) costs of printing and distributing the Fund’s prospectuses, statements of additional information and reports to prospective investors in the Fund; (b) costs involved in preparing, printing and distributing advertisements, sales literature and other promotional material pertaining to the Fund and including materials intended for use within the Life Company or for broker-dealer use and reports for persons other than existing Variable Contract owners; (c) an allocation of overhead and other branch office distribution-related expenses of a Servicing Party; (d) payments made to, and

expenses of, a Servicing Party’s financial consultants, other broker-dealers, financial intermediaries and other persons who provide support or personal services to the Fund’s shareholders in connection with the distribution of the Fund’s shares, including but not limited to, office space, equipment, communication facilities, answering routine inquiries regarding the Fund and its operations, processing shareholder transactions, promotional, advertising or marketing services intended for use within the Life Company, sub-accounting and recordkeeping services (in excess of ordinary payments made to the Fund’s transfer agent or other recordkeeper), obtaining Variable Contract owner information and providing information about the Fund, cash value and premium allocation services, compensating sales personnel, training sales personnel regarding the Fund, holding seminars and sales meetings designed to promote the distribution of fund shares, maintaining and servicing Variable Contract accounts (including the payment of a continuing fee to financial consultants); and (e) personal service and/or maintenance of Variable Contract owner accounts with respect to Fund shares attributable to such accounts; provided, however, that (i) the Distribution Fee applicable to a particular Class may be used by a Servicing Party to cover expenses primarily intended to result in the sale of the shares of the Class, including, without limitation, payments to the financial consultants of the Servicing Party and other persons as compensation for the sale of the shares and (ii) a Servicing Party may retain portions of the Distribution Fee in excess of its expenses incurred.

It is recognized that a Fund’s investment manager (“Manager”), principal underwriter, a Servicing Party, or an affiliate of the foregoing may use its management or advisory fee revenues, past profits or its resources from any other source, to make payment to a Servicing Party or any other entity with respect to any expenses incurred in connection with the distribution or marketing and sales of the Fund’s shares, including the activities referred to above. Notwithstanding any language to the contrary contained herein, if any payments made by the Fund to its Manager or any affiliate thereof, including payments made from such Manager or affiliate’s management or advisory fee or administrative fee or payments made for Variable Contract owner services should be deemed to be indirect financing of any activity primarily intended to result in the sale of Fund shares within the context of the Rule, to the extent permitted by applicable law, such payments are authorized by this Plan, and such payments are not limited by Section 1 above unless required by applicable law.

It is further recognized that the Fund will enter into normal and customary custodial, transfer agency, recordkeeping and dividend disbursing agency and other service provider arrangements, and make payments under the terms and conditions of those arrangements. These arrangements shall not ordinarily be deemed to be a part of this Plan.

Section 3. Sales Charges.

It is understood that, under certain circumstances, as disclosed in the Variable Contract offering materials, sales or other charges may be paid by Variable Contract owners who purchase Fund shares.

Section 4. Approval by Shareholders.

Except to the extent that, in accordance with Section 8 below, this Plan amends an existing plan adopted pursuant to the Rule with respect to a Fund or Class, the Plan will not take effect, and no fee will be payable in accordance with Section 1 of the Plan, with respect to a Class of a Fund until the Plan has been approved by a vote of at least a majority of the outstanding voting securities of that Class if the Plan is to be adopted after the public offering of the securities of that Class or the sale of such securities to persons who are not affiliated persons of the Fund, affiliated

2

persons of such persons, promoters of the Fund or affiliated persons of such promoters. In the event that a vote of at least a majority of the outstanding voting securities of a Class of a Fund is required, the Plan will be deemed to have been approved with respect to a Class of each such Fund so long as a majority of the outstanding voting securities of that Class votes for the approval of the Plan, notwithstanding that: (a) the Plan has not been approved by a majority of the outstanding voting securities of any other Class, or (b) the Plan has not been approved by a majority of the outstanding voting securities of the Fund.

Section 5. Approval by Board Members.

Neither the Plan nor any related agreements will take effect, with respect to a Class of a Fund, until approved by a majority vote of both (a) the Board of Directors (“Board”) and (b) those Board members who are not interested persons of the Company and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related to it (the “Qualified Board Members”), cast in person at a meeting called for the purpose of voting on the Plan and the related agreements.

Section 6. Continuance of the Plan.

The Plan will continue in effect with respect to Single Share Class and Class II, until December 1, 2006 and                  , 200  , respectively, and thereafter for successive twelve-month periods with respect to each Class; provided, however, that such continuance is specifically approved at least annually by the Board members of the Company and by a majority of the Qualified Board Members in accordance with Section 5.

Section 7. Termination.

The Plan may be terminated at any time with respect to a Class of a Fund (i) by the Fund without the payment of any penalty, by the vote of a majority of the outstanding voting securities of such Class of such Fund or (ii) by a majority vote of the Qualified Board Members. The Plan may remain in effect with respect to a particular Class of a Fund even if the Plan has been terminated in accordance with this Section 7 with respect to any other Class of such Fund.

Section 8. Amendments.

The Plan may not be amended with respect to any Class so as to increase materially the amounts of the fees described in Section 1, unless the amendment is approved by a vote of holders of at least a majority of the outstanding voting securities of that Class. No material amendment to the Plan may be made unless approved by the Company’s Board in the manner described in Section 5.

Section 9. Selection of Certain Board Members.

While the Plan is in effect, the Company shall comply with Rule 12b-1(c).

Section 10. Written Reports.

In each year during which the Plan remains in effect, the proper officers of a Fund will prepare and furnish to the Company’s Board and the Board will review, at least quarterly, written reports complying with the requirements of the Rule, which set out the amounts expended under the Plan and the purposes for which those expenditures were made.

3

Section 11. Preservation of Materials.

The Company will preserve copies of the Plan, any agreement relating to the Plan and any report made pursuant to Section 10, for a period of not less than six years (the first two years in an easily accessible place) from the date of the Plan.

Section 12. Meanings of Certain Terms.

As used in the Plan, the terms “affiliated person,” “interested person” and “majority of the outstanding voting securities” will be deemed to have the same meaning that those terms have under the rules and regulations under the 1940 Act, subject to any exemption that may be granted to the Company under the 1940 Act, by the Securities and Exchange Commission (the “Commission”), or as interpreted by the Commission.

Section 13. Limitation of Liability.

The Articles of Incorporation of the Company, amended from time to time, which is on file with the Secretary of State of Maryland, provides that to the fullest extent permitted by Maryland law, no Director or officer of the Company shall be personally liable to the Company or its stockholders for money damages, except to the extent such exemption from liability or limitation thereof is not permitted by the 1940 Act.

Section 14. Severability.

The provisions of the Plan are severable for each Fund and Class covered by this Plan, and actions taken with respect to a Plan in conformity with the Rule will be taken separately for each such Fund or Class.

Section 15. Governing Law.

This plan shall be governed by, and construed in accordance with, the laws of the State of New York.

4

IN WITNESS WHEREOF, the Company has executed the Plan on behalf of each Fund and Class listed on Appendix A as of                          , 200  .

LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, INC.

By:	/s/ R. Jay Gerken
	R. Jay Gerken Chairman, President and Chief Executive Officer

5

APPENDIX A

SHAREHOLDER SERVICES AND DISTRIBUTION PLAN

As of                  , 200  

Name of Fund	Name of Class	Aggregate Class II Fee
Legg Mason Partners Variable Aggressive Growth Portfolio	Class II	0.25%
Legg Mason Partners Variable Large Cap Growth Portfolio	Class II	0.25%
Legg Mason Partners Variable Adjustable Rate Income Portfolio	Single Class	0.25%

6

EX-99.10.B

Rule 18f-3(d) Multiple Class Plan for Legg Mason Partners Variable Portfolios III, Inc.

Dated as of [            ], 200[7]

Introduction

This plan (the “Plan”) is adopted pursuant to Rule 18f-3(d) of the Investment Company Act of 1940, as amended (the “1940 Act”). Shares of the Portfolio¹ (the “Portfolio”), a series of Legg Mason Partners Variable Portfolios III, Inc. (the “Company”) are distributed pursuant to a system (the “Multiple Class System”) in which each class of shares (a “Class”) of the Portfolio represents a pro rata interest in the same portfolio of investments of the Portfolio and differs only to the extent outlined below.

I. Distribution Arrangements and Shareholder Service Fees

One of the Classes of shares of the Portfolio has adopted a Shareholder Services and Distribution Plan, pursuant to Rule 12b-1 under the 1940 Act (the “Rule”), as such plan may be amended from time to time (the “Services and Distribution Plan”) under which shares of the Class are subject to the services and distribution fees described below.

1. Class I Shares

The Portfolio’s Class I shares are offered with no service or distribution fee.

2. Class II Shares

Under the Service and Distribution Plan, the Portfolio’s Class II shares are subject to a distribution fee of up to 0.25% of average daily net assets.

3. Additional Classes of Shares

The Boards of Directors of the Company have the authority to create additional classes, or change existing Classes, from time to time, in accordance with Rule 18f-3 under the 1940 Act.

II. Expense Allocations

Under the Multiple Class System, all expenses incurred by the Portfolio are allocated among the various Classes of shares based on the net assets of the Fund attributable to each Class, except that each Class’s net asset value and expenses reflect the expenses associated with that Class under the Portfolio’s Services and Distribution Plan, including any costs associated with obtaining shareholder approval of the Services and Distribution

¹ This Plan is being adopted for Legg Mason Partners Variable Large Cap Growth Portfolio and Legg Mason Partners Variable Aggressive Growth Portfolio, each a series of the Company (each such series is herein referred to as “Portfolio”).

Plan (or an amendment thereto) and any expenses specific to that Class. Such expenses are limited to the following:

i. transfer agency fees as identified by the transfer agent as being attributable to a specific Class;

ii. printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses and proxies to current shareholders;

iii. Blue Sky registration fees incurred by a Class of shares;

iv. Securities and Exchange Commission registration fees incurred by a Class of shares;

v. the expense of administrative personnel and services as required to support the shareholders of a specific Class;

vi. litigation or other legal expenses relating solely to one Class of shares; and

vii. fees of members of the governing board of the Portfolio incurred as a result of issues relating to one Class of shares.

Pursuant to the Multiple Class System, expenses of the Portfolio allocated to a particular Class of shares of the Portfolio are borne on a pro rata basis by each outstanding share of that Class.

EX-99.11.A

[Letterhead of Willkie Farr & Gallagher LLP]

November 3, 2006

Legg Mason Partners Variable Portfolios III, Inc.

125 Broad Street

New York, New York 10004

Ladies and Gentlemen:

You have requested us, as counsel to Legg Mason Partners Variable Portfolios III, Inc. (the “Company”), a corporation organized under the laws of the State of Maryland, on behalf of Legg Mason Partners Variable Aggressive Growth Portfolio (the “Fund”), a series of the Company, to furnish you with this opinion in connection with the Company’s Registration Statement on Form N-14 under the Securities Act of 1933, as amended, to be filed with the Securities and Exchange Commission on or about November 3, 2006 (the “Registration Statement”), registering shares of Class I Common Stock and Class II Common Stock, par value $.00001 per share, of the Fund (collectively, the “Shares”), to be issued pursuant to (i) an Agreement and Plan of Reorganization among (a) the Company, on behalf of the Fund, (b) Legg Mason Partners Variable Portfolios II, a business trust organized under the laws of the Commonwealth of Massachusetts, on behalf of its series, Legg Mason Partners Variable Aggressive Growth Portfolio (“Legg Mason Partners Variable Aggressive Growth Portfolio (A)”), and (c) solely with respect to certain aspects, Legg Mason Partners Fund Advisor, LLC (the “Advisor”); and (ii) an Agreement and Plan of Reorganization, by and among (a) the Company, on behalf of the Fund, (b) Legg Mason Partners Investment Series, a business trust organized under the laws of the Commonwealth of Massachusetts, on behalf of its series, Legg Mason Partners Premier Selections All Cap Growth Portfolio (each of Legg Mason Partners Aggressive Growth Portfolio (A) and Legg Mason Partners Premier Selections All Cap Growth Portfolio, an “Acquired Fund”), and (c) solely with respect to certain aspects, the Advisor (each, an “Agreement” and together, the “Agreements”). The Agreements provide for the proposed acquisition by the Fund of all of the assets of each Acquired Fund solely in exchange for the Shares and the assumption by the Fund of all of the liabilities of each Acquired Fund.

We have examined the Registration Statement, substantially in the form in which it is to become effective, the Company’s Charter and By-Laws, each as amended, resolutions adopted by the Board of Directors of the Company relating to the authorization of the sale and issuance of the Shares and the approval of the Agreements (the “Resolutions”) and the form of the Agreements to be included in the Proxy Statement/Prospectus included in the Registration Statement. We have also examined such other records, documents, papers, statutes and authorities as we have deemed necessary to form a basis for the opinion hereinafter expressed.

In our examination of the materials described above, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all copies submitted to us. As to various questions of fact material to our opinion, we have relied upon statements and certificates of officers and representatives of the Company and others, which facts we have not independently verified. We have further assumed that the Agreements will be duly executed and delivered in substantially the same form as that included in the Registration Statement and that upon such execution and delivery, it will constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

Based upon the foregoing, we are of the opinion that the issuance of the Shares has been duly authorized and (assuming that, upon any issuance of the Shares, the total number of shares of each series and class of Common Stock, $.00001 par value per share (the “Common Stock”), of the Company issued and outstanding will not exceed the total number of shares of each series and class of Common Stock that the Company is then authorized to issue under the Charter), when and if issued and delivered against payment therefor in accordance with the Resolutions, the Agreements, the Articles Supplementary classifying and designating certain of the Shares of the Fund as Class II Common Stock and Articles of Amendment re-designating certain of the Shares of the Fund as Class I Common Stock, the Shares will be validly issued, fully paid and non-assessable.

We hereby consent to the reference to us in the Registration Statement and the filing of this opinion as an exhibit to the Registration Statement.

We are members of the Bar of the State of New York only and do not opine as to the laws of any jurisdiction other than the laws of the State of New York and the federal laws of the United States, and the opinions set forth above are, accordingly, limited to the laws of those jurisdictions. As to matters governed by the laws of the State of Maryland, we have relied upon the opinion of Venable LLP (which is attached hereto).

Very truly yours,

/s/ Willkie Farr & Gallagher LLP

EX-99.11.B

[VENABLE LLP LETTERHEAD]

November 3, 2006

Legg Mason Partners Variable Portfolios III, Inc.

125 Broad Street

New York, N.Y. 10004

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York 10019-6099

Re: Registration Statement on Form N-14

Ladies and Gentlemen:

We have acted as Maryland counsel to Legg Mason Partners Variable Portfolios III, Inc., a Maryland corporation registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company (the “Company”), in connection with the sale and issuance of shares (the “Shares”) of Class I Common Stock (the “Class I Common Stock”), $.00001 par value per share, and Class II Common Stock, $.00001 par value per share (the “Class II Common Stock”), of the Company, pursuant to (i) an Agreement and Plan of Reorganization, by and among the Company, on behalf of its series Legg Mason Partners Variable Aggressive Growth Portfolio (the “Acquiring Fund”), Legg Mason Partners Variable Portfolios II, on behalf of its series Legg Mason Partners Variable Aggressive Growth Portfolio, and solely with respect to certain aspects, Legg Mason Partners Fund Advisor, LLC (the “Advisor”) and (ii) an Agreement and Plan of Reorganization, by and among the Company, on behalf of the Acquiring Fund, Legg Mason Partners Investment Series, on behalf of its series Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, and solely with respect to certain aspects, the Advisor (each, a “Plan” and together the “Plans”), covered by the above referenced Registration Statement, and all amendments thereto (the “Registration Statement”), filed by the Company on or about the date hereof with the Securities and Exchange Commission (the “Commission”), under the Securities Act of 1933, as amended (the “1933 Act”). Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in the Registration Statement.

In connection with our representation of the Company, and as a basis for the opinion hereinafter set forth, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents (hereinafter collectively referred to as the “Documents”):

1. The Registration Statement and the related form of prospectus included therein, substantially in the form transmitted to the Commission under the 1933 Act;

Legg Mason Partners Variable Portfolios III, Inc.

Willkie Farr & Gallagher LLP

November 3, 2006

Page 2

2. The charter of the Company (the “Charter”), certified as of a recent date by the State Department of Assessments and Taxation of Maryland (the “SDAT”);

3. The Amended and Restated Bylaws of the Company, certified as of the date hereof by an officer of the Company;

4. The form of the Plans (the “Form of Plans”), certified as of the date hereof by an officer of the Company;

5. A certificate of the SDAT as to the good standing of the Company, dated as of a recent date;

6. Resolutions (the “Resolutions”) adopted by the Board of Directors of the Company relating to the authorization of the sale and issuance of the Shares and the approval of the Plans, certified as of the date hereof by an officer of the Company;

7. A certificate executed by an officer of the Company, dated as of the date hereof; and

8. Such other documents and matters as we have deemed necessary or appropriate to express the opinion set forth below, subject to the assumptions, limitations and qualifications stated herein.

In expressing the opinion set forth below, we have assumed the following:

1. Each individual executing any of the Documents, whether on behalf of such individual or any other person, is legally competent to do so.

2. Each individual executing any of the Documents on behalf of a party (other than the Company) is duly authorized to do so.

3. Each of the parties (other than the Company) executing any of the Documents has duly and validly executed and delivered each of the Documents to which such party is a signatory, and such party’s obligations set forth therein are legal, valid and binding and are enforceable in accordance with all stated terms.

4. All Documents submitted to us as originals are authentic. The form and content of all Documents submitted to us as unexecuted drafts do not differ in any respect relevant to this opinion from the form and content of such Documents as executed and delivered. All Documents submitted to us as certified or photostatic copies conform to the original

Legg Mason Partners Variable Portfolios III, Inc.

Willkie Farr & Gallagher LLP

November 3, 2006

Page 3

documents. All signatures on all such Documents are genuine. All public records reviewed or relied upon by us or on our behalf are true and complete. All representations, warranties, statements and information contained in the Documents are true and complete. There has been no oral or written modification of or amendment to any of the Documents, and there has been no waiver of any provision of any of the Documents, by action or omission of the parties or otherwise.

5. Prior to the issuance of any of the Shares, Articles of Amendment re-designating the certain of the Shares of Acquiring Fund as Class I Common Stock of the Acquiring Fund and Articles Supplementary classifying and designating certain of Shares of the Acquiring Fund as Class II Common Stock of the Acquiring Fund will be filed by the Company and accepted for record by the SDAT (the “Corporate Proceedings”).

6. The Plans will not differ in any manner relevant to this opinion from the Form of Plans.

Based upon the foregoing, and subject to the assumptions, limitations and qualifications stated herein, it is our opinion that:

1. The Company is a corporation duly incorporated and existing under and by virtue of the laws of the State of Maryland and is in good standing with the SDAT.

2. The issuance of the Shares has been duly authorized and (assuming that, upon any issuance of the Shares, the total number of shares of each series and class of Common Stock, $.00001 par value per share (the “Common Stock”), of the Company, issued and outstanding will not exceed the total number of shares of each series and class of Common Stock that the Company is then authorized to issue under the Charter), when and if issued and delivered against payment therefor in accordance with the Resolutions, the Plans and the Corporate Proceedings, the Shares will be validly issued, fully paid and nonassessable.

The foregoing opinion is limited to the laws of the State of Maryland and we do not express any opinion herein concerning any other law. We express no opinion as to compliance with federal or state securities laws, including the securities laws of the State of Maryland, or the 1940 Act.

The opinion expressed herein is limited to the matters specifically set forth herein and no other opinion shall be inferred beyond the matters expressly stated. We assume no obligation to supplement this opinion if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed herein after the date hereof.

Legg Mason Partners Variable Portfolios III, Inc.

Willkie Farr & Gallagher LLP

November 3, 2006

Page 4

This opinion is being furnished to you for submission to the Commission as an exhibit to the Registration Statement. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the 1933 Act.

Very truly yours,

/s/ Venable LLP

EX-99.12

FORM OF OPINION

                    , 2007

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

Legg Mason Partners Investment Series

125 Broad Street

New York, NY 10004

Legg Mason Partners Variable Aggressive Growth Portfolio (B)

Legg Mason Partners Variable Portfolios III, Inc.

125 Broad Street

New York, NY 10004

Dear Ladies and Gentlemen:

You have requested our opinion regarding certain federal income tax consequences to Legg Mason Partners Premier Selections All Cap Growth Portfolio (“Acquired Fund”), a separate series of Legg Mason Partners Investment Series, a Massachusetts business trust (“Acquired Fund Trust”), to the holders of the shares of beneficial interest (“Acquired Fund Shares”) of Acquired Fund (the “Acquired Fund Shareholders”), and to Legg Mason Partners Aggressive Growth Portfolio (B) (“Acquiring Fund”), a separate series of Legg Mason Partners Variable Portfolios III, Inc., a Maryland corporation (“Acquiring Fund Corporation”) in connection with the proposed transfer of substantially all of the properties of Acquired Fund to Acquiring Fund in exchange solely for voting shares of common stock of Acquiring Fund (“Acquiring Fund Shares”) and the assumption of all liabilities of Acquired Fund by Acquiring Fund, followed by the distribution of such Acquiring Fund Shares received by Acquired Fund in complete liquidation and termination of Acquired Fund (the “Reorganization”), all pursuant to the Agreement and Plan of Reorganization (the “Plan”) dated as of                     executed by Acquired Fund Trust on behalf of Acquired Fund and by Acquiring Fund Corporation on behalf of Acquiring Fund.

U.S.    Austin    Boston    Charlotte    Harrisburg    Hartford    New York    Newport Beach    Palo Alto    Philadelphia    Princeton

San Francisco    Washington DC    EUROPE    Brussels    London    Luxembourg    Munich    Paris

Page 2

For purposes of this opinion, we have examined and relied upon (1) the Plan, (2) the Form N-14 filed by Acquiring Fund on                      with the Securities and Exchange Commission, (3) the related Proxy Statement dated                     , (4) the facts and representations contained in the letter dated on or about the date hereof addressed to us from Acquiring Fund Corporation on behalf of Acquiring Fund, (5) the facts and representations contained in the letter dated on or about the date hereof addressed to us from Acquired Fund Trust on behalf of Acquired Fund, and (6) such other documents and instruments as we have deemed necessary or appropriate for purposes of rendering this opinion.

This opinion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), United States Treasury regulations, judicial decisions, and administrative rulings and pronouncements of the Internal Revenue Service, all as in effect on the date hereof. This opinion is conditioned upon the Reorganization taking place in the manner described in the Plan and the Form N-14 referred to above.

Based upon the foregoing, it is our opinion that for federal income tax purposes:

1. The acquisition by Acquiring Fund of substantially all of the properties of Acquired Fund in exchange solely for Acquiring Fund Shares and the assumption of all liabilities of Acquired Fund by Acquiring Fund followed by the distribution of Acquiring Fund Shares to the Acquired Fund Shareholders in exchange for their Acquired Fund Shares in complete liquidation and termination of Acquired Fund will constitute a tax-free reorganization under Section 368(a) of the Code.

2. Acquired Fund will not recognize gain or loss upon the transfer of substantially all of its assets to Acquiring Fund in exchange solely for Acquiring Fund Shares and the assumption of all liabilities of Acquired Fund except that Acquired Fund may be required to recognize gain or loss with respect to contracts described in Section 1256(b) of the Code or stock in a passive foreign investment company, as defined in Section 1297(a) of the Code.

3. Acquired Fund will not recognize gain or loss upon the distribution to its shareholders of the Acquiring Fund Shares received by Acquired Fund in the Reorganization.

Dechert LLP

Page 3

4. Acquiring Fund will recognize no gain or loss upon receiving the properties of Acquired Fund in exchange solely for Acquiring Fund Shares and the assumption of all liabilities of Acquired Fund.

5. The adjusted basis to Acquiring Fund of the properties of Acquired Fund received by Acquiring Fund in the Reorganization will be the same as the adjusted basis of those properties in the hands of Acquired Fund immediately before the exchange.

6. Acquiring Fund’s holding periods with respect to the properties of Acquired Fund that Acquiring Fund acquires in the Reorganization will include the respective periods for which those properties were held by Acquired Fund (except where investment activities of Acquiring Fund have the effect of reducing or eliminating a holding period with respect to an asset).

7. The Acquired Fund Shareholders will recognize no gain or loss upon receiving Acquiring Fund Shares solely in exchange for Acquired Fund Shares.

8. The aggregate basis of the Acquiring Fund Shares received by an Acquired Fund Shareholder in the Reorganization will be the same as the aggregate basis of Acquired Fund Shares surrendered by the Acquired Fund Shareholder in exchange therefor.

9. An Acquired Fund Shareholder’s holding period for the Acquiring Fund Shares received by the Acquired Fund Shareholder in the Reorganization will include the holding period during which the Acquired Fund Shareholder held Acquired Fund Shares surrendered in exchange therefor, provided that the Acquired Fund Shareholder held such Shares as a capital asset on the date of the Reorganization.

We express no opinion as to the federal income tax consequences of the Reorganization except as expressly set forth above, or as to any transaction except those consummated in accordance with the Plan.

Very truly yours,

/s/ Dechert LLP

Dechert LLP

FORM OF OPINION

                    , 2007

Legg Mason Partners Variable Aggressive Growth Portfolio (A)

Legg Mason Partners Variable Portfolios II

125 Broad Street

New York, NY 10004

Legg Mason Partners Variable Aggressive Growth Portfolio (B)

Legg Mason Partners Variable Portfolios III, Inc.

125 Broad Street

New York, NY 10004

Dear Ladies and Gentlemen:

You have requested our opinion regarding certain federal income tax consequences to Legg Mason Partners Variable Aggressive Growth Portfolio (A) (“Acquired Fund”), a separate series of Legg Mason Partners Variable Portfolios II, a Massachusetts business trust (“Acquired Fund Trust”), to the holders of the shares of beneficial interest (“Acquired Fund Shares”) of Acquired Fund (the “Acquired Fund Shareholders”), and to Legg Mason Partners Aggressive Growth Portfolio (B) (“Acquiring Fund”), a separate series of Legg Mason Partners Variable Portfolios III, Inc., a Maryland corporation (“Acquiring Fund Corporation”) in connection with the proposed transfer of substantially all of the properties of Acquired Fund to Acquiring Fund in exchange solely for voting shares of common stock of Acquiring Fund (“Acquiring Fund Shares”) and the assumption of all liabilities of Acquired Fund by Acquiring Fund, followed by the distribution of such Acquiring Fund Shares received by Acquired Fund in complete liquidation and termination of Acquired Fund (the “Reorganization”), all pursuant to the Agreement and Plan of Reorganization (the “Plan”) dated as of executed by Acquired Fund Trust on behalf of Acquired Fund and by Acquiring Fund Corporation on behalf of Acquiring Fund.

U.S.    Austin    Boston    Charlotte    Harrisburg    Hartford    New York    Newport Beach    Palo Alto    Philadelphia    Princeton

San Francisco    Washington DC    EUROPE    Brussels    London    Luxembourg    Munich    Paris

Page 2

For purposes of this opinion, we have examined and relied upon (1) the Plan, (2) the Form N-14 filed by Acquiring Fund on with the Securities and Exchange Commission, (3) the related Proxy Statement dated , (4) the facts and representations contained in the letter dated on or about the date hereof addressed to us from Acquiring Fund Corporation on behalf of Acquiring Fund, (5) the facts and representations contained in the letter dated on or about the date hereof addressed to us from Acquired Fund Trust on behalf of Acquired Fund, and (6) such other documents and instruments as we have deemed necessary or appropriate for purposes of rendering this opinion.

This opinion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), United States Treasury regulations, judicial decisions, and administrative rulings and pronouncements of the Internal Revenue Service, all as in effect on the date hereof. This opinion is conditioned upon the Reorganization taking place in the manner described in the Plan and the Form N-14 referred to above.

Based upon the foregoing, it is our opinion that for federal income tax purposes:

1. The acquisition by Acquiring Fund of substantially all of the properties of Acquired Fund in exchange solely for Acquiring Fund Shares and the assumption of all liabilities of Acquired Fund by Acquiring Fund followed by the distribution of Acquiring Fund Shares to the Acquired Fund Shareholders in exchange for their Acquired Fund Shares in complete liquidation and termination of Acquired Fund will constitute a tax-free reorganization under Section 368(a) of the Code.

2. Acquired Fund will not recognize gain or loss upon the transfer of substantially all of its assets to Acquiring Fund in exchange solely for Acquiring Fund Shares and the assumption of all liabilities of Acquired Fund except that Acquired Fund may be required to recognize gain or loss with respect to contracts described in Section 1256(b) of the Code or stock in a passive foreign investment company, as defined in Section 1297(a) of the Code.

3. Acquired Fund will not recognize gain or loss upon the distribution to its shareholders of the Acquiring Fund Shares received by Acquired Fund in the Reorganization.

Dechert LLP

Page 3

4. Acquiring Fund will recognize no gain or loss upon receiving the properties of Acquired Fund in exchange solely for Acquiring Fund Shares and the assumption of all liabilities of Acquired Fund.

5. The adjusted basis to Acquiring Fund of the properties of Acquired Fund received by Acquiring Fund in the Reorganization will be the same as the adjusted basis of those properties in the hands of Acquired Fund immediately before the exchange.

6. Acquiring Fund’s holding periods with respect to the properties of Acquired Fund that Acquiring Fund acquires in the Reorganization will include the respective periods for which those properties were held by Acquired Fund (except where investment activities of Acquiring Fund have the effect of reducing or eliminating a holding period with respect to an asset).

7. The Acquired Fund Shareholders will recognize no gain or loss upon receiving Acquiring Fund Shares solely in exchange for Acquired Fund Shares.

8. The aggregate basis of the Acquiring Fund Shares received by an Acquired Fund Shareholder in the Reorganization will be the same as the aggregate basis of Acquired Fund Shares surrendered by the Acquired Fund Shareholder in exchange therefor.

9. An Acquired Fund Shareholder’s holding period for the Acquiring Fund Shares received by the Acquired Fund Shareholder in the Reorganization will include the holding period during which the Acquired Fund Shareholder held Acquired Fund Shares surrendered in exchange therefor, provided that the Acquired Fund Shareholder held such Shares as a capital asset on the date of the Reorganization.

We express no opinion as to the federal income tax consequences of the Reorganization except as expressly set forth above, or as to any transaction except those consummated in accordance with the Plan.

Very truly yours,

/s/ Dechert LLP

Dechert LLP

EX-99.14

Consent of Independent Registered Public Accounting Firm

The Boards of Directors

Legg Mason Partners Variable Portfolios III, Inc.

(formerly Travelers Series Fund, Inc.)

and

Legg Mason Partners Variable Portfolios II

(formerly Greenwich Street Series Fund)

and

Legg Mason Partners Investment Series

(formerly Smith Barney Investment Series)

We consent to the use of our reports, incorporate herein by reference, for each of the funds listed below as of each of the respective fiscal year end dates listed below and to the reference to our firm under the heading “Financial Highlights” in the Proxy Statement/Prospectus.

Registrant (and Fund) Name and Fiscal Year End	Report Date
Legg Mason Partners Variable Portfolios III, Inc.
(Legg Mason Partners Variable Aggressive Growth Portfolio,
formerly Smtih Barney Aggressive Growth Portfolio)
October 31, 2005	December 16, 2005
Legg Mason Partners Variable Portfolios II
(Legg Mason Partners Variable Aggressive Growth Portfolio, formerly
Salomon Brothers Variable Aggressive Growth Fund)
December 31, 2005	February 22, 2006
Legg Mason Partners Investment Series
(Legg Mason Partners Variable Premier Selections All Cap Growth
Portfolio, formerly Smith Barney Premier Selections All Cap Growth
Portfolio)
October 31, 2005	December 16, 2006
	/s/ KPMG LLP KPMG LLP

New York, New York

November 3, 2006

EX-99.16

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby makes, constitutes and appoints each of R. Jay Gerken, Robert I. Frenkel, Thomas C. Mandia and Marc De Oliveira, with full power to act without the other, as his or her agent and attorney-in-fact for the purpose of executing in his or her name, in his or her capacity as a Director of Legg Mason Partners Variable Portfolios III, Inc. (the “Fund”) registration statements on Form N-14 (including amendments thereto), with respect to the Legg Mason Partners Variable Aggressive Growth Portfolio, a series of the Company, to be filed with the United States Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.

All past acts of an attorney-in-fact in furtherance of the foregoing are hereby ratified and confirmed.

This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument.

This power of attorney shall be valid from the date hereof until revoked by me.

IN WITNESS WHEREOF, I have executed this instrument as of the 28th day of August, 2006.

/s/ R. Jay Gerken R. Jay Gerken	Director and Chairman of the Board	August 28, 2006
Robert A. Frankel	Director	August     , 2006
Michael Gellert	Director	August     , 2006
Rainer Greeven	Director	August     , 2006
Susan M. Heilbron	Director	August     , 2006

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby makes, constitutes and appoints each of R. Jay Gerken, Robert I. Frenkel, Thomas C. Mandia and Marc De Oliveira, with full power to act without the other, as his or her agent and attorney-in-fact for the purpose of executing in his or her name, in his or her capacity as a Director of Legg Mason Partners Variable Portfolios III, Inc. (the “Fund”) registration statements on Form N-14 (including amendments thereto), with respect to the Legg Mason Partners Variable Aggressive Growth Portfolio, a series of the Company, to be filed with the United States Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.

All past acts of an attorney-in-fact in furtherance of the foregoing are hereby ratified and confirmed.

This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument.

This power of attorney shall be valid from the date hereof until revoked by me.

IN WITNESS WHEREOF, I have executed this instrument as of the 28th day of August, 2006.

R. Jay Gerken	Director and Chairman of the Board	August     , 2006
/s/ Robert A. Frankel Robert A. Frankel	Director	August 28, 2006
Michael Gellert	Director	August     , 2006
Rainer Greeven	Director	August     , 2006
Susan M. Heilbron	Director	August     , 2006

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby makes, constitutes and appoints each of R. Jay Gerken, Robert I. Frenkel, Thomas C. Mandia and Marc De Oliveira, with full power to act without the other, as his or her agent and attorney-in-fact for the purpose of executing in his or her name, in his or her capacity as a Director of Legg Mason Partners Variable Portfolios III, Inc. (the “Fund”) registration statements on Form N-14 (including amendments thereto), with respect to the Legg Mason Partners Variable Aggressive Growth Portfolio, a series of the Company, to be filed with the United States Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.

All past acts of an attorney-in-fact in furtherance of the foregoing are hereby ratified and confirmed.

This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument.

This power of attorney shall be valid from the date hereof until revoked by me.

IN WITNESS WHEREOF, I have executed this instrument as of the 28th day of August, 2006.

R. Jay Gerken	Director and Chairman of the Board	August     , 2006
Robert A. Frankel	Director	August     , 2006
/s/ Michael Gellert Michael Gellert	Director	August 28, 2006
Rainer Greeven	Director	August     , 2006
Susan M. Heilbron	Director	August     , 2006

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby makes, constitutes and appoints each of R. Jay Gerken, Robert I. Frenkel, Thomas C. Mandia and Marc De Oliveira, with full power to act without the other, as his or her agent and attorney-in-fact for the purpose of executing in his or her name, in his or her capacity as a Director of Legg Mason Partners Variable Portfolios III, Inc. (the “Fund”) registration statements on Form N-14 (including amendments thereto), with respect to the Legg Mason Partners Variable Aggressive Growth Portfolio, a series of the Company, to be filed with the United States Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.

All past acts of an attorney-in-fact in furtherance of the foregoing are hereby ratified and confirmed.

This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument.

This power of attorney shall be valid from the date hereof until revoked by me.

IN WITNESS WHEREOF, I have executed this instrument as of the 14th day of September, 2006.

/s/ Rainer Greeven   Rainer Greeven Director September 14, 2006

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby makes, constitutes and appoints each of R. Jay Gerken, Robert I. Frenkel, Thomas C. Mandia and Marc De Oliveira, with full power to act without the other, as his or her agent and attorney-in-fact for the purpose of executing in his or her name, in his or her capacity as a Director of Legg Mason Partners Variable Portfolios III, Inc. (the “Fund”) registration statements on Form N-14 (including amendments thereto), with respect to the Legg Mason Partners Variable Aggressive Growth Portfolio, a series of the Company, to be filed with the United States Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended and the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.

All past acts of an attorney-in-fact in furtherance of the foregoing are hereby ratified and confirmed.

This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument.

This power of attorney shall be valid from the date hereof until revoked by me.

IN WITNESS WHEREOF, I have executed this instrument as of the 28th day of August, 2006.

R. Jay Gerken	Director and Chairman of the Board	August     , 2006
Robert A. Frankel	Director	August     , 2006
Michael Gellert	Director	August     , 2006
Rainer Greeven	Director	August     , 2006
/s/ Susan M. Heilbron Susan M. Heilbron	Director	August 28, 2006

EX-99.17.A

EVERY SHAREHOLDER’S VOTE IS IMPORTANT

Your Proxy Vote is important!

And now you can Proxy Vote by PHONE or the INTERNET.

It saves Money! Telephone and Internet voting saves postage costs. Savings which can help minimize expenses.

It saves Time! Telephone and Internet voting is instantaneous – 24 hours a day.

It’s Easy! Just follow these simple steps:

1. Read your proxy statement and have it at hand.

2. Call toll-free 1-866-877-0438, or go to website: https://vote.proxy-direct.com

3. Follow the recorded or on-screen directions.

4. Do not mail your Proxy Card when you vote by phone or the Internet.

Please detach at perforation before mailing.

PROXY LEGG MASON PARTNERS VARIABLE PORTFOLIOS II SPECIAL MEETING OF SHAREHOLDERS FEBRUARY 9, 2007 AT 10:00 A.M. PROXY

PROXY IS SOLICITED BY THE BOARD OF TRUSTEES. The undersigned holder of shares hereby appoints R. Jay Gerken, Robert I. Frenkel, Thomas C. Mandia and Rocco Del Guercio attorneys and proxies for the undersigned, each with full powers of substitution and revocation, to represent the undersigned and to vote on behalf of the undersigned all shares of Legg Mason Partners Variable Aggressive Growth Portfolio (the “Acquired Fund”), a series of Legg Mason Partners Variable Portfolios II (the “Trust”) that the undersigned is entitled to vote at the Special Meeting of Shareholders of the Acquired Fund to be held at the offices of Bingham McCutchen LLP, 399 Park Avenue, 19th Floor, New York, New York 10022 on February 9, 2007 at 10:00 A.M., and any adjournments or postponements thereof. The undersigned hereby acknowledges receipt of the Notice of Special Meeting and Proxy Statement/Prospectus dated December     , 2006 and hereby instructs said attorneys and proxies to vote said shares as indicated herein. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Special Meeting or any adjournments or postponements thereof. A majority of the proxies present and acting at the Special Meeting in person or by substitute (or if only one shall be present, then that one) shall have and may exercise all of the power and authority of said proxies hereunder. The undersigned hereby revokes any proxy previously given.

VOTE VIA THE TELEPHONE: 1-866-877-0438 VOTE VIA THE INTERNET: https://vote.proxy-direct.com
999 9999 9999 999
Note: Please sign exactly as your name appears on this Proxy. If joint owners, EITHER may sign this Proxy. When signing as attorney, executor, administrator, trustee, guardian or corporate officer, please give your full title.
Signature(s)
Title(s), if applicable
	, 2006
Date

EVERY SHAREHOLDER’S VOTE IS IMPORTANT

Please detach at perforation before mailing.

This proxy, if properly executed, will be voted in the manner directed by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR APPROVAL OF THE PROPOSAL.

PLEASE MARK VOTES AS IN THIS EXAMPLE:        n

1. To approve the Agreement and Plan of Reorganization, providing for (i) the acquisition of all of the assets and the assumption of all of the liabilities of Legg Mason Partners Variable Aggressive Growth Portfolio (the “Acquired Portfolio”), a series of the Trust, in exchange for shares of Legg Mason Partners Variable Aggressive Growth Portfolio (the “Acquiring Portfolio”), a series of Legg Mason Partners Variable Portfolios III, Inc., to be distributed to the shareholders of the Acquired Portfolio, and (ii) the subsequent termination of the Acquired Portfolio.

FOR            AGAINST            ABSTAIN

2. To transact any other business which may properly come before the Special Meeting or and adjournments or postponements thereof.

NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED ON THE REVERSE SIDE.

EVERY SHAREHOLDER’S VOTE IS IMPORTANT

Your Proxy Vote is important!

And now you can Proxy Vote by PHONE or the INTERNET.

It saves Money! Telephone and Internet voting saves postage costs. Savings which can help minimize expenses.

It saves Time! Telephone and Internet voting is instantaneous – 24 hours a day.

It’s Easy! Just follow these simple steps:

1. Read your proxy statement and have it at hand.

2. Call toll-free 1-866-877-0438, or go to website: https://vote.proxy-direct.com

3. Follow the recorded or on-screen directions.

4. Do not mail your Proxy Card when you vote by phone or the Internet.

Please detach at perforation before mailing.

PROXY LEGG MASON PARTNERS INVESTMENT SERIES SPECIAL MEETING OF SHAREHOLDERS FEBRUARY 9, 2007 AT 10:00 A.M. PROXY

PROXY IS SOLICITED BY THE BOARD OF TRUSTEES. The undersigned holder of shares hereby appoints R. Jay Gerken, Robert I. Frenkel, Thomas C. Mandia and Rocco Del Guercio attorneys and proxies for the undersigned, each with full powers of substitution and revocation, to represent the undersigned and to vote on behalf of the undersigned all shares of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (the “Acquired Fund”), a series of Legg Mason Partners Investment Series (the “Trust”) that the undersigned is entitled to vote at the Special Meeting of Shareholders of the Acquired Fund to be held at the offices of Bingham McCutchen LLP, 399 Park Avenue, 19th Floor, New York, New York 10022 on February 9, 2007 at 10:00 A.M., and any adjournments or postponements thereof. The undersigned hereby acknowledges receipt of the Notice of Special Meeting and Proxy Statement/Prospectus dated December     , 2006 and hereby instructs said attorneys and proxies to vote said shares as indicated herein. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Special Meeting or any adjournments or postponements thereof. A majority of the proxies present and acting at the Special Meeting in person or by substitute (or if only one shall be present, then that one) shall have and may exercise all of the power and authority of said proxies hereunder. The undersigned hereby revokes any proxy previously given.

VOTE VIA THE TELEPHONE: 1-866-877-0438 VOTE VIA THE INTERNET: https://vote.proxy-direct.com
999 9999 9999 999
Note: Please sign exactly as your name appears on this Proxy. If joint owners, EITHER may sign this Proxy. When signing as attorney, executor, administrator, trustee, guardian or corporate officer, please give your full title.
Signature(s)
Title(s), if applicable
	, 2006
Date

EVERY SHAREHOLDER’S VOTE IS IMPORTANT

Please detach at perforation before mailing.

This proxy, if properly executed, will be voted in the manner directed by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR APPROVAL OF THE PROPOSAL.

PLEASE MARK VOTES AS IN THIS EXAMPLE:        n

1. To approve the Agreement and Plan of Reorganization, providing for (i) the acquisition of all of the assets and the assumption of all of the liabilities of Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio (the “Acquired Portfolio”), a series of the Trust, in exchange for shares of Legg Mason Partners Variable Aggressive Growth Portfolio (the “Acquiring Portfolio”), a series of Legg Mason Partners Variable Portfolios III, Inc., to be distributed to the shareholders of the Acquired Portfolio, and (ii) the subsequent termination of the Acquired Portfolio.

FOR            AGAINST            ABSTAIN

2. To transact any other business which may properly come before the Special Meeting or and adjournments or postponements thereof.

NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED ON THE REVERSE SIDE.

EX-99.17.B

February 28, 2006

STATEMENT OF ADDITIONAL INFORMATION

Travelers Series Fund Inc.

125 Broad Street

New York, New York 10004

1-800-842-8573

This Statement of Additional Information (“SAI”) supplements the information contained in the current Prospectuses (collectively, the “Prospectuses”) of the portfolios of the Travelers Series Fund Inc. (the “Company”), each dated February 28, 2005 (as amended or supplemented from time to time), and should be read in conjunction with the Prospectuses. The Company is a series investment company consisting of nine portfolios (each, a “fund”). The Prospectuses for each fund may be obtained, without charge, from the Company or a broker-dealer, financial intermediary, financial institution or a distributor’s financial consultant. This SAI, although not in itself a prospectus, is incorporated by reference into each Prospectus as applicable in its entirety.

Shares of each fund are offered to and may only be purchased by insurance company separate accounts (the “Separate Accounts”) that fund certain variable annuity and variable life insurance contracts and certain qualified plans (the “Contracts”). The Separate Accounts invest in shares of one or more of the funds in accordance with allocation instructions received from Contract owners. Such allocation rights are further described in the accompanying Contract prospectus. Shares of each fund are offered to Separate Accounts without a sales charge at their net asset value, next determined after receipt of an order by an insurance company. The offering of shares of a fund may be suspended from time to time and the Company reserves the right to reject any specific purchase order.

The Company, the investment underlying certain variable annuity and variable life insurance contracts, offers a choice of nine funds:

The Smith Barney International All Cap Growth Portfolio seeks total return on its assets from growth of capital and income and will invest at least 80% of its assets in a diversified portfolio of equity securities of established non-U.S. issuers.

The Smith Barney Large Cap Value Portfolio seeks long-term growth of capital with current income a secondary objective. This fund invests equity securities of U.S. companies with larger market capitalization.

The Smith Barney Large Capitalization Growth Portfolio seeks long-term growth of capital by investing in equity securities of U.S. companies with large market capitalization of at least $5 billion at the time of investment.

The Smith Barney Aggressive Growth Portfolio seeks capital appreciation by investing primarily in common stocks of companies the manager believes are experiencing, or will experience, growth in earnings that exceeds the average rate of earnings growth of the companies comprising the S&P 500 Index.

The Smith Barney Mid Cap Core Portfolio seeks long-term growth of capital by investing primarily in equity securities of medium sized companies.

The Smith Barney High Income Portfolio seeks primarily high current income by investing at least 80% of its assets in high-yielding corporate debt obligations and preferred stock of U.S. and foreign issuers. Capital appreciation is a secondary objective.

The SB Adjustable Rate Income Portfolio seeks to provide high current income and to limit the degree of fluctuation of its net asset value from movements in interest rates by investing in adjustable rate securities.

The Smith Barney Money Market Portfolio seeks maximum current income consistent with preservation of capital. Shares of Smith Barney Money Market Portfolio are not insured or guaranteed by the U.S. Government. There is no assurance that the fund will be able to maintain a stable net asset value of $1.00 per share.

1

The Social Awareness Stock Portfolio seeks long-term capital appreciation and retention of net investment income by investing at least 80% of its assets in equity securities. The fund seeks to invest in companies that meet the manager’s investment screen and, when possible, certain social criteria.

In all cases, there can be no assurance that a fund will achieve its investment objective.

CONTENTS

Directors and Officers	3
Investment Objectives and Management Policies	8
Investment Practices	20
Risk Factors	41
Investment Restrictions	54
Portfolio Turnover	63
Taxation	63
Determination of Net Asset Value	67
Availability of the Funds	68
Redemption of Shares	68
Management	68
Portfolio Manager Disclosure	73
Other Information about the Company	81
Financial Statements	87
Other Information	88
Appendix A—Ratings on Debt Obligations	A-1
Appendix B—Proxy Voting Policies and Procedures	B-1

2

DIRECTORS AND OFFICERS

The Directors and Officers of the Company, their ages, their principal occupations during the past five years (their titles may have varied during that period), the number of investment companies associated with Legg Mason, Inc. (“Legg Mason”) the Directors oversee, and other directorships held, are set forth below. Each Director serves until a successor is elected and qualified. The “Fund Complex” consists of the Company and certain other investment companies associated with Legg Mason.

Each Director and Officer of the Company noted as an interested person is interested by virtue of that individual’s position with Citigroup Asset Management (“CAM”) or its affiliates described in the table below, and is referred to as an “Interested Director.” All other Directors are not deemed to be “interested persons” of the Company, as defined in the Investment Company Act of 1940 (the “1940 Act”), and are referred to as “Non-Interested Directors.”

Name, Address, and Year of Birth	Position(s) Held with Company	Term of Office* and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Director	Other Directorships Held by Director**
Non-Interested Directors:
Robert A. Frankel 1961 Deergrass Way Carlsbad, CA 92009 Year of Birth: 1927	Director	Since 1999	Managing Partner of Robert A. Frankel Management Consultants; Former Vice President of The Readers Digest Association, Inc.	18	None
Michael E. Gellert 122 East 42nd Street New York, NY 10168 Year of Birth: 1931	Director	Since 1999	General Partner of Windcrest Partners, a venture capital firm	11	Director of Dalet S.A. (media management operations), SEACOR Holdings, Inc. (offshore marine services provider) and Six Flags, Inc. (worldwide regional theme park operators)
Rainer Greeven 630 5th Avenue New York, NY 10111 Year of Birth: 1936	Director	Since 1994	Attorney, Rainer Greeven PC	11	None
Susan M. Heilbron P.O. Box 557 Chilmark, MA 02535 Year of Birth: 1945	Director	Since 1994	Owner/Consultant of Lacey & Heilbron, a public relations firm	11	None
Interested Director:
R. Jay Gerken*** CAM 399 Park Avenue 4th Floor New York, NY 10022 Year of Birth: 1951	Chairman, President and Chief Executive Officer	Since 2002	Managing Director of CAM; Chairman, President and Chief Executive Officer of Smith Barney Fund Management LLC (“SBFM”) and Citi Fund Management Inc. (“CFM”); President and Chief Executive Officer of certain mutual funds associated with Legg Mason; Formerly, President, Chairman and Chief Executive Officer of Travelers Investment Adviser, Inc. (from 2002 to 2005), Portfolio Manager of Smith Barney Allocation Series Inc. (from 1996-2001) and Smith Barney Growth and Income Fund (from 1996-2000)	182	None

* Directors serve until their successors are elected and qualified.

** This column includes only directorships of companies required to register or file reports with the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the 1940 Act.

*** Mr. Gerken is an “interested person” of the Company as defined in the 1940 Act because he is an officer of the investment manager or its affiliates.

3

Name, Address, and Year of Birth	Position(s) Held with Company	Term of Office* and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Director	Other Directorships Held by Director**
Officers:
Andrew B. Shoup CAM 125 Broad Street 10th Floor New York, NY 10004 Year of Birth: 1956	Senior Vice President and Chief Administrative Officer	Since 2003	Director of CAM; Senior Vice President and Chief Administrative Officer of certain mutual funds associated with Legg Mason; Treasurer of certain mutual funds associated with Legg Mason; formerly, Head of International Funds Administration of CAM (from 2001 to 2003) and Director of Global Funds Administration of CAM (from 2000 to 2001)	N/A	N/A
James Giallanza CAM 125 Broad Street New York, NY 10004 Year of Birth: 1966	Treasurer and Chief Financial Officer	Since 2004	Director of CAM; Treasurer and Chief Financial Officer of other mutual funds associated with Legg Mason; formerly, Director and Controller of the US wholesale business at UBS Global Asset Management US Inc. (September 2001 through July 2004) and Director of Global Funds Administration at Citigroup Asset Management (June 2000 through September 2001)	N/A	N/A
Jeffrey J. Russell CAM 399 Park Avenue 4th Floor New York, NY 10022 Year of Birth: 1957	Vice President and Investment Officer	Since 1994	Managing Director of CAM; Investment Officer of certain mutual funds associated with Legg Mason	N/A	N/A
Martin R. Hanley Western Asset Management Company (“Western Asset”) 399 Park Avenue New York, NY 10022 Year of Birth: 1965	Vice President and Investment Officer	Since 1994	Portfolio manager of CAM and Western Asset, a wholly-owned subsidiary of Legg Mason, and an affiliate of CAM; Investment Officer of certain mutual funds associated with Legg Mason	N/A	N/A
Richard A. Freeman CAM 399 Park Avenue New York, NY 10022 Year of Birth: 1953	Vice President and Investment Officer	Since 1999	Managing Director of CAM; Investment Officer of certain mutual funds associated with Legg Mason	N/A	N/A
Brian Angerame CAM 399 Park Avenue New York, NY 10022 Year of Birth: 1972	Vice President and Investment Officer	Since 2005	Director of CAM; Investment Officer of certain mutual funds associated with Legg Mason	N/A	N/A

* Directors serve until their successors are elected and qualified.

** This column includes only directorships of companies required to register or file reports with the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the 1940 Act.

4

Name, Address, and Year of Birth	Position(s) Held with Company	Term of Office* and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Director	Other Directorships Held by Director**
Officers:
Derek Deutsch CAM 399 Park Avenue New York, NY 10022 Year of Birth: 1969	Vice President and Investment Officer	Since 2005	Director of CAM; Investment Officer of certain mutual funds associated with Legg Mason	N/A	N/A
Peter Stournaras CAM 399 Park Avenue New York, NY 10022 Year of Birth: 1973	Vice President and Investment Officer	Since 2005	Director of CAM; Investment Officer of certain mutual funds associated with Legg Mason	N/A	N/A
Alan J. Blake CAM 399 Park Avenue New York, NY 10022 Year of Birth: 1949	Vice President and Investment Officer	Since 1998	Managing Director of CAM; Investment Officer of certain mutual funds associated with Legg Mason	N/A	N/A
Theresa M. Veres Western Asset 399 Park Avenue New York, New York 10022 Year of Birth: 1966	Vice President and Investment Officer	Since 2003	Portfolio manager of CAM and Western Asset Investment Officer of certain mutual funds associated with Legg Mason	N/A	N/A
Mark McAllister CAM 399 Park Avenue, 4th Floor New York, NY 10022 Year of Birth: 1962	Vice President and Investment Officer	Since 2004	Managing Director of CAM; Investment Officer of certain mutual funds associated with Legg Mason	N/A	N/A
Robert Feitler CAM 399 Park Avenue, 4th Floor New York, NY 10022 Year of Birth: 1959	Vice President and Investment Officer	Since 2004	Director of CAM; Investment Officer of certain mutual funds associated with Legg Mason	N/A	N/A
Ted P. Becker CAM 399 Park Avenue, 4th Floor New York, NY 10022 Year of Birth: 1951	Chief Compliance Officer	Since 2006	Managing Director of Compliance at Legg Mason (since 2005); Chief Compliance Officer with certain mutual funds associated with Legg Mason (since 2006); formerly, Managing Director of Compliance at CAM (2002-2005); Managing Director—Internal Audit & Risk Review at Citigroup (prior to 2002).	N/A	N/A
John Chiota CAM 100 First Stamford Place 5th Floor Stamford, CT 06902 Birth Year: 1968	Chief Anti- Money Laundering Compliance Officer	Since 2006	Vice President of CAM (since 2004); Chief Anti-Money Laundering Compliance Officer with certain mutual funds associated with Legg Mason (since 2006); prior to August 2004, Chief AML Compliance Officer with TD Waterhouse.	N/A	N/A

* Directors serve until their successors are elected and qualified.

** This column includes only directorships of companies required to register or file reports with the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the 1940 Act.

5

Name, Address, and Year of Birth	Position(s) Held with Company	Term of Office* and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Director	Other Directorships Held by Director**
Executive Officers:
William Theriault CAM 399 Park Avenue, 4th Floor New York, NY 10022 Year of Birth: 1966	Vice President and Investment Officer	Since 2005	Director, CAM; Portfolio Manager for CAM or its predecessor firms since 1996	N/A	N/A
Robert I. Frenkel CAM 300 First Stamford Place 4th Floor Stamford, CT 06902 Year of Birth: 1954	Secretary and Chief Legal Officer	Since 2003	Managing Director and General Counsel, Global Mutual Funds for CAM and its predecessor (since 1994); Secretary of CFM; Secretary and Chief Legal Officer of certain mutual funds associated with Legg Mason	N/A	N/A

* Directors serve until their successors are elected and qualified.

** This column includes only directorships of companies required to register or file reports with the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the 1940 Act.

The business affairs of each fund are managed by or under the direction of the Board of Directors.

The Board has an audit committee (the “Audit Committee”) which is composed of all of the Non-Interested Directors. In accordance with its written charter adopted by the Board of Directors, the Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the fund. The Audit Committee oversees the scope of the fund’s audits, the fund’s accounting and financial reporting policies and practices and their internal controls. The Audit Committee approves, and recommends to the Non-Interested Directors of the company for their ratification, the selection, appointment, retention or termination of the fund’s independent registered public accounting firm and approves the compensation of the independent registered public accounting firm. The Audit Committee also approves all audit and permissible non-audit services provided to the funds by the independent registered public accounting firm and all permissible non-audit services provided by the funds’ independent registered public accounting firm to SBFM and any affiliated service providers if the engagement relates directly to the funds’ operations and financial reporting. During the most recent fiscal year, the Audit Committee met twice.

The Board also has a standing governance committee (the “Governance Committee”). All Non-Interested Directors are members of the Governance Committee. The Governance Committee is responsible for, among other things, recommending candidates to fill vacancies on the Board. The Governance Committee does not have a procedure to consider nominees recommended by shareholders. During the most recent fiscal year, the Governance Committee did not meet.

The following sets forth the dollar range of equity securities in the Company beneficially owned by each Director, and, on an aggregate basis, in all registered investment companies overseen by each Director in the Fund Complex as of December 31, 2005:

Name of Director	Dollar Range of Equity Securities in the Company	Aggregate Dollar Range of Equity Securities in All Registered Investment Companies overseen by Director in Family of Investment Companies
Robert A. Frankel	None	Over $100,000
Michael E. Gellert	None	None
Rainer Greeven	None	None
Susan M. Heilbron	None	None
R. Jay Gerken	None	Over $100,000

6

Citigroup Inc. (“Citigroup”), the parent company of Citigroup Global Markets Inc. (“CGMI”), one of the Company’s distributors, has invested approximately $8 to $10 million in Virtual Growth Inc. through a private placement; Windcrest Partners, of which Michael Gellert is the general partner, has also invested in Virtual Growth Inc. Citibank N.A. has issued a $12 million line of credit to Windcrest Partners; the balance was $250,000 as of December 31, 2005. Citibank N.A. has also issued a $1.8 million line of credit in Mr. Gellert’s name; the balance as of December 31, 2005 is $0.

The following table shows the compensation paid by the Company and the Fund Complex to each Director during the Company’s last fiscal year. None of the officers of the Company received any compensation from the Company for such period. The Company does not pay retirement benefits to its Directors and Executive Officers. Officers and Interested Directors of the Company are compensated by CAM.

Name of Person	Compensation from Company and Fund Complex Paid to Directors Calendar Year Ended 12/31/05		Number of Funds for Which Director Serves Within Fund Complex
Robert A. Frankel	$	111,250	18
Michael Gellert	$	35,400	11
Rainer Greeven	$	35,700	11
Susan M. Heilbron	$	35,400	11
R. Jay Gerken		0	182

	Aggregate Compensation From Funds FYE 10/31/05
Name of Person	LCV	SOC
Robert A. Frankel	$2,747.79	$179.89
Michael Gellert	$2,663.65	$179.89
Rainer Greeven	$2,670.31	$179.89
Susan M. Heilbron	$2,663.65	$179.89
R. Jay Gerken	0	0

	Aggregate Compensation From Funds FYE 10/31/05
Name of Person	HI		MM		LCG
Robert A. Frankel	$	2,540.58	$	3,727.13	$	3,133.80
Michael Gellert	$	2,456.41	$	3,642.99	$	3,049.61
Rainer Greeven	$	2,463.08	$	3,649.65	$	3,056.28
Susan M. Heilbron	$	2,456.41	$	3,642.99	$	3,049.61
R. Jay Gerken		0		0		0

	Aggregate Compensation From Funds FYE 10/31/05
Name of Person	SBMC		AG		IACG		ADJ
Robert A. Frankel	$	1,557.52	$	6,876.77	$	1,819.21	$	1,053.20
Michael Gellert	$	1,473.37	$	6,792.58	$	1,735.03	$	969.05
Rainer Greeven	$	1,480.03	$	6,799.25	$	1,741.70	$	975.71
Susan M. Heilbron	$	1,473.37	$	6,792.58	$	1,735.03	$	969.05
R. Jay Gerken		0		0		0		0

LCV       Smith Barney Large Cap Value Portfolio	AG          Smith Barney Aggressive Growth Portfolio
HI            Smith Barney High Income Portfolio	IACG     Smith Barney International All Cap Growth Portfolio
MM        Smith Barney Money Market Portfolio	ADJ        SB Adjustable Rate Income Portfolio
LCG       Smith Barney Large Cap Growth Portfolio	SOC       Social Awareness Stock Portfolio
SBMC   Smith Barney Mid Cap Core Portfolio

On February 2, 2006, Directors and Executive Officers owned in the aggregate less than 1% of the outstanding securities of the Company.

7

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

Each fund’s investment objectives and certain investment restrictions (described under “Investment Restrictions”) are deemed to be “fundamental,” and therefore may be changed only by the “vote of a majority of the outstanding voting securities” as defined under the 1940 Act. However, each fund’s investment policies are nonfundamental, and thus may be changed without shareholder approval by the Board of Directors, provided such change is not prohibited by such fund’s fundamental investment restrictions or applicable law, and any such change will first be disclosed in the then current Prospectus or SAI.

Set forth below is a discussion of certain nonfundamental investment policies for each fund. Refer to the “Investment Practices” and “Risk Factors” sections of this SAI for further information.

Smith Barney International All Cap Growth Portfolio

Under normal market conditions, the fund invests at least 80% of its assets in a diversified portfolio of equity securities and may invest up to 20% of its assets in bonds, notes and debt securities (consisting of securities issued in the Eurocurrency markets or obligations of the United States or foreign governments and their political sub-divisions).

In seeking to achieve its objective, the fund invests its assets primarily in common stocks of foreign companies which in the opinion of SBFM have potential for growth of capital. However, there is no requirement that the fund invest exclusively in common stocks or other equity securities and, if deemed advisable, the fund may invest up to 20% of its assets in bonds, notes and other debt securities (including securities issued in the Eurocurrency markets or obligations of the United States or foreign governments and their political subdivisions).

The fund will generally invest its assets broadly among countries and will normally have represented in the portfolio business activities in not less than three different countries. Except as stated below, the fund will invest at least 80% of its assets in companies organized or governments located in any area of the world other than the United States, such as the Far East (e.g., Japan, Hong Kong, Singapore, Malaysia), Western Europe (e.g., United Kingdom, Germany, the Netherlands, France, Italy, Switzerland), Eastern Europe (e.g., the Czech Republic, Hungary, Poland, and the countries of the former Soviet Union), Central and South America (e.g., Mexico, Chile, and Venezuela), Australia, Canada and such other areas and countries as SBFM may determine from time to time. Concentration of the fund’s assets in one or a few countries or currencies will subject the fund to greater risks than if the fund’s assets were not geographically concentrated.

It is expected that securities held by the funds will ordinarily be traded on a stock exchange or other market in the country in which the issuer is principally based, but may also be traded on markets in other countries including, in many cases, the U.S. securities exchanges and over-the-counter markets.

The fund may enter into reverse repurchase agreements with broker/dealers and other financial institutions up to 5% of its net assets.

Smith Barney Large Cap Value Portfolio

Under normal market conditions the fund invests at least 80% of the value of its net assets plus any borrowings for investment purposes, in equity securities or other investments with similar economic characteristics of U.S. companies with large market capitalizations. Large market capitalization companies are currently defined as those whose market capitalizations are similar to companies in the Russell 1000 Index. Securities of companies whose market capitalizations no longer meet this definition after purchase by the fund still will be considered securities of large capitalization companies for purposes of the fund’s 80% investment policy.

The fund may make investments in foreign securities, though management currently intends to limit such investments to 5% of the fund’s assets, and an additional 10% of its assets may be invested in sponsored American Depositary Receipts (“ADRs”), which are certificates issued by U.S. banks representing the right to receive securities of a foreign issuer deposited with that bank or a correspondent bank. The fund may also lend up to 20% of the value of its total assets and may purchase or sell securities on a when-issued or delayed delivery basis.

8

The fund may buy or sell covered put and covered call options up to 15% of its net assets, provided such options are listed on a national securities exchange.

The fund will provide its shareholders with at least 60 days’ prior notice of any change in its 80% policy.

Smith Barney Large Capitalization Growth Portfolio

Under normal market conditions, the fund invests at least 80% of the value of its net assets plus any borrowings for investment purposes, in equity securities or other investments with similar economic characteristics of U.S. companies with large market capitalizations. Large market capitalization companies are currently defined as those whose market capitalizations are similar to companies in the Russell 1000 Index. Companies whose capitalization falls below this level after purchase will continue to be considered large capitalization companies for purposes of the 80% policy. The core holdings of the fund will be large capitalization companies that are dominant in their industries, global in scope and have a long-term history of performance. The fund has the flexibility, however, to invest up to 20% of the fund’s net assets plus any borrowings for investment purposes in companies with other market capitalizations. Companies with large market capitalizations typically have a large number of publicly held shares and a high trading volume resulting in a high degree of liquidity.

The fund may invest in securities of non-U.S. issuers in the form of ADRs, European Depositary Receipts (“EDRs”) or similar securities representing interests in the common stock of foreign issuers. Management intends to limit the fund’s investment in these types of securities to 10% of the fund’s net assets. ADRs are receipts, typically issued by a U.S. bank or trust company, which evidence ownership of underlying securities issued by a foreign corporation. EDRs are receipts issued in Europe which evidence a similar ownership arrangement. Generally, ADRs, in registered form, are designed for use in the U.S. securities markets and EDRs, in bearer form, are designed for use in European securities markets. The underlying securities are not always denominated in the same currency as the ADRs or EDRs. Although investment in the form of ADRs or EDRs facilitates investment in foreign securities, it does not mitigate the risks associated with investing in foreign securities.

Under normal market conditions, at least 80% of the fund’s portfolio will consist of common stocks, but it also may contain money market instruments for cash management purposes, including U.S. government securities; certificates of deposit (“CDs”), time deposits (“TDs”) and bankers’ acceptances issued by domestic banks (including their branches located outside the United States and subsidiaries located in Canada), domestic branches of foreign banks, savings and loan associations and similar institutions; high grade commercial paper; and repurchase agreements with respect to such instruments.

The fund will provide its shareholders with at least 60 days’ prior notice of any change in its 80% policy.

Smith Barney Aggressive Growth Portfolio

The fund invests primarily in common stocks of companies the manager believes are experiencing, or will experience, growth in earnings that exceeds the average rate of earnings growth of the companies comprising the S&P 500 Index. The fund may invest in the securities of large, well-known companies that offer prospects of long-term earnings growth. However, because higher earnings growth rates are often achieved by small to medium-sized companies, a significant portion of the fund’s assets are invested in the securities of such companies.

SBFM emphasizes individual security selection while diversifying the fund’s investments across industries, which may help to reduce risk. SBFM focuses primarily, but not exclusively, on emerging growth companies that have passed their “start-up” phase and show positive earnings and the prospect of achieving significant profit gains in the two to three years after the fund acquires their stocks.

The fund may invest up to 10% of its assets in foreign securities.

9

Smith Barney Mid Cap Core Portfolio

The fund invests, under normal market conditions, at least 80% of the value of its net assets, plus any borrowings for investment purposes, in equity securities or other investments with similar economic characteristics of medium sized companies. Medium sized companies are those with a market capitalization of at least $1 billion and not exceeding (i) $10 billion or (ii) the highest month-end capitalization value of any stock in the Russell Mid Cap Index for the previous 12 months, whichever is greater. Securities of companies whose market capitalizations no longer meet this definition after purchase by the fund still will be considered to be securities of mid capitalization companies for purposes of the fund’s 80% investment policy. The size of the companies in, and the composition of, the Russell Mid Cap Index changes with market conditions.

SBFM focuses on medium capitalization companies that exhibit attractive growth characteristics. SBFM selects individual “growth” stocks for investment in two ways: by identifying those companies which exhibit the most favorable growth prospects and by identifying those companies which have favorable valuations relative to their growth characteristics. This strategy is commonly known as “growth at a reasonable price” and offers investors style diversification within a single fund.

The fund may invest up to 20% of its assets in foreign securities.

The fund has adopted a policy to provide its shareholders with at least 60 days’ prior notice of any change in its 80% policy.

Smith Barney High Income Portfolio

The fund seeks to achieve its investment objectives by investing, under normal conditions at least 80% of the value of its net assets plus any borrowings for investment purposes, in high-yield corporate debt obligations and preferred stock of U.S. and foreign issuers or other investments with similar economic characteristics. Up to 20% of the fund’s net assets, plus any borrowings for investment purposes, may be invested in common stock or common stock equivalents, including convertible securities, options, warrants and rights, and/or securities rated higher than Ba by Moody’s Investor Services, Inc. (“Moodys”) and BB by the Standard & Poor’s Division of the McGraw-Hill Companies Inc. (“S&P”). The fund’s equity investments may be made in securities of companies of any size depending on the relative attractiveness of the company and the economic sector in which it operates. Fixed income securities purchased by the fund will generally be lower-rated securities, and may be rated as low as C by Moody’s or D by S&P, or in non-rated income securities that SBFM determines to be of comparable quality. The fund will not purchase securities rated lower than B by both Moody’s and S&P, if, immediately after such purchase, more than 20% of the fund’s total assets are invested in such securities.

The fund may invest up to 20% of its assets in securities of foreign issuers that are denominated in currencies other than the U.S. dollar and may invest without limitation in securities of foreign issuers that are denominated in U.S. dollars.

The fund will provide its shareholders with at least 60 days’ prior notice of any change in its 80% policy.

SB Adjustable Rate Income Portfolio

In seeking to achieve its investment objectives, the fund will invest principally in adjustable rate securities and U.S. government securities. Under normal market conditions, the fund will invest at least 80% of its net assets in adjustable rate securities, which may include U.S. government securities, or others investments with similar economic characteristics. The fund’s assets not invested in U.S. government securities may be invested in, among other instruments, fixed rate and adjustable rate mortgage-backed securities (“MBSs”), asset-backed securities (“ABSs”) and corporate debt securities rated within the two highest long-term debt categories by a nationally recognized statistical rating organization (“NRSRO”), such as those rated Aa by Moody’s or AA by S&P and money market instruments with a comparable short-term rating. Up to 20% of the fund’s total assets may be invested in securities that are unrated but deemed to be of comparable credit quality by SBFM, and up to

10

10% of the fund’s total assets may be invested in U.S. dollar-denominated foreign securities, including MBSs and ABSs issued by foreign entities that are of comparable credit quality. The foregoing policies as to ratings of portfolio securities will be applicable at the time securities are purchased by the fund; if portfolio securities of the fund are subsequently assigned lower ratings, if they cease to be rated or if they cease to be deemed to be comparable, SBFM will reassess whether the fund should continue to hold the securities.

The fund may invest up to 5% of its total assets in municipal obligations and in zero coupon securities, including zero coupon U.S. Treasury securities. In addition, the fund may engage in various hedging strategies to increase investment return and/or protect against interest rate changes in an effort to maintain the stability of its net asset value.

Adjustable Rate Securities

The fund will invest at least 80% of its net assets in adjustable rate securities (“Adjustable Rate Securities”), consisting principally of MBS and ABS. Adjustable Rate Securities are instruments that bear interest at rates that adjust at periodic intervals at a fixed amount (typically referred to as a “spread”) over the market levels of interest rates as reflected in specified indexes. MBSs are securities that directly or indirectly represent an interest in, or are backed by and are payable from, mortgage loans secured by real property. ABSs are similar in structure to MBSs, except that the underlying asset pools consist of credit card, automobile or other types of receivables, or of commercial loans. MBSs and ABSs are issued in structured financings through which a sponsor securitizes the underlying mortgage loans or financial assets to provide the underlying assets with greater liquidity or to achieve certain other financial goals. The collateral backing MBSs and ABSs is usually held by an independent bailee, custodian or trustee on behalf of the holders of the related MBSs or ABSs. The holder of the related MBSs or ABSs (such as the fund) will have either an ownership interest or security interest in the underlying collateral and can exercise its rights to it through the bailee, custodian or trustee.

Payments of principal of and interest on MBSs and ABSs are made more frequently than are payments on conventional debt securities. In addition, holders of MBSs and of certain ABSs (such as ABSs backed by home equity loans) may receive unscheduled payments of principal at any time representing prepayments on the underlying mortgage loans or financial assets. These prepayments may usually be made by the related obligor without penalty. Prepayment rates are affected by changes in prevailing interest rates and numerous economic, geographic, social and other factors. (ABSs backed by assets other than home equity loans do not generally prepay in response to changes in interest rates, but may be subject to prepayments in response to other factors.) Changes in the rates of prepayments will generally affect the yield to maturity of the security.

Among the specific types of MBSs in which the fund may invest are ARMs, which are pass-through mortgage securities collateralized by mortgages with adjustable rather than fixed rates. ARMs eligible for inclusion in a mortgage pool generally provide for a fixed initial mortgage interest rate for either the first 3, 6, 12, 13, 36 or 60 scheduled monthly payments. Thereafter, the interest rates are subject to periodic adjustment based on changes in a designated benchmark index.

Indices.    The key determinant of the interest rates paid on Adjustable Rate Securities is the interest rate index chosen (and the spread, above or below the interest rate of the index, required to be paid on the security). Certain indices are tied to the interest rate paid on specified securities, such as one-, three- or five-year U.S. Treasury securities, whereas other indices are more general. A prominent example of a general type of index is the cost of funds for member institutions (that is, savings and loan associations and savings banks) of the Federal Home Loan Bank (the “FHLB”) of San Francisco (the 11th District Cost of Funds Index or “COFI”). A number of factors may affect the COFI and cause it to behave differently from indices tied to specific types of securities. The COFI is dependent upon, among other things, the origination dates and maturities of the member institutions’ liabilities. Consequently, the COFI may not reflect the average prevailing market interest rates on new liabilities of similar maturities, and may not move in the same direction as prevailing interest rates since, as longer term deposits or borrowings mature and are renewed at market interest rates, the COFI will rise or fall depending upon the differential between the prior and the new rates on the deposits and borrowings. In addition,

11

in the thrift industry in recent years have caused and may continue to cause the cost of funds of thrift institutions to change for reasons unrelated to changes in general interest rate levels. Any movement in the COFI as compared to other indices based upon specific interest rates may be affected by changes instituted by the FHLB of San Francisco in the method used to calculate the COFI. To the extent that the COFI may reflect interest changes on a more delayed basis than other indices, in a period of rising interest rates any increase may produce a higher yield later than would be produced by the other indices. In a period of declining interest rates, the COFI may remain higher than other market interest rates, which may result in a higher level of principal prepayments on mortgage loans that adjust in accordance with the COFI than mortgage or other loans that adjust in accordance with other indices. In addition, to the extent that the COFI may lag behind other indices in a period of rising interest rates, securities based on the COFI may have a lower market value than would result from use of other indices. In a period of declining interest rates, securities based on the COFI may reflect a higher market value than would securities based on other indices.

The interest rates paid on Adjustable Rate Securities are generally readjusted periodically to an increment over the chosen interest rate index. Such readjustments occur at intervals ranging from one to 36 months. The degree of volatility in the market value of the Adjustable Rate Securities in the fund’s portfolio will be a function of the frequency of the adjustment period, the applicable index and the degree of volatility in the applicable index. It will also be a function of the maximum increase or decrease of the interest rate adjustment on any one adjustment date, in any one year and over the life of the securities. These maximum increases and decreases are typically referred to as “caps” and “floors,” respectively. The fund will not seek to maintain an overall average cap or floor, although SBFM will consider caps or floors in selecting Adjustable Rate Securities for the fund.

The adjustable interest rate feature underlying the Adjustable Rate Securities in which the fund invests generally will act as a buffer to reduce sharp changes in the fund’s net asset value in response to normal interest rate fluctuations. As the interest rates on the mortgages underlying the fund’s MBSs are reset periodically, yields of portfolio securities will gradually align themselves to reflect changes in market rates and should cause the net asset value of the fund to fluctuate less dramatically than it would if the fund invested in more traditional long-term, fixed rate debt securities. During periods of rapidly rising interest rates, however, changes in the coupon rate may temporarily lag behind changes in the market rate, possibly resulting in a lower net asset value until the coupon resets to market rates. Thus, investors could suffer some principal loss if they sell their shares of the fund before the interest rates on the underlying mortgages are adjusted to reflect current market rates.

Unlike fixed rate mortgages, which generally decline in value during periods of rising interest rates, the fund’s MBSs will allow the fund to participate in increases in interest rates through periodic adjustments in the coupons of the underlying mortgages, resulting in both higher current yields and lower price fluctuations. In addition, if prepayments of principal are made on the underlying mortgages during periods of rising interest rates, the fund generally will be able to reinvest those amounts in securities with a higher current rate of return. The fund will not benefit from increases in interest rates to the extent that interest rates rise to the point at which they cause the current coupon of Adjustable Rate Securities to exceed the maximum allowable caps. The fund’s net asset value could vary to the extent that current yields on Adjustable Rate Securities are different from market yields during interim periods between the coupon reset dates.

MBSs.    Three basic types of MBSs are currently available for investments: (a) those issued or guaranteed by the United States Government or one of its agencies or instrumentalities, primarily consisting of securities either guaranteed by the Government National Mortgage Association (“GNMA”) or issued by the Federal National Mortgage Association (“FNMA”) or the Federal Home Loan Mortgage Corporation (“FHLMC”); (b) those issued by private issuers that represent an interest in or are collateralized by MBSs issued or guaranteed by the United States government or one of its agencies or instrumentalities; and (c) those issued by private issuers that represent an interest in or are collateralized by whole mortgage loans or MBSs without a United States Government guarantee but usually having some form of private credit enhancement.

MBSs and ABSs issued by Nongovernmental Entities.    Certain of the MBSs, as well as certain of the ABSs, in which the fund may invest will be issued by private issuers. Such MBSs and ABSs may take a form similar to the

12

pass-through MBSs issued by agencies or instrumentalities of the United States, or may be structured in a manner similar to the other types of MBSs or ABSs described below. Private issuers include originators of or investors in mortgage loans and receivables such as savings and loan associations, savings banks, commercial banks, investment banks, finance companies and special purpose finance subsidiaries of these types of institutions.

Credit Enhancements.    Credit enhancements for certain MBSs and ABSs issued by nongovernmental entities typically are provided by external entities such as banks or financial institutions or by the structure of a transaction itself. Credit enhancements provided for certain MBSs and ABSs issued by non-governmental entities typically take one of two forms: (a) liquidity protection or (b) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses resulting from default ensures ultimate payment of the obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of these approaches. The degree of credit support provided for each issue is generally based on historical information with respect to the level of credit risk associated with the underlying assets. Delinquencies or losses in excess of those anticipated could adversely affect the return on an investment in a security. The fund will not pay any additional fees for credit support, although the existence of credit support may increase the price of a security. SBFM will monitor, on an ongoing basis, the creditworthiness of the providers of credit enhancement for such MBSs and ABSs held by the fund.

Examples of such credit support arising out of the structure of the transaction include “senior-subordinated securities” (multiple class securities with one or more classes being senior to other subordinated classes as to the payment of principal and interest, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class), creation of “reserve funds” (in which case cash or investments, sometimes funded from a portion of the payments on the underlying assets, are held in reserve against future losses) and “overcollateralization” (in which case the scheduled payments on, or the principal amount of, the underlying assets exceeds that required to make payment of the securities and pay any servicing or other fees). The fund may purchase subordinated securities that, as noted above, may serve as a form of credit support for senior securities purchased by other investors.

Collateralized Mortgage Obligations.    The fund may invest in MBSs taking the form of CMOs, which are debt obligations collateralized by mortgage loans or mortgage pass-through securities. Typically, CMOs are collateralized by GNMA, FNMA or FHLMC certificates, but also may be collateralized by whole loans or private mortgage pass-through securities (this collateral being referred to collectively as “Mortgage Assets”). Multi-class pass-through securities are equity interests in a trust composed of Mortgage Assets. Payments of principal of and interest on the Mortgage Assets, and any reinvestment income on the Mortgage Assets, provide the funds to pay debt service on the CMOs or make scheduled distributions on the multi-class pass-through securities. CMOs may be issued by agencies or instrumentalities of the United States Government, or by private originators of, or investors in, mortgage loans, including depository institutions, mortgage banks, investment banks and special purpose subsidiaries of these types of institutions.

In a CMO, a series of bonds or certificates is issued in multiple classes. Each class of CMOs, often referred to as a “tranche,” is issued at a specific fixed or floating coupon rate and has a stated maturity or final distribution date. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semi-annual basis. The principal of and interest on the Mortgage Assets may be allocated among the several classes of a CMO series in a number of different ways. Generally, the purpose of the allocation of the cash flow of a CMO to the various classes is to obtain a more predictable cash flow to the individual tranches than exists with the underlying collateral of the CMO. As a general rule, the more predictable the cash flow is on a CMO tranche, the lower the anticipated yield will be on that tranche at the time of issuance relative to prevailing market yields on MBSs.

13

Amortization Class CMOs (“PAC Bonds”).    Parallel pay CMOs are structured to provide payments of principal on each payment date to more than one class. These simultaneous payments are taken into account in calculating the stated maturity date or final distribution date of each class, which, like other CMO structures, must be retired by its stated maturity date or final distribution date but may be retired earlier. PAC Bonds are parallel pay CMOs that generally require payments of a specified amount of principal on each payment date; the required principal payments on PAC Bonds have the highest priority after interest has been paid to all classes.

ABSs.    The fund will invest in various types of Adjustable Rate Securities in the form of ABSs. The securitization techniques for ABSs are similar to those used for MBSs; through the use of trusts and special purpose corporations, various types of receivables (such as home equity loans and automobile and credit card receivables) are securitized in pass-through structures similar to the mortgage pass-through structures described above or in a pay-through structure similar to the CMO structure. ABSs are typically bought or sold from or to the same entities that act as primary dealers in U.S. government securities.

Certain of the ABSs in which the fund will invest will be guaranteed by the Small Business Administration (“SBA”). The SBA is an independent agency of the United States, and ABSs guaranteed by the SBA carry a guarantee of both principal and interest backed by the full faith and credit of the United States. These ABSs may include pass-through securities collateralized by SBA-guaranteed loans whose interest rates adjust in much the same fashion as described above with respect to ARMs. These loans generally include commercial loans, such as working capital loans and equipment loans. The underlying loans are originally made by private lenders and are guaranteed in part by the SBA, the guaranteed portion of the loans constituting the underlying financial assets in these ABSs. In general, the collateral supporting ABSs is of shorter maturity than mortgage loans and may be less likely to experience substantial prepayments. Like MBSs, ABSs are often backed by a pool of assets representing the obligations of a number of different parties. Currently, pass-through securities collateralized by SBA-guaranteed loans and home equity loans are the most prevalent ABSs that are Adjustable Rate Securities.

ABSs are relatively new and untested instruments and may be subject to greater risk of default during periods of economic downturn than other securities, including MBSs, which could result in possible losses to the fund. In addition, the secondary market for ABSs may not be as liquid as the market for other securities, including MBSs, which may result in the fund’s experiencing difficulty in valuing ABSs.

U.S. Government Agencies or Instrumentalities.    MBSs issued or guaranteed by agencies or instrumentalities of the United States Government are generally considered to be of higher quality than those issued or guaranteed by nongovernmental entities.

Government National Mortgage Association.    GNMA is a wholly owned corporate instrumentality of the United States Government within the Department of Housing and Urban Development. The National Housing Act of 1934, as amended (the “Housing Act”), authorizes GNMA to guarantee the timely payment of the principal of and interest on securities that are based on and backed by a pool of specified mortgage loans. For these types of securities to qualify for a GNMA guarantee, the underlying mortgages must be insured by the Federal Housing Administration (“FHA”) under the Housing Act, or Title V of the Housing Act of 1949 (“FHA Loans”), or be guaranteed by the Veterans’ Administration under the Servicemen’s Readjustment Act of 1944, as amended (“VA Loans”), or be pools of other eligible mortgage loans. The Housing Act provides that the full faith and credit of the United States Government is pledged to the payment of all amounts that may be required to be paid under any guarantee.

GNMA pass-through MBSs may represent a proportionate interest in one or more pools of the following types of mortgage loans: (a) fixed rate level payment mortgage loans; (b) fixed rate graduated payment mortgage loans; (c) fixed rate growing equity mortgage loans; (d) fixed rate mortgage loans secured by manufactured (mobile) homes; (e) mortgage loans on multifamily residential properties under construction; (f) mortgage loans on completed multifamily projects; (g) fixed rate mortgage loans as to which escrowed funds are used to reduce the borrower’s monthly payments during the early years of the mortgage loans (“buydown” mortgage loans); (h) mortgage loans that provide for adjustments on payments based on periodic changes in interest rates or in other payment terms of the mortgage loans; and (i) mortgage-backed serial notes.

14

Federal National Mortgage Association.    FNMA is a federally chartered and privately owned corporation established under the Federal National Mortgage Association Charter Act. FNMA was originally organized in 1938 as a United States Government agency to add greater liquidity to the mortgage market, and was transformed into a private sector corporation by legislation enacted in 1968. FNMA provides funds to the mortgage market primarily by purchasing home mortgage loans from local lenders, thereby providing them with funds for additional lending. FNMA acquires funds to purchase loans from investors that may not ordinarily invest in mortgage loans directly, thereby expanding the total amount of funds available for housing. FNMA guarantees timely payment of principal and interest on FNMA MBSs. The obligations of FNMA are not backed by the full faith and credit of the United States. Nevertheless, because of the relationship between FNMA and the United States, MBSs issued by FNMA are generally considered to be high quality securities with minimal credit risk.

Each FNMA pass-through MBS represents a proportionate interest in one or more pools of FHA Loans, VA Loans or conventional mortgage loans (that is, mortgage loans that are not insured or guaranteed by any government agency). The loans contained in those pools consist of: (a) fixed rate level payment mortgage loans; (b) fixed rate growing equity mortgage loans; (c) fixed rate graduated payment mortgage loans; (d) variable rate mortgage loans; (e) other adjustable rate mortgage loans; and (f) fixed rate mortgage loans secured by multifamily projects.

Federal Home Loan Mortgage Corporation.    FHLMC is a corporate instrumentality of the United States established by the Emergency Home Finance Act of 1970, as amended (the “FHLMC Act”). FHLMC was organized primarily for the purpose of increasing the availability of mortgage credit to finance needed housing. The operations of FHLMC currently consist primarily of the purchase of first lien, conventional, residential mortgage loans and participation interests in mortgage loans and the sale of the mortgage loans in the form of MBSs.

The mortgage loans underlying FHLMC MBSs typically consist of fixed rate or adjustable rate mortgage loans with original terms to maturity of between 10 and 30 years, substantially all of which are secured by first liens on one- to four-family residential properties or multifamily projects. Each mortgage loan must meet the applicable standards set out in the FHLMC Act. Mortgage loans underlying FHLMC MBSs may include whole loans, participation interests in whole loans and undivided interests in whole loans and participations in another FHLMC MBS.

FHLMC guarantees (a) the timely payment of interest on all FHLMC MBSs, (b) the ultimate collection of principal with respect to some FHLMC MBSs and (c) the timely payment of principal with respect to other FHLMC MBSs. The obligations of FHLMC are not backed by the full faith and credit of the United States. Nevertheless, because of the relationship of FHLMC to the United States, MBSs issued by FHLMC are generally considered to be high quality securities with minimal credit risk.

U.S. Small Business Administration.    The SBA is an independent agency of the United States established by the Small Business Act of 1953. The SBA was organized primarily to assist independently owned and operated businesses that are not dominant in their respective markets. The SBA provides financial assistance, management counseling and training for small businesses, as well as acting generally as an advocate of small businesses. The SBA guarantees the payment of principal and interest on portions of loans made by private lenders to certain small businesses. The loans are generally commercial loans such as working capital loans and equipment loans. The SBA is authorized to issue from time to time, through its fiscal and transfer agent, SBA-guaranteed participation certificates evidencing fractional undivided interests in pools of these SBA-guaranteed portions of loans made by private lenders. The SBA’s guarantee of the certificates, and its guarantee of a portion of the underlying loan, are backed by the full faith and credit of the United States.

Other Investments of the SB Adjustable Rate Income Portfolio

Fixed Rate MBSs.    Fixed rate MBSs in which the fund may invest consist primarily of fixed rate pass-through securities and fixed rate CMOs. Like Adjustable Rate Securities, these fixed rate securities may be

15

issued either by agencies or instrumentalities of the United States Government or by the types of private issuers described above. The basic structures of fixed rate MBSs are the same as those described above with respect to Adjustable Rate Securities. The principal difference between fixed rate securities and Adjustable Rate Securities is that the interest rate on the former type of securities is set at a predetermined amount and does not vary according to changes in any index.

Stripped MBSs.    The fund may invest in stripped MBSs (“SMBSs”), which are derivative multi-class mortgage-backed securities typically issued by the same types of issuers that issue MBSs. Unlike MBSs, SMBSs commonly involve two classes of securities that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common variety of SMBSs contemplates one class (the principal only or “PO” class) receiving some of the interest and most of the principal from the underlying assets, and the other class (the interest only or “IO” class) receiving most of the interest and the remainder of the principal. In the most extreme case, the IO class receives all of the interest, while the PO class receives all of the principal. Although the fund may purchase securities of a PO class, it is more likely to purchase the securities of an IO class.

Although IO class SMBSs individually have greater market volatility than Adjustable Rate Securities, the fund will seek to combine investments in IOs with other investments that have offsetting price patterns. The value of IOs varies with a direct correlation to changes in interest rates, whereas the value of fixed rate MBSs, like that of other fixed rate debt securities, varies inversely with interest rate fluctuations. Therefore, active management of IOs in combination with fixed rate MBSs is intended to add incremental yield from changes in market rates while not materially increasing the volatility of the fund’s net asset value.

The yield to maturity of an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying assets, and a rapid rate of principal payments in excess of that considered in pricing the securities will have a material adverse effect on an IO security’s yield to maturity. If the underlying Mortgage Assets experience greater-than-anticipated payments of principal, the fund may fail to recoup fully its initial investment in IOs. The sensitivity of an IO that represents the interest portion of a particular class as opposed to the interest portion of an entire pool to interest rate fluctuations may be increased because of the characteristics of the principal portion to which it relates.

Foreign Securities.    The fund may invest up to 10% of its total assets in U.S. dollar-denominated foreign securities, including MBSs and ABSs issued by foreign entities.

Investments in foreign securities involve certain risks not ordinarily associated with investments in securities of domestic issuers. These 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.

Municipal Obligations.    The fund may invest up to 5% of its total assets in obligations issued by state and local governments, political subdivisions, agencies and public authorities (“Municipal Obligations”). Any Municipal Obligation that is backed directly or indirectly by U.S. Treasury securities or the full faith and credit of the United States Government will be considered by SBFM to have the highest rating.

Short Sales.    The fund may make short sales of securities. A short sale is a transaction in which the fund sells a security it does not own in anticipation that the market price of that security will decline. The fund may make short sales both as a form of hedging to offset potential declines in securities positions it holds in similar securities and in order to maintain portfolio flexibility.

The fund may make short sales “against the box” without complying with the limitations described above. In a short sale against the box transaction, the fund, at the time of the sale, owns or has the immediate and unconditional right to acquire at no additional cost the identical security sold. This is distinguished from a “naked short,” in which the fund does not own or have the right to acquire the security sold.

16

To complete a short sale, the fund must arrange through a broker to borrow the securities to be delivered to the buyer. The proceeds received by the fund from the short sale are retained by the broker until the fund replaces the borrowed securities. In borrowing the securities to be delivered to the buyer, the fund becomes obligated to replace the securities borrowed at their market price at the time of replacement, whatever that price may be. The fund may have to pay a premium to borrow the securities and must pay any dividends or interest payable on the securities until they are replaced.

The fund’s obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker, which collateral consists of cash or U.S. government securities. In addition, the fund will place in a segregated account an amount of cash, U.S. government securities or other liquid securities equal to the difference, if any, between (a) the market value of the securities sold at the time they were sold short and (b) any cash or U.S. government securities deposited as collateral with the broker in connection with the short sale (not including the proceeds of the short sale). Until it replaces the borrowed securities, the fund will maintain the segregated account daily at a level such that the amount deposited in the account plus the amount deposited with the broker (not including the proceeds from the short sale) will equal the current market value of the securities sold short and will not be less than the market value of the securities at the time they were sold short.

The fund will not enter into a short sale of securities if, as a result of the sale, the total market value of all securities sold short by the fund would exceed 25% of the value of the fund’s assets. In addition, the fund may not (a) sell short the securities of any single issuer listed on a national securities exchange to the extent of more than 2% of the value of the fund’s net assets or (b) sell short the securities of any class of an issuer to the extent of more than 2% of the outstanding securities of the class at the time of the transaction.

Transactions Involving Eurodollar Instruments.    The fund may from time to time purchase Eurodollar instruments traded on the Chicago Mercantile Exchange. These instruments are in essence U.S. dollar-denominated futures contracts or options on futures contracts that are linked to the London Inter Bank Offered Rate (“LIBOR”). Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. The fund intends to use Eurodollar futures contracts and options on futures contracts to hedge against changes in LIBOR, to which many interest rate swaps are linked. The use of these instruments is subject to the same limitations and risks as those applicable to the use of the interest rate futures contracts and options on futures contracts described below.

The fund will provide its shareholders with at least 60 days’ prior notice of any change in its 80% policy.

Smith Barney Money Market Portfolio

The fund operates as a money market fund, and utilizes certain investment policies so that, to the extent reasonably possible, its price per share will not change from $1.00, although no assurance can be given that this goal will be achieved on a continuous basis. For example, the fund will not purchase a security which, after giving effect to any demand features, has a remaining maturity of greater than 13 months, or maintain a dollar-weighted average portfolio maturity in excess of 90 days (securities used as collateral for repurchase agreements are not subject to these restrictions).

The fund’s investments are limited to dollar denominated instruments that the Board of Directors determines present minimal credit risks and that are Eligible Securities at the time acquired by the fund. The term Eligible Securities includes securities rated by the “Requisite NRSROs” in one of the two highest short-term rating categories, securities of issuers that have received such ratings with respect to other short-term debt securities and comparable unrated securities. “Requisite NRSROs” means (a) any two NRSROs that have issued a rating with respect to a security or class of debt obligations of an issuer, or (b) one NRSRO, if only one NRSRO has issued such a rating at the time that the fund acquires the security. The NRSROs currently designated as such by

17

the Securities and Exchange Commission (the “SEC”) are S&P, Moody’s, Fitch Inc. and Dominion Bond Rating Service Ltd. See Appendix A for a discussion of the ratings categories of the NRSROs.

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

The following are also permitted investments for the fund:

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

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

Bank Obligations.    Obligations (including CDs, bankers’ acceptances and fixed TDs) and securities backed by letters of credit of U.S. banks or other U.S. financial institutions that are members of the Federal Reserve System or the Federal Deposit Insurance Corporation (“FDIC”) (including obligations of foreign branches of such members) if either: (a) the principal amount of the obligation is insured in full by the FDIC, or (b) the issuer of such obligation has capital, surplus and undivided profits in excess of $100 million or total assets of $1 billion (as reported in its most recently published financial statements prior to the date of investment). Under current FDIC regulations, the maximum insurance payable as to any one CD is $100,000; therefore, CDs in denominations greater than $100,000 that are purchased by the fund will not be fully insured. The fund currently intends to limit its investment in fixed TDs with an ultimate maturity of from two business days to six months and will invest in such TDs only if, when combined with other illiquid assets of the fund, not more than 10% of its assets would be invested in all such instruments. The fund may also invest in securities of foreign branches of U.S. banks. Such investments involve considerations that are not ordinarily associated with investing in domestic CDs. The fund may invest in instruments issued by domestic banks, including those issued by their branches outside the United States and subsidiaries located in Canada, and instruments issued by foreign banks through their branches located in the United States and the United Kingdom. In addition, the fund may invest in fixed TDs of foreign banks issued through their branches located in Grand Cayman Island, London, Nassau, Tokyo and Toronto.

The purchase of obligations of foreign banks will involve similar investment and risk considerations that are applicable to investing in obligations of foreign branches of U.S. banks. These factors will be carefully considered by SBFM in selecting investments for the fund. See “Risk Factors.”

High Quality Municipal Obligations.    Debt obligations of states, cities, counties, municipalities, municipal agencies and regional districts rated SP-1+, A-1, AA or better by S&P or MIG 2, VMIG 2, or Prime-1 or Aa or better by Moody’s or, if not rated, are determined by SBFM to be of comparable quality. At certain times, supply/demand imbalances in the tax-exempt market cause municipal obligations to yield more than taxable obligations of equivalent credit quality and maturity length. The purchase of these securities could enhance the fund’s yield. The fund will not invest more than 10% of its total assets in municipal obligations.

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

18

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

Notwithstanding any of the foregoing investment policies, the fund may invest up to 100% of its assets in U.S. government securities.

Social Awareness Stock Portfolio

Set forth below is a discussion of certain nonfundamental investment policies and investment strategies for the fund.

The fund’s investment objective is long-term capital appreciation and retention of net investment income. The fund seeks to fulfill this objective by selecting investments, primarily equity securities, that SBFM determines meet its investment screen, based on analysis of data, and, to the extent possible, certain social criteria. SBFM has discretion to determine the source for the data.

The fund normally invests 80% of its assets in equity securities (“80% investment policy”). The portfolio manager generally selects common stocks that are diversified across industries and companies. For defensive purposes or for temporary investment of cash flows, however, the fund may invest in bonds, notes or other evidence of indebtedness, issued publicly or placed privately, deemed to be of suitable credit quality, including U.S. government securities.

Social Criteria.    SBFM uses certain supportive social criteria in seeking common stocks that are acceptable investments for the fund. Supportive criteria are such factors as favorable attitudes toward preserving the environment, waste management strategies, and supportive employee work environments. Companies are avoided as unacceptable investments for the fund if a significant portion of their revenues, as determined by SBFM, is derived from: (1) producing tobacco, tobacco products, alcohol, or military defense systems, or (2) providing military defense related services or (3) gambling services. These investment restrictions are not fundamental and may be changed without shareholder approval.

The fund’s principal objective does not preclude it from realizing short-term gains when SBFM believes that conditions suggest the fund’s long-term goal is best accomplished by such short-term transactions. Further, if a company fails to meet the fund’s social criteria after the fund has purchased the company’s common stock, or if the fund inadvertently acquires a security that is not an acceptable investment, SBFM may determine to sell such securities within a reasonable period of time. However, SBFM does not anticipate engaging in active and frequent trading as it generally manages the fund in a “buy and hold” style.

Operating Policies.    Changes in the fund’s investments may be made from time to time to take into account changes in the outlook for particular industries or companies. The fund’s investments will not be concentrated in any one industry, which means that no more than twenty-five percent of the value of its assets will be invested in any one industry. While the fund may occasionally invest in foreign securities through American Depositary Receipts (“ADRs”), it is not anticipated that such investments will, at any time, account for more than 10% of its investment portfolio.

The fund’s assets generally are kept fully invested except that: (1) sufficient cash may be kept on hand reasonably to provide for contract obligations, and (2) reasonable amounts of cash, U.S. government or other liquid securities, such as short-term bills and notes, may be held for limited periods, pending investments in

19

accordance with its investment policies. When SBFM determines that investments of other types may be advantageous for defensive purposes or for temporary investment of cash flows, however, investments may be made in cash and cash investments, bonds, notes, or other evidence of indebtedness, issued publicly or placed privately, deemed to be of suitable credit quality, including U.S. government securities.

The fund may also invest assets in securities of companies that have operated for less than three years, including the operations of predecessors. The fund has undertaken that it will not make investments that will result in more than 5% of total assets being invested in the securities of newly formed companies and equity securities that are not readily marketable. Investing in securities of unseasoned companies may, under certain circumstances, involve greater risk than is customarily associated with investment in more established companies.

The fund does not intend to make short sales of securities or make purchases on margin, except for short-term credits that are necessary for the clearance of transactions, except as permitted under the 1940 Act.

In pursuing its objective, the fund currently is subject to fundamental investment policies and operating (non-fundamental) investment policies described below under “Investment Restrictions.”

INVESTMENT PRACTICES

Each of the following investment practices is subject to any limitations set forth under “Investment Objectives and Management Policies” or under “Investment Restrictions.” See “Risk Factors” for additional information about the risks of these investment practices.

Equity Securities

Common Stocks (each fund except Smith Barney Money Market Portfolio).    Each fund may purchase common stocks. Common stocks are shares of a corporation or other entity that entitle the holder to a pro rata share of the profits of the corporation, if any, without preference over any other shareholder or class of shareholders, including holders of the entity’s preferred stock and other senior equity. Common stock usually carries with it the right to vote and frequently an exclusive right to do so. Common stocks include securities issued by limited partnerships, limited liability companies, business trusts and companies organized outside the United States.

Convertible Securities (each fund except Smith Barney Money Market Portfolio).    Each fund may invest in convertible securities, which are fixed-income securities that may be converted at either a stated price or stated rate into underlying shares of common stock. Convertible securities have general characteristics similar to both fixed-income and equity securities. Although to a lesser extent than with fixed-income securities, the market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. In addition, because of the conversion feature, the market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stocks and, therefore, also will react to variations in the general market for equity securities.

Like fixed-income securities, convertible securities are investments which provide for a stable stream of income with generally higher yields than common stocks. Of course, like all fixed-income securities, there can be no assurance of current income because the issuers of the convertible securities may default on their obligations. Convertible securities, however, generally offer lower interest or dividend yields than non-convertible securities of similar quality because of the potential for capital appreciation. A convertible security, in addition to providing fixed income, offers the potential for capital appreciation through the conversion feature, which enables the holder to benefit from increases in the market price of the underlying common stock. However, there can be no assurance of capital appreciation because securities prices fluctuate.

20

Convertible securities generally are subordinated to other similar but non-convertible securities of the same issuer, although convertible bonds enjoy seniority in right of payment to all equity securities, and convertible preferred stock is senior to common stock of the same issuer. Because of the subordination feature, however, convertible securities typically have lower ratings than similar non-convertible securities.

Synthetic Convertible Securities (each fund except Smith Barney Money Market Portfolio).    Each fund may invest in synthetic convertible securities. Synthetic convertible securities differ from convertible securities in certain respects, including that each component of a synthetic convertible security has a separate market value and responds differently to market fluctuations. Investing in synthetic convertible securities involves the risk normally involved in holding the securities comprising the synthetic convertible security.

Unlike a convertible security, which is a single security, a synthetic convertible security is comprised of distinct securities that together resemble convertible securities in certain respects. Synthetic convertible securities are typically created by combining non-convertible bonds or preferred stocks with warrants or stock call options. The options that will form elements of synthetic convertible securities may be listed on a securities exchange or on Nasdaq or may be privately traded. The components of a synthetic convertible security generally are not offered as a unit and may be purchased and sold by the fund at different times. Synthetic convertible securities differ from convertible securities in certain respects, including that each component of a synthetic convertible security has a separate market value and responds differently to market fluctuations.

Warrants or Rights (each fund except Smith Barney Money Market Portfolio).    Warrants or rights may be acquired by each fund in connection with other securities or separately and provide the fund with the right to purchase at a later date other securities of the issuer. Each fund has undertaken that its investment in warrants or rights, valued at the lower of cost or market, will not exceed 5% of the value of its net assets and not more than 2% of such assets will be invested in warrants and rights which are not listed on the American or New York Stock Exchange. Warrants or rights acquired by a fund in units or attached to securities will be deemed to be without value for purposes of this restriction.

Real Estate Investment Trusts (“REITs”) (each fund except Smith Barney Money Market Portfolio).    Each fund may invest without limitations in shares of REITs, except for AIM Capital Appreciation which may invest up to 15% of its assets in REITs. REITs are pooled investment vehicles which invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs may also include operating or finance companies. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Generally, a REIT is not taxed on its income that it distributes to its shareholders provided the REIT complies with several requirements of the Code. A mortgage trust can make construction, development or long-term mortgage loans, which are sensitive to the credit quality of the borrower. Mortgage trusts derive their income from interest payments. Hybrid trusts combine the characteristics of both equity and mortgage trusts, generally by holding both ownership interests and mortgage interests in real estate.

Investment Company Securities (each fund).    The fund may invest in investment company securities including shares of closed-end investment companies, unit investment trusts, and open-end investment companies. Investment companies are professionally managed portfolios that may invest in any type of instrument. Investing in other investment companies involves substantially the same risks as investing directly in the underlying instruments, but may involve additional expenses at the investment company level, such as portfolio management fees and operating expenses. The expenses would be in addition to those paid by the fund for similar services. Certain types of investment companies, such as closed-end investment companies, issue a fixed number of shares that trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. Others are continuously offered at net asset value, but may also be traded in the secondary market. Generally, the fund may purchase and sell securities of open and closed-end investment companies subject to the limits prescribed under the 1940 Act.

21

Indexed Securities (each fund except Smith Barney Money Market Portfolio).    The fund may purchase securities whose prices are indexed to the prices of other securities, securities indices, currencies, precious metals or other commodities, or other financial indicators. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic. Gold-indexed securities, for example, typically provide for a maturity value that depends on the price of gold, resulting in a security whose price tends to rise and fall together with gold prices. Currency-indexed securities typically are short-term to intermediate-term debt securities whose maturity values or interest rates are determined by reference to the values of one or more specified foreign currencies, and may offer higher yields than U.S. dollar-denominated securities of equivalent issuers. Currency-indexed securities may be positively or negatively indexed; that is, their maturity value may increase when the specified currency value increases, resulting in a security that performs similarly to a foreign-denominated instrument, or their maturity value may decline when foreign currencies increase, resulting in a security whose price characteristics are similar to a put on the underlying currency. Currency- indexed securities may also have prices that depend on the values of a number of different foreign currencies relative to each other.

The performance of indexed securities depends to a great extent on the performance of the security, currency, or other instrument to which they are indexed, and may also be influenced by interest rate changes in the United States and abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer’s creditworthiness deteriorates. Recent issuers of indexed securities have included banks, corporations, and certain U.S. government agencies. Indexed securities may be more volatile than the underlying instruments.

Fixed Income Securities

Corporate Debt Obligations (each fund).    Each fund may invest in corporate debt obligations and zero coupon securities issued by financial institutions and corporations. Corporate debt obligations are subject to the risk of an issuer’s inability to meet principal and interest payments on the obligations and may also be subject to price volatility due to such 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 (each fund).    Each fund may invest in U.S. government securities, which are debt obligations issued or guaranteed as to payment of principal and interest by the U.S. Government (including Treasury bills, notes and bonds, certain mortgage participation certificates and CMOs) or by its agencies and instrumentalities and government-approved enterprises (such as GNMA, the Student Loan Marketing Association, the Tennessee Valley Authority, the Bank for Cooperatives, the Farmers Home Administration, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks, the Export-Import Bank of the U.S., the Federal Housing Administration, FHLMC, the U.S. Postal Service, the Federal Financing Bank and FNMA). Some of these securities (such as Treasury bills) are supported by the full faith and credit of the U.S. Treasury; others (such as obligations of the Federal Home Loan Banks) are supported by the right of the issuer to borrow from the Treasury; while still others (such as obligations of FNMA and the Student Loan Marketing Association) are supported only by the credit of the instrumentality.

Zero Coupon, Pay-In-Kind and Delayed Interest Securities (Smith Barney High Income and SB Adjustable Rate Income Portfolios).    Each fund may invest in zero coupon, pay-in-kind and delayed interest securities as well as custodial receipts or certificates underwritten by securities dealers or banks that evidence ownership of future interest payments, principal payments or both on certain U.S. government securities. Zero coupon securities pay no cash income to their holders until they mature and are issued at substantial discounts from their value at maturity. When held to maturity, their entire return comes from the difference between their purchase price and their maturity value. Zero-coupon and delayed interest securities are issued at a significant discount from their principal amount. While zero-coupon bonds do not require the periodic payment of interest, deferred interest bonds provide for a period of delay before the regular payment of interest begins. Payment-in-kind bonds

22

allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because interest on zero coupon, pay-in-kind and delayed interest securities is not paid on a current basis, the values of securities of this type are subject to greater fluctuations than are the values of securities that distribute income regularly and may be more speculative than such securities.

Custodial receipts evidencing specific coupon or principal payments have the same general attributes as zero coupon U.S. government securities but are not considered to be U.S. government securities. Although under the terms of a custodial receipt a fund is typically authorized to assert its rights directly against the issuer of the underlying obligation, the fund may be required to assert through the custodian bank such rights as may exist against the underlying issuer. Thus, in the event the underlying issuer fails to pay principal and/or interest when due, a fund may be subject to delays, expenses and risks that are greater than those that would have been involved if the fund had purchased a direct obligation of the issuer. In addition, in the event that the trust or custodial account in which the underlying security has been deposited is determined to be an association taxable as a corporation, instead of a non-taxable entity, the yield on the underlying security would be reduced in respect of any taxes paid.

Mortgage-Backed Securities (Smith Barney High Income and SB Adjustable Rate Income Portfolios).    Each fund may invest in mortgage-backed securities, which are securities representing interests in “pools” of mortgage loans. Monthly payments of interest and principal by the individual borrowers on mortgages are “passed through” to the holders of the securities (net of fees paid to the issuer or guarantor of the securities) as the mortgages in the underlying mortgage pools are paid off. The average lives of mortgage pass-throughs are variable when issued because their average lives depend on prepayment rates. The average life of these securities is likely to be substantially shorter than their stated final maturity as a result of unscheduled principal prepayments. Prepayments on underlying mortgages result in a loss of anticipated interest, and all or part of a premium if any has been paid, and the actual yield (or total return) to a fund may be different than the quoted yield on the securities. Mortgage prepayments generally increase with falling interest rates and decrease with rising interest rates. Additional payments may be made out of unscheduled repayments of principal resulting from the sale of the underlying residential property, refinancing or foreclosure, net of fees or costs that may be incurred. Prepayments of principal on mortgage-backed securities may tend to increase due to refinancing of mortgages as interest rates decline. Like other fixed income securities, when interest rates rise the value of a mortgage pass-through security generally will decline; however, when interest rates are declining, the value of mortgage pass-through securities with prepayment features may not increase as much as that of other fixed-income securities.

Payment of principal and interest on some mortgage pass-through securities (but not the market value of the securities themselves) may be guaranteed by the full faith and credit of the U.S. Government (in the case of securities guaranteed by GNMA; or guaranteed by agencies or instrumentalities of the U.S. Government (such as FNMA or FHLMC which are supported only by the discretionary authority of the U.S. Government to purchase the agency’s obligations). Mortgage pass-through securities may also be issued by non governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers). Some of these mortgage pass-through securities may be supported by various forms of insurance or guarantees.

Interests in pools of mortgage-related securities differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment that consists of both interest and principal payments. In effect, these payments are a “pass-through” of the monthly payments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by prepayments of principal resulting from the sale, refinancing or foreclosure of the underlying property, net of fees or costs which may be incurred. Some mortgage pass-through securities (such as securities issued by GNMA) are described as “modified pass-through.” These securities entitle the holder to receive all interest and principal payments owed on the mortgages in the mortgage pool, net of certain fees, at the scheduled payment dates regardless of whether the mortgagor actually makes the payment.

23

The principal governmental guarantor of mortgage pass-through securities is GNMA. GNMA is a wholly owned U.S. government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the U.S. Government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed mortgages. These guarantees, however, do not apply to the market value or yield of mortgage pass-through securities. GNMA securities are often purchased at a premium over the maturity value of the underlying mortgages. This premium is not guaranteed and will be lost if prepayment occurs.

Government-related guarantors (i.e., whose guarantees are not backed by the full faith and credit of the U.S. Government) include FNMA and FHLMC. FNMA is a government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation by the Secretary of Housing and Urban Development. FNMA purchases conventional residential mortgages (i.e., mortgages not insured or guaranteed by any governmental agency) from a list of approved seller/servicers which include state and federally-chartered savings and loan associations, mutual savings banks, commercial banks, credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment by FNMA of principal and interest.

FHLMC is also a government-sponsored corporation owned by private stockholders. FHLMC issues Participation Certificates (“PCs”) which represent interests in conventional mortgages (i.e., not federally insured or guaranteed) from FHLMC’s national portfolio. FHLMC guarantees timely payment of interest and ultimate collection of principal regardless of the status of the underlying mortgage loans. Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of mortgage loans. Such issuers may also be the originators and/or servicers of the underlying mortgage-related securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or agency guarantees of payments in the former pools. However, timely payment of interest and principal of mortgage loans in these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by governmental entities, private insurers and the mortgage poolers. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. A fund may also buy mortgage-related securities without insurance or guarantees.

Collateralized mortgage obligations are a type of bond secured by an underlying pool of mortgages or mortgage pass-through certificates that are structured to direct payments on underlying collateral to different series of classes of the obligations.

Asset-Backed Securities (Smith Barney High Income, SB Adjustable Rate Income and Smith Barney Money Market Portfolios).    Each fund may invest in asset-backed securities. These securities, issued by trusts and special purpose corporations, are backed by a pool of assets, such as credit card and automobile loan receivables, representing the obligations of a number of different parties. Asset-backed securities arise through the grouping by governmental, government-related and private organizations of loans, receivables and other assets originated by various lenders. Interests in pools of these assets differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal paid at maturity or specified call dates. Instead, asset-backed securities provide periodic payments which generally consist of both interest and principal payments.

Corporate asset-backed securities present certain risks. For instance, in the case of credit card receivables, these securities may not have the benefit of any security interest in the related collateral. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. Most issuers of automobile receivables permit the servicers to retain possession of the underlying obligations. If the servicer were to sell these obligations to another party, there is a

24

risk that the purchaser would acquire an interest superior to that of the holders of the related automobile receivables. In addition, because of the large number of vehicles involved in a typical issuance and technical requirements under state laws, the trustee for the holders of the automobile receivables may not have a proper security interest in all of the obligations backing such receivables. Therefore, there is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities.

Corporate asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors to make payments on underlying assets, the securities may contain elements of credit support which fall into two categories: (i) liquidity protection and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses resulting from ultimate default ensures payment through insurance policies or letters of credit obtained by the issuer or sponsor from third parties. A fund will not pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on historical information respecting the level of credit risk associated with the underlying assets. Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an instrument in such a security.

Loan Participations, Assignments and Other Direct Indebtedness (Smith Barney High Income Portfolio).    The fund may invest a portion of its assets in loan participations (“Participations”) and other direct claims against a borrower. By purchasing a Participation, the fund acquires some or all of the interest of a bank or other lending institution in a loan to a corporate or government borrower. The Participations typically will result in the fund’s having a contractual relationship only with the lender, not the borrower. The fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. Many such loans are secured, although some may be unsecured. Such loans may be in default at the time of purchase. Loans that are fully secured offer the fund more protection than an unsecured loan in the event of non-payment of scheduled interest or principal. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated.

These loans are made generally to finance internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other corporate activities. Such loans are typically made by a syndicate of lending institutions, represented by an agent lending institution which has negotiated and structured the loan and is responsible for collecting interest, principal and other amounts due on its own behalf and on behalf of the others in the syndicate, and for enforcing its and their other rights against the borrower. Alternatively, such loans may be structured as a novation, pursuant to which the fund would assume all of the rights of the lending institution in a loan, or as an assignment, pursuant to which the fund would purchase an assignment of a portion of a lender’s interest in a loan either directly from the lender or through an intermediary. The fund may also purchase trade or other claims against companies, which generally represent money owed by the company to a supplier of goods or services. These claims may also be purchased at a time when the company is in default.

The fund will acquire Participations only if the lender interpositioned between the fund and the borrower is determined by management to be creditworthy.

Corporate Loans (Smith Barney High Income Portfolio).    The fund may invest up to 15% of its total assets in corporate loans. Corporate loans are negotiated and underwritten by a bank or syndicate of banks and other institutional investors. The fund may acquire an interest in corporate loans through the primary market by acting as one of a group of lenders of a corporate loan. The primary risk in an investment in corporate loans is that the borrower may be unable to meet their interest and/or principal payment obligations. The occurrence of such default would have an adverse affect on the fund’s net asset value. Corporate loans in which the fund may invest

25

may be collateralized or uncollateralized and senior or subordinate. Investments in uncollateralized and/or subordinate loans entail a greater risk of nonpayment than do investments in corporate loans that hold a more senior position in the borrower’s capital structure or that are secured with collateral.

The fund may also acquire an interest in corporate loans by purchasing both Participations in and Assignments of portions of corporate loans from third parties. By purchasing a Participation, the fund acquires some or all of the interest of a bank or other lending institution in a loan to a corporate borrower. The Participations typically will result in the fund’s having a contractual relationship only with the lender and not the borrower. The fund will have the right to receive payments or principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, the fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the fund may not directly benefit from any collateral supporting the loan in which it has purchased the Participation. As a result, the fund will assume the credit risk of both the borrower and the lender that is selling the Participation. The fund will acquire Participations only if the lender interpositioned between the fund and the borrower is determined by management to be creditworthy. When the fund purchases Assignments from lenders, the fund will acquire direct rights against the borrower on the loan. However, since Assignments are arranged through private negotiations between potential assignees and assignors, the rights and obligations acquired by the fund as the purchaser of an Assignment may differ from, and be more limited than, those held by the assigned lender.

In addition, the fund may have difficulty disposing of its investments in corporate loans. The liquidity of such securities is limited and the fund anticipates that such securities could be sold only to a limited number of institutional investors. The lack of a liquid secondary market could have an adverse impact on the value of such securities and on the fund’s ability to dispose of particular Assignments or Participations when necessary to meet the fund’s liquidity needs or in response to a specific economic event, such as a deterioration in the creditworthiness of the borrower. The lack of a liquid secondary market for corporate loans also may make it more difficult for the fund to assign a value to those securities for purposes of valuing the fund’s investments and calculating its net asset value. The fund’s policy limiting its illiquid securities will be applicable to investments in corporate loans.

Foreign Investments

Depositary Receipts (each fund except Smith Barney Money Market Portfolio).    For many foreign securities, there are U.S. dollar-denominated ADRs, which are traded in the United States on exchanges or over the counter and are sponsored and issued by domestic banks. ADRs represent the right to receive securities of foreign issuers deposited in a domestic bank or a correspondent bank. Because ADRs trade on United States securities exchanges, they are not generally treated as foreign securities. Global Depositary Receipts (“GDRs”) are receipts issued by either a U.S. or non-U.S. banking institution evidencing ownership of the underlying foreign securities. EDRs, which sometimes are referred to as Continental Depository Receipts (“CDRs”), are receipts issued in Europe typically by foreign banks and trust companies that evidence ownership of either foreign or domestic securities. Generally, ADRs, in registered form, are designed for use in the United States securities markets, and GDRs, EDRs, and CDRs, in bearer form, are designed for use in European securities markets. Although investment in the form of ADRs, EDRs or GDRs facilitates trading in foreign securities, it does not mitigate the risks associated with investing in foreign securities. By investing in depositary receipts rather than directly in foreign issuers’ stock, a fund can avoid currency risks during the settlement period for either purchases or sales. In general, there is a large, liquid market for many depositary receipts. The information available for depositary receipts is subject to the accounting, auditing and financial reporting standards of the domestic market or exchange on which they are traded, which standards are more uniform and more exacting that those to which many foreign issuers may be subject.

26

Emerging Markets (Smith Barney International All Cap Growth and Smith Barney High Income Portfolios).    Emerging market countries include any country determined by the manager or subadviser, as the case may be, to have an emerging market economy, taking into account a number of factors, including the country’s foreign currency debt rating, its political and economic stability and the development of its financial and capital markets. The manager or subadviser determines an issuer’s principal trading market for its securities and the source of its revenues and assets. The issuer’s principal activities generally are deemed to be located in a particular country if: (a) the security is issued or guaranteed by the government of that country or any of its agencies, authorities or instrumentalities; (b) the issuer is organized under the laws of, and maintains a principal office in, that country; (c) the issuer has its principal securities trading market in that country; or (d) the issuer has 50% or more of its assets in that country.

Money Market Securities

Commercial Bank Obligations (each fund).    For the purposes of each fund’s investment policies with respect to bank obligations (such as CDs, TDs and bankers’ acceptances), obligations of foreign branches of U.S. banks and of foreign banks may be general obligations of the parent bank in addition to the issuing bank, or may be limited by the terms of a specific obligation and by government regulation. As with investment in non-U.S. securities in general, investments in the obligations of foreign branches of U.S. banks and of foreign banks may subject a fund to investment risks that are different in some respects from those of investments in obligations of domestic issuers. See “Investment Risks.” Although a fund will typically acquire obligations issued and supported by the credit of U.S. or foreign banks having total assets at the time of purchase of at least U.S. $500 million (or the equivalent thereof), this U.S. $500 million figure is not a fundamental investment policy or restriction of the funds. For calculation purposes with respect to the U.S. $500 million figure, the assets of a bank will be deemed to include the assets of its U.S. and non-U.S. branches.

Commercial Paper (each fund).    Commercial paper consists of short-term (usually from 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations. A variable amount master demand note (which is a type of commercial paper) represents a direct borrowing arrangement involving periodically fluctuating rates of interest under a letter agreement between a commercial paper issuer and an institutional lender, pursuant to which the lender may determine to invest varying amounts. Transfer of such notes is usually restricted by the issuer, and there is no secondary trading market for such notes. Each fund, except Smith Barney Money Market Portfolio, therefore, may not invest in a master demand note, if as a result more than 15% of the value of each such fund’s net assets would be invested in such notes and other illiquid securities. Smith Barney Money Market Portfolio may not invest in such notes if more than 10% of the value of its total assets would be invested in such notes and other illiquid securities.

Certificates of Deposit (each fund).    Certificates of deposit are receipts issued by a bank in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to the bearer of the receipt on the date specified on the certificate. The certificate can usually be traded in the secondary market prior to maturity.

Certificates of deposit are limited to U.S. dollar-denominated certificates of U.S. banks that have at least $1 billion in deposits as of the date of their most recently published financial statements (including foreign branches of U.S. banks, U.S. branches of foreign banks that are members of the Federal Reserve System or the Federal Deposit Insurance Corporation, and savings and loan associations that are insured by the Federal Deposit Insurance Corporation).

The Social Awareness Stock Portfolio does not acquire time deposits or obligations issued by the International Bank for Reconstruction and Development, the Asian Development Bank or the Inter-American Development Bank. Additionally, the fund does not currently intend to purchase such foreign securities (except to the extent that certificates of deposit of foreign branches of U.S. banks may be deemed foreign securities) or purchase certificates of deposit, bankers’ acceptances or other similar obligations issued by foreign banks.

27

Bankers’ Acceptances (each fund).    Bankers’ acceptances in which the fund may invest are 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. Bankers’ acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain funds to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then “accepted” by the bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an earning asset, or it may be sold in the secondary market at the going rate of discount for a specific maturity. Although maturities for acceptances can be as long as 270 days, most acceptances have maturities of six months or less. Bankers’ acceptances acquired by the fund must have been accepted by U.S. commercial banks, including foreign branches of U.S. commercial banks, having total deposits at the time of purchase in excess of $1 billion and must be payable in U.S. dollars.

Letters of Credit (each fund).    The funds may also engage in trades of commercial paper and other short-term obligations that are backed by irrevocable letters of credit issued by banks which assume the obligation for payment of principal and interest in the event of default by an issuer. Only banks the securities of which, in the opinion of SBFM, are of investment quality comparable to other permitted investments of the fund may be used for letters of credit-backed investments.

Other Investment Practices

Illiquid and Restricted Securities (each fund).    Each fund (except Smith Barney Money Market Portfolio) may invest up to 1.5% of its net assets in securities that are restricted as to resale (“restricted securities”) under the Securities Act of 1933, as amended (the “1933 Act”).

Smith Barney Money Market Portfolio may invest up to 10% of its net assets in such securities. Illiquid securities are those that are not readily marketable within seven days in the ordinary course of business and may include restricted securities that may not be publicly sold without registration under the Securities Act of 1933 (the “1933 Act”) and Rule 144A securities. In most instances restricted securities are traded at a discount from the market value of unrestricted securities of the same issuer until the restriction is eliminated. If the fund sells such portfolio securities, it may be deemed an underwriter, as such term is defined in the 1933 Act, with respect to those sales, and registration of such securities under the 1933 Act may be required. The fund will not bear the expense of such registration. In determining securities subject to the percentage limitation, the fund will include, in addition to restricted securities, repurchase agreements maturing in more than seven days and other securities not having readily available market quotations, including options traded over-the-counter and other securities subject to restrictions on resale. Some restricted securities can be offered and sold to “qualified institutional buyers” under Rule 144A under the 1933 Act. The Board of Directors may determine, based upon a continuing review of the trading markets for a specific restricted security, that such restricted securities are liquid and therefore not subject to a fund’s restriction on illiquid investments. The Board of Directors has adopted guidelines and delegated to management the daily function of determining and monitoring liquidity of restricted securities available pursuant to Rule 144A. The Board, however, retains sufficient oversight and is ultimately responsible for the determinations. Since it is not possible to predict with assurance exactly how the market for Rule 144A restricted securities will develop, the Board will carefully monitor each fund’s investments in these securities, focusing on such important factors, among others, as valuation, liquidity and availability of information. Investments in restricted securities could have the effect of increasing the level of illiquidity in a fund to the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities.

Repurchase Agreements (each fund).    Each fund may enter into repurchase agreements, wherein the seller agrees to repurchase a security from the fund at an agreed-upon future date, normally the next business day. Approved counterparties are limited to national banks or broker-dealers on the Federal Reserve Bank of New York’s list of primary reporting dealers, in each case meeting SBFM’s credit quality standards as presenting minimal risk of default. All repurchase transactions must be collateralized by U.S. government securities with market value no less than 102% of the amount of the transaction, including accrued interest. Repurchase

28

transactions generally mature the next business day but in the event of a transaction of longer maturity, collateral will be marked-to-market daily and, when required, the counterparty will provide additional cash or qualifying collateral. The resale price is greater than the purchase price, which reflects the agreed-upon rate of return for the period the fund holds the security and which is not related to the coupon rate on the purchased security. If the seller defaults, realization upon the collateral by the fund may be delayed or limited or the fund might incur a loss if the value of the collateral securing the repurchase agreement declines and might incur disposition costs in connection with liquidating the collateral. It is the policy of each fund (except the Smith Barney Money Market Portfolio) not to invest in repurchase agreements that do not mature within seven days if any such investment together with any other illiquid assets held by a fund amount to more than 15% of that fund’s net assets. The Smith Barney Money Market Portfolio may not invest in such securities if any such investment together with any other illiquid assets held by it amount to more than 10% of its total assets.

Reverse Repurchase Agreements (Smith Barney International All Cap Growth, Smith Barney Aggressive Growth, Smith Barney Mid Cap Core, SB Adjustable Rate Income and Social Awareness Stock Portfolios).    Each fund may enter into reverse repurchase agreements with the same parties with whom it may enter into repurchase agreements. Repurchase agreements involve the sale of fund securities with an agreement to repurchase the securities at an agreed-upon price, date and interest payment and have the characteristics of borrowing. Since the proceeds of borrowings under reverse repurchase agreements are invested, this would introduce the speculative factor known as “leverage.” The securities purchased with the funds obtained from the agreement and securities collateralizing the agreement will have maturity dates no later than the repayment date. Such transactions are only advantageous if the fund has an opportunity to earn a greater rate of interest on the cash derived from the transaction than the interest cost of obtaining that cash. Opportunities to realize earnings from the use of the proceeds equal to or greater than the interest required to be paid may not always be available, and the fund intends to use the reverse repurchase technique only when management believes it will be advantageous to the fund. The use of reverse repurchase agreements may exaggerate any interim increase or decrease in the value of the participating fund’s assets. The fund’s custodian bank will maintain a separate account for the fund with securities having a value equal to or greater than such commitments.

At the time a fund enters into a reverse repurchase agreement, it will establish and maintain a segregated account with an approved custodian containing cash or liquid securities that have a value no less than the repurchase price, including accrued interest. Reverse repurchase agreements will be treated as borrowings and will be considered in the fund’s overall borrowing limitation.

Borrowing and Leverage (each fund).    Each fund may borrow from banks, on a secured or unsecured basis. If the fund borrows and uses the proceeds to make additional investments, income and appreciation from such investments will improve its performance if they exceed the associated borrowing costs but impair its performance if they are less than such borrowing costs. This speculative factor is known as “leverage.” Smith Barney International All Cap Growth, Smith Barney Aggressive Growth and SB Adjustable Rate Income Portfolios are the only funds that will utilize leverage. Should any fund engage in leverage, immediately after such borrowing the value of its assets, including the amount borrowed, less liabilities, must be equal to at least 300% of the amount borrowed, plus all outstanding borrowings.

“Dollar Roll” Transactions (SB Adjustable Rate Income Portfolio).    The fund may enter into “dollar roll” transactions pursuant to which the fund sells fixed income or mortgage backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specified future date. During the roll period, the fund forgoes principal and interest paid on the securities. The fund is compensated for the lost interest by the difference between the current sales price and the lower price for the future purchase (often referred to as the “drop”) as well as by the interest earned on the cash proceeds of the initial sale. The fund may also be compensated by receipt of a commitment fee.

Since the fund will receive interest on the securities in which it invests the transaction proceeds, such transactions may involve leverage. However, since such securities must satisfy the quality requirements of the

29

fund and will mature on or before the settlement date on the transaction, management believes that such transactions do not present the risks to the fund that are associated with other types of leverage. Dollar roll transactions are considered borrowings by the fund and will be subject to the fund’s overall borrowing limitation. Dollar roll transactions are considered speculative.

Dollar roll transactions involve the risk that the market value of the securities sold by the fund may decline below the repurchase price of those securities. At the time that the fund enters into a dollar roll transaction, it will place in a segregated account cash or other liquid securities having a value equal to the repurchase price and will subsequently monitor the account to ensure that its value is maintained.

Securities Lending (each fund).    Each fund may seek to increase its net investment income by lending its securities provided such loans are callable at any time and are continuously secured by cash or U.S. government securities equal to no less than the market value, determined daily, of the securities loaned. The fund will receive amounts equal to dividends or interest on the securities loaned. It will also earn income for having made the loan because cash collateral pursuant to these loans will be invested in short-term money market instruments. In connection with lending of securities the fund may pay reasonable finders, administrative and custodial fees. From time to time a fund may return to the borrower and/or a third party, which is unaffiliated with the fund, Legg Mason, of which SBFM is a wholly-owned subsidiary, or CGMI, one of the fund’s co-distributors, and is acting as a “finder,” a part of the interest earned from the investment of collateral received for securities loaned.

Management will limit such lending to not more than the percentages shown below:

Fund	Limit as a % of Total Assets
Smith Barney International All Cap Growth Portfolio	15	%
Smith Barney Large Cap Value Portfolio	20	%
Smith Barney Aggressive Growth Portfolio	33 1/3	%
Smith Barney Mid Cap Core Portfolio	33 1/3	%
Smith Barney High Income Portfolio	20	%
Smith Barney Money Market Portfolio	33 1/3	%
Smith Barney Large Capitalization Growth Portfolio	33 1/3	%
SB Adjustable Rate Income Portfolio	33 1/3	%
Social Awareness Stock Portfolio	33 1/3	%

Where voting or consent rights with respect to loaned securities pass to the borrower, management will follow the policy of calling the loan, in whole or in part as may be appropriate, to permit the exercise of such voting or consent rights if the issues involved have a material effect on the fund’s investment in the securities loaned. Apart from lending its securities and acquiring debt securities of a type customarily purchased by financial institutions, none of the foregoing funds will make loans to other persons. The risks in lending portfolio securities, as with other extensions of secured credit, consist of possible delay in receiving additional collateral or in the recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. Loans will only be made to borrowers whom management deems to be of good standing and will not be made unless, in the judgment of management, the interest to be earned from such loans would justify the risk.

By lending its securities, a fund can increase its income by continuing to receive interest on the loaned securities, by investing the cash collateral in short-term instruments or by obtaining yield in the form of interest paid by the borrower when U.S. government securities are used as collateral. Each fund will adhere to the following conditions whenever it lends its securities: (1) the fund must receive at least 102% cash collateral or equivalent securities from the borrower, which amount of collateral will be maintained by daily marking to market; (2) the borrower must increase the collateral whenever the market value of the securities loaned rises above the level of the collateral; (3) the fund must be able to terminate the loan at any time; (4) the fund must receive reasonable interest on the loan, as well as any dividends, interest or other distributions on the loaned

30

securities, and any increase in market value; (5) the fund may pay only reasonable custodian fees in connection with the loan; and (6) voting rights on the loaned securities may pass to the borrower, except that, if a material event adversely affecting the investment in the loaned securities occurs, the fund must terminate the loan and regain the fund’s right to vote the securities.

When-Issued, Delayed Delivery and Forward Commitment Securities.    Each fund may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis. Such transactions arise when securities are purchased or sold by a fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the fund at the time of entering into the transaction. In when-issued or delayed-delivery transactions, delivery of the securities occurs beyond normal settlement periods, but no payment or delivery will be made by a fund prior to the actual delivery or payment by the other party to the transaction. A fund will not accrue income with respect to a when-issued or delayed-delivery security prior to its stated delivery date.

Purchasing such securities involves the risk of loss if the value of the securities declines prior to settlement date. The sale of securities for delayed delivery involves the risk that the prices available in the market on the delivery date may be greater than those obtained in the sale transaction. Each fund’s custodian will maintain, in a segregated account on behalf of the fund, cash, U.S. government securities or other liquid securities having a value equal to or greater than the fund’s purchase commitments; the custodian will likewise segregate securities sold on a delayed basis. Placing securities rather than cash in the segregated account may have a leveraging effect on the fund’s net asset value per share. To the extent that the fund remains substantially fully invested in securities at the same time that it has committed to purchase securities on a when-issued or delayed-delivery basis, greater fluctuations in its net asset value per share may occur than if it had set aside cash to satisfy its purchase commitments.

Short Sales Against the Box (SB Adjustable Rate Income, Smith Barney High Income and Social Awareness Stock Portfolios).    Each fund may make short sales of securities in order to reduce market exposure and/or to increase its income if, at all times when a short position is open, the fund owns an equal or greater amount of such securities or owns preferred stock, debt or warrants convertible or exchangeable into an equal or greater number of the shares of the securities sold short. Short sales of this kind are referred to as short sales “against the box.” The broker-dealer that executes a short sale generally invests the cash proceeds of the sale until they are paid to the fund. Arrangements may be made with the broker-dealer to obtain a portion of the interest earned by the broker on the investment of short sale proceeds. The fund will segregate the securities against which short sales against the box have been made in a special account with its custodian.

Derivative Contracts

Futures, Options and Currency Transactions (each fund except Smith Barney Aggressive Growth and Smith Barney Money Market Portfolios).    Each fund may enter into contracts for the purchase or sale for future delivery of equity or fixed-income securities or contracts based on financial indices including interest rates or an index of U.S. government or foreign government securities or equity or fixed-income securities (“futures contracts”), and may buy and write put and call options to buy or sell futures contracts (“options on futures contracts”). A call option written by a fund is “covered” if the fund owns the securities or currency underlying the option or has an absolute and immediate right to acquire that security or currency without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other securities or currencies held in its portfolio. A call option is also covered if the fund holds, on a share-for-share basis, a call on the same security or holds a call on the same currency as the call written where the exercise price of the call held is equal to or less than the exercise price of the call written or greater than the exercise price of the call written, if the difference is maintained by the fund in cash, Treasury bills or other high-grade, short-term obligations in a segregated account on the fund’s books. When a fund buys or sells a futures contract it incurs a contractual obligation to receive or deliver the underlying instrument (or a cash payment based on the difference between the underlying instrument’s closing price and the price at which the

31

contract was entered into) at a specified price on a specified date. An option on a futures contract gives a fund the right (but not the obligation) to buy or sell a futures contract at a specified price on or before a specified date.

Except as noted below the funds will not enter into transactions in futures contracts and options on futures contracts for speculation and will not enter into such transactions other than to hedge against potential changes in interest or currency exchange rates or the price of a security or a securities index which might correlate with or otherwise adversely affect either the value of the fund’s securities or the prices of securities which the fund is considering buying at a later date. The Smith Barney International All Cap Growth, Smith Barney Large Cap Value, Smith Barney Large Capitalization Growth, Smith Barney Mid Cap Core and Smith Barney High Income Portfolios, however, may enter into futures contracts and options on futures contracts for non-hedging purposes consistent with applicable law.

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

The Commodity Futures Trading Commission (“CFTC”) recently eliminated limitations on futures transactions and options thereon by registered investment companies, provided that the investment manager to the registered investment company claims an exclusion from regulation as a commodity pool operator. Each fund is operated by a person who has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and therefore is not subject to registration or regulation as a pool operator under the Commodity Exchange Act. As a result of these CFTC rule changes, each fund is no longer restricted in its ability to enter into futures transactions and options thereon under CFTC regulations. Each fund, however, continues to have policies with respect to futures and options thereon as set forth herein. The current view of the staff of the SEC is that a fund’s long and short positions in future contracts as well as put and call options on futures written by it must be collateralized with cash or other liquid securities and segregated with the fund’s custodian or a designated sub-custodian or “covered” in a manner similar to that for covered options on securities and designed to eliminate any potential leveraging.

Writing Covered Call Options (Smith Barney International All Cap Growth, Smith Barney Large Cap Value, Smith Barney Mid Cap Core, Smith Barney High Income, Social Awareness Stock and SB Adjustable Rate Income Portfolios).    Each fund may write (sell) covered call options. A fund may write (sell) covered call options for hedging purposes or to increase its portfolio return. Covered call options will generally be written on securities and currencies which, in the opinion of management, are not expected to make any major price moves in the near future but which, over the long term, are deemed to be attractive investments for the fund.

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 which such option was sold, requiring him to deliver the underlying security or currency against payment of the exercise price. This obligation terminates upon the expiration of the call option, or such earlier time at which the writer effects a closing purchase transaction by purchasing an option identical to that previously sold. Management believes that the writing of covered call options is less risky than writing uncovered or “naked” options, which the funds will not do.

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, a fund, in return for the premium, gives up the opportunity for profit from a price increase in the underlying

32

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. Each fund does not consider a security or currency covered by a call option to be “pledged” as that term is used in the fund’s policy which limits the pledging or mortgaging of its assets.

The premium a fund receives for writing a call option is deemed to constitute the market value of an option. The premium the fund will receive from writing a call option will reflect, among other things, the current market price of the underlying security or currency, the relationship of the exercise price to such market price, the historical price volatility of the underlying security or currency, and the length of the option period. In determining whether a particular call option should be written on a particular security or currency, management will consider the reasonableness of the anticipated premium and the likelihood that a liquid secondary market will exist for those options. The premium received by the fund for writing covered call options will be recorded as a liability in the fund’s statement of assets and liabilities. This liability will be adjusted daily to the option’s current market value. The liability will be extinguished upon expiration of the option or delivery of the underlying security or currency upon the exercise of the option. The liability with respect to a listed option will also be extinguished upon the purchase of an identical option in a closing transaction.

Closing transactions will be effected in order to realize a profit on an outstanding call option, to prevent an underlying security or currency from being called, or to permit the sale of the underlying security or currency. Furthermore, effecting a closing transaction will permit a fund to write another call option on the underlying security or currency with either a different exercise price, expiration date or both. If the fund desires to sell a particular security or currency from its portfolio on which it has written a call option or purchases a put option, it will seek to effect a closing transaction prior to, or concurrently with, the sale of the security or currency. There is no assurance that the fund will be able to effect such closing transactions at a favorable price. If the fund cannot enter into such a transaction, it may be required to hold a security or currency that it might otherwise have sold, in which case it would continue to be a market risk with respect to the security or currency.

Each fund will pay transaction costs in connection with the writing of options and in entering into closing purchase contracts. Transaction costs relating to options activity are normally higher than those applicable to purchases and sales of portfolio securities.

Call options written by each fund will normally have expiration dates of less than nine months from the date written. The exercise price of the options may be below, equal to or above the current market values of the underlying securities or currencies at the time the options are written. From time to time, the fund may purchase an underlying security or currency for delivery in accordance with the exercise of an option, rather than delivering such security or currency from its portfolio. In such cases, additional costs will be incurred.

Each fund will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more, respectively, than the premium received from the writing of the option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security or currency, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security or currency owned by the fund.

Purchasing Call Options (Smith Barney International All Cap Growth, Smith Barney Large Cap Value, Smith Barney Mid Cap Core, Smith Barney High Income, Social Awareness Stock and SB Adjustable Rate Income Portfolios).    Each fund may purchase call options. As the holder of a call option, a fund has the right to

33

purchase the underlying security or currency at the exercise price at any time during the option period. The fund may enter into closing sale transactions with respect to such options, exercise them or permit them to expire. Call options may be purchased by the fund for the purpose of acquiring the underlying security or currency for its portfolio. Utilized in this fashion, the purchase of call options enables the fund to acquire the security or currency at the exercise price of the call option plus the premium paid. At times the net cost of acquiring the security or currency in this manner may be less than the cost of acquiring the security or currency directly. This technique may also be useful to the fund in purchasing a large block of securities that would be more difficult to acquire by direct market purchases. So long as it holds such a call option rather than the underlying security or currency itself, the fund is partially protected from any unexpected decline in the market price of the underlying security or currency and in such event could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option.

A fund may also purchase call options on underlying securities or currencies it owns in order to protect unrealized gains on call options previously written by it. Call options may also be purchased at times to avoid realizing losses that would result in a reduction of the fund’s current return.

Purchasing Put Options (Smith Barney International All Cap Growth, Smith Barney Large Cap Value, Smith Barney Mid Cap Core, Smith Barney High Income, Social Awareness Stock and SB Adjustable Rate Income Portfolios).    Each fund may purchase put options. As the holder of a put option, the fund has the right to sell the underlying security or currency at the exercise price at any time during the option period. The fund may enter into closing sale transactions with respect to such options, exercise them or permit them to expire.

Each fund may purchase a put option on an underlying security or currency (a “protective put”) owned by the fund as a hedging technique in order to protect against an anticipated decline in the value of the security or currency. Such hedge protection is provided only during the life of the put option when the fund, as the holder of the put option, is able to sell the underlying security or currency at the put exercise price regardless of any decline in the underlying security’s market price or currency’s exchange value. For example, a put option may be purchased in order to protect unrealized appreciation of a security or currency when management deems it desirable to continue to hold the security or currency. The premium paid for the put option and any transaction costs would reduce any gains otherwise available for distribution when the security or currency is eventually sold.

Each fund may also purchase put options at a time when the fund does not own the underlying security or currency. By purchasing put options on a security or currency it does not own, the fund seeks to benefit from a decline in the market price of the underlying security or currency. If the put option is not sold when it has remaining value, and if the market price of the underlying security or currency remains equal to or greater than the exercise price during the life of the put option, the fund will lose its entire investment in the put option. In order for the purchase of a put option to be profitable, the market price of the underlying security or currency must decline sufficiently below the exercise price to cover the premium and transaction costs, unless the put option is sold in a closing sale transaction.

The premium paid by a fund when purchasing a put option will be recorded as an asset in the fund’s statement of assets and liabilities. This asset will be adjusted daily to the option’s current market value, which will be calculated as described in “Determination of Net Asset Value” in this SAI. 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.

Writing Put Options (SB Adjustable Rate Income Portfolio).    The fund may write put options that give the holder of the option the right to sell the underlying security to the fund at the stated exercise price. The fund will receive a premium for writing a put option, which increases the fund’s return. The fund will write only covered put options, which means that so long as the fund is obligated as the writer of the option it will have placed and

34

maintained cash, U.S. government securities or other liquid securities with a value equal to or greater than the exercise price of the underlying securities. By writing a put, the fund will be obligated to purchase the underlying security at a price that may be higher than the market value of that security at the time of exercise for as long as the option is outstanding. The fund may engage in closing transactions to terminate put options that it has written.

Options on Securities (each fund except Smith Barney Money Market Portfolio).    In an effort to reduce fluctuations in net asset value or to increase portfolio return, the funds may write covered put and call options and may buy put and call options and warrants on securities traded on U.S. and foreign securities exchanges. The purpose of such transactions is to hedge against changes in the market value of portfolio securities caused by fluctuating interest rates, fluctuating currency exchange rates and changing market conditions, and to close out or offset existing positions in such options or futures contracts as described below. A fund may write and buy options on the same types of securities that the fund could buy directly and may buy options on financial indices as described below with respect to futures contracts. There are no specific limitations on the writing and buying of options on securities except as noted above.

A put option gives the holder the right, upon payment of a premium, to deliver a specified amount of a security to the writer of the option on or before a fixed date at a predetermined price. A call option gives the holder the right, upon payment of a premium, to call upon the writer to deliver a specified amount of a security on or before a fixed date at a predetermined price.

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

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

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

Each fund may buy or write options in privately negotiated transactions on the types of securities and indices based on the types of securities in which the fund is permitted to invest directly. The fund will effect such transactions only with investment dealers and other financial institutions (such as commercial banks or savings and loan institutions) deemed creditworthy, and only pursuant to procedures adopted by management for monitoring the creditworthiness of those entities. To the extent that an option bought or written by the fund in a negotiated transaction is illiquid, the value of an option bought or the amount of the fund’s obligations under an option written by the fund, as the case may be, will be subject to the fund’s limitation on illiquid investments. In the case of illiquid options, it may not be possible for the fund to effect an offsetting transaction at a time when management believes it would be advantageous for the fund to do so.

Options on Foreign Currencies (Smith Barney High Income, Smith Barney Mid Cap Core, Smith Barney Large Capitalization Growth, Smith Barney Large Cap Value and Smith Barney International All Cap Growth

35

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

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

A fund’s ability to establish and close out positions in foreign currency options is subject to the existence of a liquid market. There can be no assurance that a liquid market will exist for a particular option at any specific time. In addition, options on foreign currencies are affected by all of those factors that influence foreign exchange rates and investments generally.

A position in an exchange-listed option may be closed out only on an exchange that provides a secondary market for identical options. Exchange markets for options on foreign currencies exist but are relatively new, and the ability to establish and close out positions on the exchanges is subject to maintenance of a liquid secondary market. Closing transactions may be effected with respect to options traded in the over-the-counter (“OTC”) markets (currently the primary markets for options on foreign currencies) only by negotiating directly with the other party to the option contract or in a secondary market for the option if such market exists. Although each fund intends to purchase only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market will exist for any particular option at any specific time. In such event, it may not be possible to effect closing transactions with respect to certain options, with the result that the fund would have to exercise those options which it has purchased in order to realize any profit. Any OTC options acquired by a fund and assets used as “cover” for OTC options written by the fund would be considered illiquid and subject to each fund’s limitation on investing in such securities.

Options on Securities Indices (Smith Barney International All Cap Growth, Smith Barney Mid Cap Core, Social Awareness Stock, Smith Barney Large Cap Value, Smith Barney Large Capitalization Growth, Smith Barney High Income, SB Adjustable Rate Income, and Smith Barney High Income Portfolios).    Each fund may enter into options on securities indices. Through the writing or purchase of index options, a fund can achieve many of the same objectives as through the use of options on individual securities. Options on securities indices are similar to options on a security except that, rather than the right to take or make delivery of a security at a specified price, an option on a securities index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. This amount of cash is equal to the difference between the closing price of the index and the exercise price of the option. The writer of the option is obligated, in return for the premium received, to make delivery of this amount. Unlike options on securities (which require, upon exercise, delivery of the underlying security), settlements of options on securities indices, upon exercise thereof, are in cash, and the gain or loss of an option on an index depends on price movements in

36

the market generally (or in a particular industry or segment of the market on which the underlying index is based) rather than price movements in individual securities, as is the case with respect to options on securities.

When a fund writes an option on a securities index, it will be required to deposit with its custodian eligible securities equal in value to 100% of the exercise price in the case of a put, or the contract’s value in the case of a call. In addition, where the fund writes a call option on a securities index at a time when the contract value exceeds the exercise price, the fund will segregate, until the option expires or is closed out, cash or cash equivalents equal in value to such excess.

Options on securities and index options involve risks similar to those risks relating to transactions in financial futures described below. Also, an option purchased by the fund may expire worthless, in which case the fund would lose the premium paid therefor.

Except as provided below, each fund intends to write over-the-counter options only with primary U.S. government securities dealers recognized by the Federal Reserve Bank of New York. Also, the contracts which each fund has in place with such primary dealers will provide that each fund has the absolute right to repurchase an option it writes at any time at a price which represents the fair market value, as determined in good faith through negotiation between the parties, but which in no event will exceed a price determined pursuant to a formula in the contract. Although the specific formula may vary between contracts with different primary dealers, the formula will generally be based on a multiple of the premium received by a fund for writing the option, plus the amount, if any, of the option’s intrinsic value (i.e., the amount that the option is in-the-money). The formula may also include a factor to account for the difference between the price of the security and the strike price of the option if the option is written out-of-money. Each fund will treat all or a part of the formula price as illiquid for purposes of the fund’s limit on investment in illiquid securities. Each fund may also write over-the-counter options with non-primary dealers, including foreign dealers, and will treat the assets used to cover these options as illiquid for purposes of the fund’s limit on investment in illiquid securities.

Forward Currency Transactions (Smith Barney International All Cap Growth, Smith Barney Mid Cap Core, Smith Barney High Income, Smith Barney Large Capitalization Growth and Smith Barney Large Cap Value Portfolios).    Each fund may enter into forward foreign currency exchange contracts (“forward currency contracts”) to attempt to minimize the risk to the fund from adverse changes in the relationship between the U.S. dollar and other currencies. A forward currency contract is an obligation to buy or sell an amount of a specified currency for an agreed-upon price (which may be in U.S. dollars or a foreign currency) at a future date, which is individually negotiated between currency traders and their customers. A fund may enter into a forward currency contract, for example, when it enters into a contract to buy or sell a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of the security (“transaction hedge”). Additionally, when a fund believes that a foreign currency in which its securities are denominated may suffer a substantial decline against the U.S. dollar, the fund may enter into a forward currency contract to sell an amount of that foreign currency approximating the value of some or all of the portfolio securities denominated in that currency, or, when the fund believes that the U.S. dollar may suffer a substantial decline against a foreign currency, the fund may enter into a forward currency contract to buy that foreign currency for a fixed U.S. dollar amount (“position hedge”). A fund also may enter into a forward currency contract with respect to a currency where the fund is considering the purchase of investments denominated in that currency but has not yet done so (“anticipatory hedge”). In any of these circumstances the fund may, alternatively, enter into a forward currency contract with respect to a different foreign currency when the fund believes that the U.S. dollar value of that currency will correlate with the U.S. dollar value of the currency in which portfolio securities of, or being considered for purchase by, the fund are denominated (“cross hedge”). Each fund may invest in forward currency contracts with stated contract values of up to the value of the fund’s assets.

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, a fund may not always be able to enter into foreign currency forward contracts at attractive prices and

37

this will limit the fund’s ability to use such contract to hedge or cross-hedge its assets. Also, with regard to the fund’s use of cross-hedges, there can be no assurance that historical correlations between the movement of certain foreign currencies relative to the U.S. dollar will continue. Thus, at any time poor correlation may exist between movements in the exchange rates of the foreign currencies underlying the fund’s cross-hedges and the movements in the exchange rates of the foreign currencies in which the fund’s assets that are the subject of such cross-hedges are denominated.

Forward contracts are traded in an interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement and is consummated without payment of any commission. A fund, however, may enter into forward contracts with deposit requirements or commissions.

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

A fund may also enter into currency swaps where each party exchanges one currency for another on a particular date and agrees to reverse the exchange on a later date at a specific exchange rate.

Interest Rate, Securities Index, Financial Futures and Currency Futures Contracts.    Each fund may enter into interest rate, securities index and financial futures contracts (each fund except Smith Barney Aggressive Growth and Smith Barney Money Market Portfolios). Smith Barney High Income, Smith Barney Mid Cap Core, Smith Barney Large Capitalization Growth, Smith Barney Large Cap Value and Smith Barney International All Cap Growth Portfolios may enter into currency future contracts. A fund may enter into futures contracts as a hedge against changes in prevailing levels of interest rates or currency exchange rates in order to establish more definitely the effective return on securities or currencies held or committed to be acquired by the fund. A fund’s hedging may include holding futures as an offset against anticipated changes in interest or currency exchange rates. A fund may also enter into futures contracts based on financial indices including any index of U.S. government securities, foreign government securities or corporate debt securities.

A futures contract provides for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument or currency for a specified price at a designated date, time and place. The purchaser of a futures contract on an index agrees to take or make delivery of an amount of cash equal to the difference between a specified dollar multiple of the value of the index on the expiration date of the contract (“current contract value”) and the price at which the contract was originally struck. No physical delivery of the debt securities underlying the index is made. Brokerage fees are incurred when a futures contract is bought or sold, and margin deposits must be maintained at all times that the futures contract is outstanding.

The principal interest rate and currency futures exchanges in the United States are the Board of Trade of the City of Chicago and the Chicago Mercantile Exchange. Futures exchanges and trading are regulated under the Commodity Exchange Act by the Commodity Futures Trading Commission. Futures are traded in London at the London International Financial futures Exchange.

Although techniques other than sales and purchases of futures contracts could be used to reduce a 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

38

offsetting purchase price is less than the original sale price, the fund realizes a gain; if it is more, the fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, the fund realizes a gain; if it is less, the fund realizes a loss. The transaction costs must also be included in these calculations. There can be no assurance, however, that the fund will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time. If the fund is not able to enter into an offsetting transaction, the fund will continue to be required to maintain the margin deposits of the underlying financial instrument or currency on the relevant delivery date.

As an example of an offsetting transaction, the contractual obligations arising from the sale of one futures contract of September Treasury Bills on an exchange may be fulfilled at any time before delivery under the futures contract is required (i.e., on a specific date in September, the “delivery month”) by the purchase of another futures contract of September Treasury Bills on the same exchange. In such instance the difference between the price at which the futures contract was sold and the price paid for the offsetting purchase, after allowance for transaction costs, represents the profit or loss to the fund.

Persons who trade in futures contracts may be broadly classified as “hedgers” and “speculators.” Hedgers, whose business activity involves investment or other commitment in securities or other obligations, use the futures markets to offset unfavorable changes in value that may occur because of fluctuations in the value of the securities and obligations held or committed to be acquired by them or fluctuations in the value of the currency in which the securities or obligations are denominated. Debtors and other obligors may also hedge the interest cost of their obligations. The speculator, like the hedger, generally expects neither to deliver nor to receive the financial instrument underlying the futures contract, but, unlike the hedger, hopes to profit from fluctuations in prevailing interest rates or currency exchange rates.

“Margin” with respect to futures contracts is the amount of funds that must be deposited by a 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 margin, 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, each 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 (each fund except Smith Barney Aggressive Growth and Smith Barney Money Market Portfolios).    Each fund may enter into options on futures contracts. Options on futures contracts are similar to options on securities or currencies except that options on Futures Contracts give the purchaser the right, in return for the premium paid, to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put), rather than to purchase or sell the futures contract, at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer’s futures margin account, which represents the amount by which the market price of the futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the futures contract. If an option is exercised on the last trading day prior to the expiration date of the option, the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing level of the securities or currencies upon which the futures contracts are based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid.

39

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 a fund or to reduce or eliminate the hedge position then currently held by the fund, the fund may seek to close out an option position by selling an option covering the same securities or currency and having the same exercise price and expiration date. The ability to establish and close out positions on options on futures contracts is subject to the existence of a liquid market. It is not certain that this market will exist at any specific time.

Swaps and Swap-Related Products (Smith Barney International All Cap Growth, Smith Barney High Income and SB Adjustable Rate Income Portfolios).    As one way of managing its exposure to different types of investments, each fund may enter into interest rate swaps, currency swaps and other types of available swap agreements, such as caps, collars and floors. Swaps involve the exchange by a fund with another party of cash payments based upon different interest rate indexes, currencies, and other prices or rates, such as the value of mortgage prepayment rates. For example, in the typical interest rate swap, a fund might exchange a sequence of cash payments based on a floating rate index for cash payments based on a fixed rate. Payments made by both parties to a swap transaction are based on a principal amount determined by the parties.

A fund may also purchase and sell caps, floors and collars. In a typical cap or floor agreement, one party agrees to make payments only under specified circumstances, usually in return for payment of a fee by the counterparty. For example, the purchase of an interest rate cap entitles the buyer, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a contractually based principal amount from the counterparty selling such interest rate cap. The sale of an interest rate floor obligates the seller to make payments to the extent that a specified interest rate falls below an agreed-upon level. A collar arrangement combines elements of buying a cap and selling a floor.

Swap agreements will tend to shift a fund’s investment exposure from one type of investment to another. For example, if a fund agreed to exchange payments in dollars for payments in foreign currency, in each case based on a fixed rate, the swap agreement would tend to decrease the fund’s exposure to U.S. interest rates and increase its exposure to foreign currency and interest rates. Caps and floors have an effect similar to buying or writing options. Depending on how they are used, swap agreements may increase or decrease the overall volatility of a fund’s investments and its share price and yield.

Swap agreements are sophisticated hedging instruments that typically involve a small investment of cash relative to the magnitude of risks assumed. As a result, swaps can be highly volatile and may have a considerable impact on a fund’s performance. Swap agreements are subject to risks related to the counterparty’s ability to perform, and may decline in value if the counterparty’s creditworthiness deteriorates. A fund may also suffer losses if it is unable to terminate outstanding swap agreements or reduce its exposure through offsetting transactions. Each fund expects to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its portfolio or to protect against any increase in the price of securities the fund anticipates purchasing at a later date. Each fund intends to use these transactions as a hedge and not as a speculative investment. Swap agreements may be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. Depending on their structure, swap agreements may increase or decrease a fund’s exposure to long or short-term interest rates (in the U.S. or abroad), foreign currency values, mortgage securities, corporate borrowing rates, or other factors such as securities prices or inflation rates. Swap agreements can take many different forms and are known by a variety of names. A fund is not limited to any particular form or variety of swap agreement if management determines it is consistent with the fund’s investment objective and policies.

A fund may enter into swaps, caps and floors on either an asset-based or liability-based basis, depending on whether it is hedging its assets or its liabilities, and will usually enter into interest rate swaps on a net basis,

40

i.e., the two payment streams are netted with the fund’s receiving or paying, as the case may be, only the net amount of the two payments. Inasmuch as these hedging transactions are entered into for good faith hedging purposes, management and each fund believes such obligations do not constitute senior securities and, accordingly will not treat them as being subject to its borrowing restrictions. The net amount of the excess, if any, of a fund’s obligations over its entitlements with respect to each interest rate swap will be accrued on a daily basis and an amount of cash or liquid securities having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account by its custodian. If a fund enters into a swap agreement on other than a net basis, it will maintain cash or liquid assets with a value equal to the full amount of such fund’s accrued obligations under the agreement. A fund will not enter into any swap, cap, floor or collar transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated in the highest rating category of at least one nationally recognized rating organization at the time of entering into such transaction. The most significant factor in the performance of swaps, caps, floors and collars is the change in specific interest rate, currency or other factor that determines the amount of payments to be made under the arrangement. If management is incorrect in its forecasts of such factors, the investment performance of the fund would be less than what it would have been if these investment techniques had not been used. If a swap agreement calls for payments by the fund the fund must be prepared to make such payments when due. In addition, if the counterparty’s creditworthiness declined, the value of the swap agreement would be likely to decline, potentially resulting in losses. If the counterparty defaults, the fund’s risk of loss consists of the net amount of payments that the fund is contractually entitled to receive. Each fund anticipates that it will be able to eliminate or reduce its exposure under these arrangements by assignment or other disposition or by entering into an offsetting agreement with the same or another counterparty. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing swap documentation. As a result, the swap market has become relatively liquid. Caps and floors are more recent innovations for which standardized documentation has not yet been developed and, accordingly, they are less liquid than swaps.

New options and futures contracts and various combinations thereof continue to be developed and a fund may invest in any such options and contracts as may be developed to the extent consistent with its investment objective and regulatory and tax requirements applicable to investment companies.

RISK FACTORS

General.    Investors in each fund other than Smith Barney Money Market Portfolio should realize that risk of loss is inherent in the ownership of any securities and that each fund’s net asset value will fluctuate, reflecting the fluctuations in the market value of its portfolio positions. The following sections describe some of the important risk factors involved in connection with the types of investments or investment practices indicated. See “Investment Objectives and Management Policies” and “Investment Practices” for a description of the permissible investments and investment practices of each fund.

Fixed Income Securities.    Investments in fixed income securities may subject the funds to risks, including the following.

Interest Rate Risk.    When interest rates decline, the market value of fixed income securities tends to increase. Conversely, when interest rates increase, the market value of fixed income securities tends to decline. The volatility of a security’s market value will differ depending upon the security’s duration, the issuer and the type of instrument.

Default Risk/Credit Risk.    Investments in fixed income securities are subject to the risk that the issuer of the security could default on its obligations, causing a fund to sustain losses on such investments. A default could impact both interest and principal payments.

Call Risk and Extension Risk.    Fixed income securities may be subject to both call risk and extension risk. Call risk exists when the issuer may exercise its right to pay principal on an obligation earlier than

41

scheduled, which would cause cash flows to be returned earlier than expected. This typically results when interest rates have declined and a fund will suffer from having to reinvest in lower yielding securities. Extension risk exists when the issuer may exercise its right to pay principal on an obligation later than scheduled, which would cause cash flows to be returned later than expected. This typically results when interest rates have increased, and a fund will suffer from the inability to invest in higher yield securities.

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

Emerging Markets Securities.    Because of the special risks associated with investing in emerging markets, an investment in a fund that invests in emerging markets may be considered speculative. Investors are strongly advised to consider carefully the special risks involved in emerging markets, which are in addition to the usual risks of investing in developed foreign markets around the world.

The risks of investing in securities in emerging countries include: (i) less social, political and economic stability; (ii) the small current size of the markets for such securities and the currently low or nonexistent volume of trading, which result in a lack of liquidity and in greater price volatility; (iii) certain national policies that may restrict the fund’s investment opportunities, including restrictions on investment in issuers or industries deemed sensitive to national interests; (iv) foreign taxation; and (v) the absence of developed structures governing private or foreign investment or allowing for judicial redress for injury to private property.

Investors should note that upon the accession to power of authoritarian regimes, the governments of a number of emerging market countries previously expropriated large quantities of real and personal property similar to the property which maybe represented by the securities purchased by the funds. The claims of property owners against those governments were never finally settled. There can be no assurance that any property represented by securities purchased by the funds will not also be expropriated, nationalized, or otherwise confiscated at some time in the future. If such confiscation were to occur, the funds could lose a substantial portion or all of their investments in such countries. A fund’s investments would similarly be adversely affected by exchange control regulation in any of those countries.

42

Certain countries in which the funds may invest may have vocal minorities that advocate radical religious or revolutionary philosophies or support ethnic independence. Any disturbance on the part of such individuals could carry the potential for widespread destruction or confiscation of property owned by individuals and entities foreign to such country and could cause the loss of the funds’ investment in those countries.

Settlement mechanisms in emerging market securities may be less efficient and reliable than in more developed markets. In such emerging securities markets there may be delays and failures in share registration and delivery.

Investing in emerging markets involves risks relating to potential political and economic instability within such markets and the risks of expropriation, nationalization, confiscation of assets and property, the imposition of restrictions on foreign investments and the repatriation of capital invested. Many emerging market countries have also experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities of certain emerging market countries.

Economies in emerging markets generally are dependent heavily upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be affected adversely by economic conditions in the countries in which they trade.

The securities markets of emerging countries are substantially smaller, less developed, less liquid and more volatile than the securities markets of the United States and other more developed countries. Disclosure and regulatory standards in many respects are less stringent than in the United States and other major markets. There also may be a lower level of monitoring and regulation of emerging securities markets and the activities of investors in such markets, and enforcement of existing regulations has been extremely limited.

In addition, brokerage commissions, custodial services and other costs relating to investment in foreign markets generally are more expensive than in the United States, particularly with respect to emerging markets. Such markets have different settlement and clearance procedures. In certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. The inability of a fund to make intended securities purchases due to settlement problems could cause it to miss attractive investment opportunities. Inability to dispose of a portfolio security caused by settlement problems could result either in losses to a fund due to subsequent declines in value of the portfolio security or, if the fund has entered into a contract to sell the security, could result in possible liability to the purchaser.

The risk also exists that an emergency situation may arise in one or more emerging markets as a result of which trading of securities may cease or may be substantially curtailed and prices for the portfolio securities in such markets may not be readily available. Section 22(e) of the 1940 Act permits a registered investment company to suspend redemption of its shares for any period during which an emergency exists, as determined by the SEC. Accordingly, if a fund believes that appropriate circumstances warrant, it will promptly apply to the SEC for a determination that an emergency exists within the meaning of Section 22(a) of the 1940 Act. During the period commencing from a fund’s identification of such conditions until the date of SEC action, the portfolio securities in the affected markets will be valued at fair value as determined in good faith by or under the direction of the Board of Directors.

Economic and Monetary Union (EMU).    As part of EMU, on January 1, 1999 11 European countries adopted a single common currency—the euro. 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. The European Central Bank is responsible for setting the official interest rate within the euro

43

zone. EMU may create new economic opportunities for investors, such as easier cross-border mergers, acquisitions and similar restructurings, more efficient distribution and product packaging and greater competition; however, EMU and the introduction of the euro present unique risks and uncertainties for investors in EMU-participating countries, including: (i) monetary and economic union on this scale has never before been attempted; (ii) there is uncertainty whether participating countries will remain committed to EMU in the face of changing economic conditions; (iii) instability within EMU may increase the volatility of European markets and may adversely affect the prices of securities of European issuers in the funds’ portfolios; (iv) there is uncertainty concerning the fluctuation of the euro relative to non-euro currencies; and (v) there is no assurance that interest rate, tax and labor regimes of EMU-participating countries will converge over time. These and other factors may cause market disruption and could adversely affect European securities and currencies held by the funds.

Sovereign Debt.    Investments in the sovereign debt of foreign countries involve special risks. The issuer of the debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt obligations, and in turn a fund’s net asset value, to a greater extent than the volatility inherent in domestic fixed income securities.

A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward principal international lenders and the political constraints to which a sovereign debtor may be subject. Emerging market governments could default on their sovereign debt. Such sovereign debtors also may be dependent on expected disbursements from foreign governments, multilateral agencies and other entities abroad to reduce principal and interest arrearages on their debt. The commitment on the part of these governments, agencies and others to make such disbursements may be conditioned on a sovereign debtor’s implementation of economic reforms and/or economic performance and the timely service of such debtor’s obligations.

Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third parties’ commitments to lend funds to the sovereign debtor, which may further impair such debtor’s ability or willingness to timely service its debts.

The occurrence of political, social or diplomatic changes in one or more of the countries issuing sovereign debt could adversely affect a fund’s investments. Emerging markets are faced with social and political issues and some of them have experienced high rates of inflation in recent years and have extensive internal debt. Among other effects, high inflation and internal debt service requirements may adversely affect the cost and availability of future domestic sovereign borrowing to finance governmental programs, and may have other adverse social, political and economic consequences. Political changes or a deterioration of a country’s domestic economy or balance of trade may affect the willingness of countries to service their sovereign debt. Although management intends to manage each fund in a manner that will minimize the exposure to such risks, there can be no assurance that adverse political changes will not cause a fund to suffer a loss of interest or principal on any of its holdings.

In recent years, some of the emerging market countries have encountered difficulties in servicing their sovereign debt obligations. Some of these countries have withheld payments of interest and/or principal of sovereign debt. These difficulties have also led to agreements to restructure external debt obligations in particular, commercial bank loans, typically by rescheduling principal payments, reducing interest rates and extending new credits to finance interest payments on existing debt. In the future, holders of emerging market sovereign debt securities may be requested to participate in similar rescheduling of such debt. Certain emerging market countries are among the largest debtors to commercial banks and foreign governments. Currently, Brazil, Russia and Mexico are among the largest debtors among developing countries. At times certain emerging market countries have declared moratoria on the payment of principal and interest on external debt; such a moratorium is currently in effect in certain emerging market countries. There is no bankruptcy proceeding by which a creditor may collect in whole or in part sovereign debt on which an emerging market government has defaulted.

44

The ability of emerging market governments to make timely payments on their sovereign debt securities is likely to be influenced strongly by a country’s balance of trade and its access to trade and other international credits. A country whose exports are concentrated in a few commodities could be vulnerable to a decline in the international prices of one or more of such commodities. Increased protectionism on the part of a country’s trading partners could also adversely affect its exports. Such events could diminish a country’s trade account surplus, if any. To the extent that a country receives payments for its exports in currencies other than hard currencies, its ability to make hard currency payments could be affected.

As noted above, sovereign debt obligations issued by emerging market governments generally are deemed to be the equivalent in terms of quality to securities rated below investment grade by Moody’s and S&P. Such securities are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the terms of the obligations and involve major risk exposure to adverse conditions. Some of such securities, with respect to which the issuer currently may not be paying interest or may be in payment default, may be comparable to securities rated D by S&P or C by Moody’s. The funds may have difficulty disposing of and valuing certain sovereign debt obligations because there may be a limited trading market for such securities. Because there is no liquid secondary market for many of these securities, each fund anticipates that such securities could be sold only to a limited number of dealers or institutional investors.

Currency Risks.    The funds that invest substantially in securities denominated in currencies other than the U.S. dollar, or that hold foreign currencies, will be affected favorably or unfavorably by exchange control regulations or changes in the exchange rates between such currencies and the U.S. dollar. Changes in currency exchange rates will influence the value of each fund’s shares and also may affect the value of dividends and interest earned by the funds and gains and losses realized by the funds. Currencies generally are evaluated on the basis of fundamental economic criteria (e.g., relative inflation and interest rate levels and trends, growth rate forecasts, balance of payments status and economic policies) as well as technical and political data. The exchange rates between the U.S. dollar and other currencies are determined by supply and demand in the currency exchange markets, the international balance of payments, governmental intervention, speculation and other economic and political conditions. If the currency in which a security is denominated appreciates against the U.S. dollar, the dollar value of the security will increase. Conversely, a decline in the exchange rate of the currency would adversely affect the value of the security expressed in U.S. dollars.

Real Estate Investment Trusts.    The values of securities issued by REITs are affected by tax and regulatory requirements and by perceptions of management skill. They are also subject to heavy cash flow dependency, defaults by borrowers or tenants, self-liquidation, the possibility of failing to qualify for the ability to avoid tax by satisfying distribution requirements under the Code, and failing to maintain exemption from the 1940 Act. Also, a fund will indirectly bear its proportionate share of expenses incurred by REITs in which the fund invests. REITs are also sensitive to factors such as changes in real estate values and property taxes, interest rates, overbuilding and creditworthiness of the issuer.

Zero Coupon, Pay-In-Kind and Delayed Interest Securities.    The values of these securities may be highly volatile as interest rates rise or fall. In addition, a fund’s investments in zero coupon, pay-in-kind and delayed interest securities will result in special tax consequences. Although zero coupon securities do not make interest payments, for tax purposes, a portion of the difference between a zero coupon security’s stated redemption price at maturity and its issue price is taxable income of the fund each year.

The value of zero coupon bonds is subject to greater fluctuation in market value in response to changes in market interest rates than bonds of comparable maturity which pay interest currently. Both zero coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds that pay interest currently. Even though such bonds do not pay current interest in cash, a fund is nonetheless required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders. Accordingly, for a fund to continue to qualify for tax treatment as a regulated investment company and to avoid income and possibly excise tax, the

45

fund may be required to distribute as a dividend an amount that is greater than the total amount of cash it actually receives. These distributions must be made from the fund’s cash assets or, if necessary, from the proceeds of sales of portfolio securities. The fund will not be able to purchase additional income-producing securities with cash used to make such distributions and its current income ultimately may be reduced as a result.

Ratings Categories.    General. In general, the ratings of NRSROs represent the opinions of these organizations as to the quality of securities that they rate. Such ratings, however, are relative and subjective, are not absolute standards of quality and do not evaluate the market value risk of the securities. It is possible that a NRSRO might not change its rating of a particular issue to reflect subsequent events. These ratings may be used by a fund as initial criteria for the selection of portfolio securities, but each fund also will rely upon the independent advice of its manager or subadviser, as the case may be, to evaluate potential investments. Management will take various factors into consideration in evaluating the creditworthiness of an issue, whether rated or non-rated. These factors may include, among others, the issuer’s financial resources, its sensitivity to economic conditions and trends, the operating history of and the community support for the facility financed by the issue, the capabilities of the issuer’s management, and regulatory matters.

Investment Grade Categories.    Fixed income securities rated in the highest four ratings categories for long-term debt by a NRSRO are considered “investment grade.” Obligations rated in the lowest of the top four ratings (e.g., Baa by Moody’s or BBB by S&P) are considered to have some speculative characteristics. Unrated securities will be considered to be investment grade if deemed by the manager or subadviser to be comparable in quality to instruments so rated, or if other outstanding obligations of the issuer of such securities are rated Baa/ BBB or better. For a description of the ratings, see Appendix A.

Lower-Rated and Non-Rated Securities.    The funds that may invest in debt securities rated below investment grade are subject to special risks, including a greater risk of loss of principal and non-payment of interest. An investor should carefully consider the following factors before investing in these funds.

Generally, lower-quality securities offer a higher return potential than investment grade securities but involve greater volatility of price and greater risk of loss of income and principal, including the possibility of default or bankruptcy of the issuers of such securities. Lower-quality securities and comparable non-rated securities will likely have large uncertainties or major risk exposures to adverse conditions and are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the terms of the obligation. The occurrence of adverse conditions and uncertainties would likely reduce the value of securities held by a fund, with a commensurate effect on the value of the fund’s shares.

The markets in which lower-quality securities or comparable non-rated securities are traded generally are more limited than those in which higher-quality securities are traded. The existence of limited markets for these securities may restrict the availability of securities for a fund to purchase and also may restrict the ability of a fund to obtain accurate market quotations for purposes of valuing securities and calculating net asset value or to sell securities at their fair value. An economic downturn could adversely affect the ability of issuers of lower-quality securities to repay principal and pay interest thereon.

While the market values of lower-quality securities and comparable non-rated securities tend to react less to fluctuations in interest rate levels than do those of investment grade securities, the market values of certain of these securities also tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-quality securities. In addition, lower-quality securities and comparable non-rated securities generally present a higher degree of credit risk. Issuers of lower-quality securities and comparable non-rated securities are often highly leveraged and may not have more traditional methods of financing available to them so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. The risk of loss due to default by such issuers is significantly greater because lower-quality securities and comparable non-rated securities generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness. A fund may incur additional expenses to the extent that it is required to seek recovery upon a default in the payment of principal or interest on its portfolio holdings.

46

Securities of Unseasoned Issuers.    The issuers of these securities may lack a significant operating history and be dependent on products or services without an established market share.

Borrowing and Leverage.    Leverage creates an opportunity for increased returns to shareholders of a fund but, at the same time, creates special risk considerations. For example, leverage may exaggerate changes in the net asset value of a fund’s shares and in the fund’s yield. Although the principal or stated value of such borrowings will be fixed, the fund’s assets may change in value during the time the borrowing is outstanding. By leveraging the fund, changes in net asset values, higher or lower, may be greater in degree than if leverage was not employed. Leverage will create interest or dividend expenses for a fund which can exceed the income from the assets retained. To the extent the income or other gain derived from securities purchased with borrowed funds exceeds the interest and other charges the fund will have to pay in respect thereof, the fund’s net income or other gain will be greater than if leverage had not been used. Conversely, if the income or other gain from the incremental assets is not sufficient to cover the cost of leverage, the net income or other gain of the fund will be less than if leverage had not been used. If the amount of income from the incremental securities is insufficient to cover the cost of borrowing, securities might have to be liquidated to obtain required funds. Depending on market or other conditions, such liquidations could be disadvantageous to a fund.

Reverse Repurchase Agreements.    Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale by a fund may decline below the price of the securities the fund has sold but is obliged to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the fund’s obligation to repurchase the securities, and the fund’s use of the proceeds of the reverse repurchase agreements may effectively be restricted pending such decision.

Loan Participations or Assignments.    The funds may have difficulty disposing of assignments and loan participations. The liquidity of such securities is limited, and each fund anticipates that such securities could be sold only to a limited number of institutional investors. The lack of a liquid secondary market could have an adverse impact on the value of such securities and on each fund’s ability to dispose of particular assignments or participations when necessary to meet the fund’s liquidity needs or in response to a specific economic event, such as a deterioration in the creditworthiness of the borrower. The lack of a liquid secondary market for assignments and participations also may make it more difficult for the fund to assign a value to those securities for purposes of valuing the fund’s portfolio securities and calculating its net asset value.

Certain of the loan participations acquired by a fund may involve revolving credit facilities or other standby financing commitments which obligate the fund to pay additional cash on a certain date or on demand. These commitments may have the effect of requiring a fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that a fund is committed to advance additional funds, it will at all times hold and maintain in a segregated account cash or other high grade debt obligations in an amount sufficient to meet such commitments. A fund’s ability to receive payments of principal, interest and other amounts due in connection with these investments will depend primarily on the financial condition of the borrower. In selecting the loan participations and other direct investments which a fund will purchase, management will rely upon its own credit analysis (and not that of the original lending institution) of the borrower. As a fund may be required to rely upon another lending institution to collect and pass on to it amounts payable with respect to the loan and to enforce its rights under the loan, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent a fund from receiving such amounts. In such cases, a fund will evaluate as well the creditworthiness of the lending institution and will treat both the borrower and the lending institution as an “issuer” of the loan participation for purposes of certain investment restrictions pertaining to the diversification of the fund’s portfolio investments. In connection with purchasing participations, a fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and a fund may not directly benefit from any collateral supporting the loan in which it has purchased the participation. As a result, a fund will assume the credit risk of both the borrower and the lender that is selling the participation.

47

The highly leveraged nature of many such loans may make such loans especially vulnerable to adverse changes in economic or market conditions. Investments in such loans may involve additional risks to a fund. For example, if a loan is foreclosed, a fund could become part owner of any collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is conceivable that under emerging legal theories of lender liability, a fund could be held liable as a co-lender. It is unclear whether loans and other forms of direct indebtedness offer securities law protection against fraud and misrepresentation. In the absence of definitive regulatory guidance, each fund relies on management’s research in an attempt to avoid situations where fraud or misrepresentation could adversely affect the fund. In addition, loan participations and other direct investments may not be in the form of securities or may be subject to restrictions on transfer, and only limited opportunities may exist to resell such instruments. As a result, a fund may be unable to sell such investments at an opportune time or may have to resell them at less than fair market value. To the extent that management determines that any such investments are illiquid, a fund will include them in the limitations on investments in illiquid securities described below under “Investment Restrictions.”

Derivative Instruments.    In accordance with its investment policies, a fund may invest in certain derivative instruments, which are securities or contracts that provide for payments based on or “derived” from the performance of an underlying asset, index or other economic benchmark. Essentially, a derivative instrument is a financial arrangement or a contract between two parties (and not a true security like a stock or a bond). Transactions in derivative instruments can be, but are not necessarily, riskier than investments in conventional stocks, bonds and money market instruments. A derivative instrument is more accurately viewed as a way of reallocating risk among different parties or substituting one type of risk for another. Every investment by a fund, including an investment in conventional securities, reflects an implicit prediction about future changes in the value of that investment. Every fund investment also involves a risk that the portfolio managers’ expectations will be wrong. Transactions in derivative instruments often enable a fund to take investment positions that more precisely reflect the portfolio managers’ expectations concerning the future performance of the various investments available to the fund. Derivative instruments can be a legitimate and often cost-effective method of accomplishing the same investment goals as could be achieved through other investments in conventional securities.

Derivative contracts include options, futures contracts, forward contracts, forward commitment and when-issued securities transactions, forward foreign currency exchange contracts and interest rate, mortgage and currency swaps. The following are the principal risks associated with derivative instruments.

Market risk:    The risk that the instrument will decline in value or that an alternative investment would have appreciated more, but this is no different from the risk of investing in conventional securities.

Leverage and associated price volatility:    Leverage causes increased volatility in the price and magnifies the impact of adverse market changes, but this risk may be consistent with the investment objective of even a conservative fund in order to achieve an average portfolio volatility that is within the expected range for that type of fund.

Credit risk:    The issuer of the instrument may default on its obligation to pay interest and principal.

Liquidity and valuation risk:    Many derivative instruments are traded in institutional markets rather than on an exchange. Nevertheless, many derivative instruments are actively traded and can be priced with as much accuracy as conventional securities. Derivative instruments that are custom designed to meet the specialized investment needs of a relatively narrow group of institutional investors such as the funds are not readily marketable and are subject to a fund’s restrictions on illiquid investments.

Correlation risk:    There may be imperfect correlation between the price of the derivative and the underlying asset. For example, there may be price disparities between the trading markets for the derivative contract and the underlying asset.

48

Each derivative instrument purchased for a fund’s portfolio is reviewed and analyzed by the fund’s portfolio managers to assess the risk and reward of each such instrument in relation the fund’s portfolio investment strategy. The decision to invest in derivative instruments or conventional securities is made by measuring the respective instrument’s ability to provide value to the fund and its shareholders.

Special Investment Considerations and Risks With Respect to Futures, Options and Currency Transactions and Swaps and Swap-Related Products.    The successful use of the investment practices described above with respect to futures contracts, options on futures contracts, forward contracts, options on securities and on foreign currencies, and swaps and swap-related products draws upon skills and experience which are different from those needed to select the other instruments in which a fund invests. Should interest or exchange rates or the prices of securities or financial indices move in an unexpected manner, a fund may not achieve the desired benefits of futures, options, swaps and forwards or may realize losses and thus be in a worse position than if such strategies had not been used. Unlike many exchange-traded futures contracts and options on futures contracts, there are no daily price fluctuation limits with respect to options on currencies, forward contracts and other negotiated or over-the-counter instruments, and adverse market movements could therefore continue to an unlimited extent over a period of time. In addition, the correlation between movements in the price of the securities and currencies hedged or used for cover will not be perfect and could produce unanticipated losses.

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

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

In connection with its transactions in futures, options, swaps and forwards, each fund may be required to place assets in a segregated account with the fund’s custodian bank to ensure that the fund will be able to meet its obligations under these instruments. Assets held in a segregated account generally may not be disposed of for so long as the fund maintains the positions giving rise to the segregation requirement. Segregation of a large percentage of the fund’s assets could impede implementation of the fund’s investment policies or the fund’s ability to meet redemption requests or other current obligations.

Particular Risks of Futures Contracts.    The prices of futures contracts are volatile and are influenced, among other things, by actual and anticipated changes in interest rates, which in turn are affected by fiscal and monetary policies and national and international political and economic events.

At best, the correlation between changes in prices of futures contracts and of the securities or currencies being hedged can be only approximate. The degree of imperfection of correlation depends upon circumstances such as: variations in speculative market demand for futures and for debt securities or currencies, including technical influences in futures trading; and differences between the financial instruments being hedged and the instruments underlying the standard futures contracts available for trading, with respect to interest rate levels, maturities, and creditworthiness of issuers. A decision of whether, when, and how to hedge involves skill and judgment, and even a well-conceived hedge may be unsuccessful to some degree because of unexpected market behavior or interest rate trends.

49

Because of the low margin deposits required, futures trading involves an extremely high degree of leverage. As a result, a relatively small price movement in a futures contract may result in immediate and substantial loss, as well as gain, to the investor. For example, if at the time of purchase 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit, if the futures contract were then closed out. Thus, a purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract. The fund, however, would presumably have sustained comparable losses if, instead of the futures contract, it had invested in the underlying financial instrument and sold it after the decline.

Furthermore, in the case of a futures contract purchase, in order to be certain that a fund has sufficient assets to satisfy its obligations under a futures contract, the fund sets aside and commits to back the futures contract an amount of cash, U.S. government securities and other liquid, high-grade debt securities equal in value to the current value of the underlying instrument less the margin deposit. In the case of a futures contract sale, a fund will either set aside amounts as in the case of a futures contract purchase, own the security underlying the contract, or hold a call option permitting the fund to purchase the same futures contract at a price no higher than the contract price. Assets used as cover cannot be sold while the position in the corresponding futures contract is open, unless they are replaced with similar assets. As a result, the commitment of a significant portion of the fund’s assets to cover could impede portfolio management or the fund’s ability to meet redemption requests or other current obligations.

Most United States futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of futures contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting some futures traders to substantial losses.

Mortgage-Backed Securities.    To the extent a fund purchases mortgage-related securities at a premium, mortgage foreclosures and prepayments of principal (which may be made at any time without penalty) may result in some loss of the fund’s principal investment to the extent of the premium paid. The yield generated by a fund that invests in mortgage-related securities may be affected by reinvestment of prepayments at higher or lower rates than the original investment. In addition, like other debt securities, the values of mortgage-related securities, including government and government related mortgage pools, generally will fluctuate in response to market interest rates.

Other Asset-Backed Securities.    The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. The rate of such prepayments, and hence the life of an asset-backed security, will be primarily a function of current market interest rates, although other economic and demographic factors may be involved. For example, falling interest rates generally result in an increase in the rate of prepayments of mortgage loans, while rising interest rates generally decrease the rate of prepayments. An acceleration in prepayments in response to sharply falling interest rates will shorten the security’s average maturity and limit the potential appreciation in the security’s value relative to a conventional debt security. Consequently, asset-backed securities are not as effective in locking in high long-term yields. Conversely, in periods of sharply rising rates, prepayments generally slow, increasing the security’s average life and its potential for price depreciation.

Adjustable Rate Securities.    The types of securities in which the SB Adjustable Rate Income Portfolio will invest have certain unique attributes that warrant special consideration or that present risks that may not exist in other types of mutual fund investments. Some of these risks and special considerations are peculiar to Adjustable Rate Securities whereas others, most notably the risk of prepayments, pertain to the characteristics of MBSs or ABSs generally.

50

Payments of principal of and interest on MBSs and ABSs are made more frequently than are payments on conventional debt securities. In addition, holders of MBSs and of certain ABSs (such as ABSs backed by home equity loans) may receive unscheduled payments of principal at any time, representing prepayments on the underlying mortgage loans or financial assets. When the holder of the security attempts to reinvest prepayments or even the scheduled payments of principal and interest, it may receive a rate of interest that is higher or lower than the rate on the MBS or ABS originally held. To the extent that MBSs or ABSs are purchased by the fund at a premium, mortgage foreclosures and principal prepayments may result in a loss to the extent of the premium paid. If MBSs or ABSs are bought at a discount, however, both scheduled payments of principal and unscheduled prepayments will increase current and total returns and will accelerate the recognition of income which, when distributed to shareholders, will be taxable as ordinary income. SBFM will consider remaining maturities or estimated average lives of MBSs and ABSs in selecting them for the fund.

ABSs may present certain risks not relevant to MBSs. Although ABSs are a growing sector of the financial markets, they are relatively new instruments and may be subject to a greater risk of default during periods of economic downturn than MBSs. In addition, assets underlying ABSs such as credit card receivables are generally unsecured, and debtors are entitled to the protection of various state and federal consumer protection laws, some of which provide a right of set-off that may reduce the balance owed. Finally, the market for ABS may not be as liquid as that for MBSs.

The interest rate reset features of Adjustable Rate Securities held by the fund will reduce the effect on the net asset value of fund shares caused by changes in market interest rates. The market value of Adjustable Rate Securities and, therefore, the fund’s net asset value, however, may vary to the extent that the current interest rate on the securities differs from market interest rates during periods between interest reset dates. The longer the adjustment intervals on Adjustable Rate Securities held by the fund, the greater the potential for fluctuations in the fund’s net asset value.

Investors in the fund will receive increased income as a result of upward adjustments of the interest rates on Adjustable Rate Securities held by the fund in response to market interest rates. The fund and its shareholders will not benefit, however, from increases in market interest rates once those rates rise to the point at which they cause the rates on the Adjustable Rate Securities to reach their maximum adjustment rate, annual or lifetime caps. Because of their interest rate adjustment feature, Adjustable Rate Securities are not an effective means of “locking-in” attractive rates for periods in excess of the adjustment period. In addition, mortgagors on loans underlying MBSs with respect to which the underlying Mortgage Assets carry no agency or instrumentality guarantee are often qualified for the loans on the basis of the original payment amounts; the mortgagor’s income may not be sufficient to enable it to continue making its loan payments as the payments increase, resulting in a greater likelihood of default.

Any benefits to the fund and its shareholders from an increase in the fund’s net asset value caused by declining market interest rates are reduced by the potential for increased prepayments and a decline in the interest rates paid on Adjustable Rate Securities held by the fund. When market rates decline significantly, the prepayment rate on Adjustable Rate Securities is likely to increase as borrowers refinance with fixed rate mortgage loans, thereby decreasing the capital appreciation potential of Adjustable Rate Securities. As a result, the fund should not be viewed as consistent with an objective of seeking capital appreciation.

Options and Futures Markets.    Participation in the options or futures markets involves investment risks and transaction costs to which the fund would not be subject absent the use of these strategies. If SBFM’s predictions of movements in the direction of the securities and interest rate markets are not accurate, the adverse consequences to the fund may leave the fund in a worse position than if options or futures strategies were not used. Risks inherent in the use of options, futures contracts and options on futures contracts include: (a) dependence on SBFM’s ability to predict correctly movements in the direction of interest rates and securities prices; (b) imperfect correlation between the price of options and futures contracts and options on futures contracts and movements in the prices of the securities being hedged; and (c) the skills needed to use these

51

strategies being different from those needed to select portfolio securities. In addition, positions in futures contracts and options on futures contracts may be closed out only on the exchange or board of trade on which they were entered into, and no assurance can be given that an active market will exist for a particular contract or option at a particular time.

Disclosure of Portfolio Holdings

The funds have adopted policies and procedures developed by CAM, the business unit that includes the funds’ investment manager, with respect to the disclosure of the funds’ portfolio securities and any ongoing arrangements to make available information about each fund’s portfolio securities. The policy requires that consideration always be given as to whether disclosure of information about any fund’s portfolio holdings is in the best interests of such fund’s shareholders, and that any conflicts of interest between the interests of the fund’s shareholders and those of SBFM, the funds’ distributors or their affiliates be addressed in a manner that places the interests of fund shareholders first. The policy provides that information regarding a fund’s portfolio holdings may not be shared with non-CAM employees, with investors or potential investors (whether individual or institutional), or with third parties unless it is done for legitimate fund business purposes and in accordance with the policy.

CAM’s policy generally provides for the release of details of securities positions once they are considered “stale.” Data is considered stale 25 calendar days following quarter-end for funds other than money market funds, and 25 calendar days following month-end with respect to money market funds. CAM believes that this passage of time prevents a third party from benefiting from an investment decision made by a fund that has not been fully reflected by the market.

Under the policy, a fund’s complete list of holdings (including the size of each position) may be made available to investors, potential investors, third parties and non-CAM employees with simultaneous public disclosure month-end, except in the case of a money market fund’s holdings, which may be released with simultaneous public disclosure at least 25 days after month end. Typically, simultaneous public disclosure is achieved by the filing of Form N-Q or Form N-CSR in accordance with SEC rules, provided that such filings may not be made until 25 days following quarter-end and/or posting the information to a CAM or the funds’ Internet site that is accessible by the public, or through public release by a third party vendor.

The policy permits the release of limited portfolio holdings information that is not yet considered stale in a number of situations, including:

1. A fund’s top ten securities, current as of month-end, and the individual size of each such security position may be released at any time following month-end with simultaneous public disclosure.

2. A fund’s top ten securities positions (including the aggregate but not individual size of such positions) may be released at any time with simultaneous public disclosure.

3. A list of securities (that may include fund holdings together with other securities) followed by a portfolio manager (without position sizes or identification of particular funds) may be disclosed to sell-side brokers at any time for the purpose of obtaining research and/or market information from such brokers.

4. A trade in process may be discussed only with counterparties, potential counterparties and others involved in the transaction (i.e., brokers and custodians).

5. A fund’s sector weightings, yield and duration (for fixed income and money market funds), performance attribution (e.g. analysis of the fund’s out performance or underperformance of its benchmark based on its portfolio holdings) and other summary and statistical information that does not include identification of specific portfolio holdings may be released, even if non-public, if such release is otherwise in accordance with the policy’s general principles.

52

6. A fund’s portfolio holdings may be released on an as-needed basis to its legal counsel, counsel to its Non-Interested Directors, and its independent public accountants, in required regulatory filings or otherwise to governmental agencies and authorities.

Under the policy, if information about a fund’s portfolio holdings is released pursuant to an ongoing arrangement with any party, a fund must have a legitimate business purpose for the release of the information, and either the party receiving the information must be under a duty of confidentiality, or the release of non-public information must be subject to trading restrictions and confidential treatment to prohibit the entity from sharing with an unauthorized source or trading upon any non-public information provided. Neither a fund, CAM, nor any other affiliated party may receive compensation or any other consideration in connection with such arrangements. Ongoing arrangements to make available information about a fund’s portfolio securities will be reviewed at least annually by a fund’s Board.

The approval of a fund’s Chief Compliance Officer, or designee, must be obtained before entering into any new ongoing arrangement or altering any existing ongoing arrangement to make available portfolio holdings information, or with respect to any exceptions to the policy. Any exceptions to the policy must be consistent with the purposes of the policy. Exceptions are considered on a case-by-case basis and are granted only after a thorough examination and consultation with CAM’s legal department, as necessary. Exceptions to the policies are reported to a fund’s Board at its next regularly scheduled meeting.

Each fund discloses its complete portfolio holdings approximately 25 days after month-end on the Manager’s website, www.citigroupam.com.

Set forth below is a list, as of October 1, 2005, of those parties with whom CAM, on behalf of a fund, has authorized ongoing arrangements that include the release of portfolio holdings information in accordance with the policy, as well as the frequency of the release under such arrangements, and the length of the lag, if any, between the date of the information and the date on which the information is disclosed. The parties identified below as recipients are service providers, fund rating agencies, consultants and analysts.

Recipient	Frequency	Delay Before Dissemination
State Street Bank & Trust Co., (Fund Custodian and Accounting Agent)	Daily	None
Institutional Shareholders Services, (Proxy Voting Services)	As necessary	None
Bloomberg	Quarterly	25 Days after Quarter End
Lipper	Quarterly	25 Days after Quarter End
S&P	Quarterly	25 Days after Quarter End
Morningstar	Quarterly	25 Days after Quarter End
Vestek	Daily	None
Factset	Daily	None

53

Portfolio holdings information for a fund may also be released from time to time pursuant to ongoing arrangements with the following parties:

Baseline	Daily	None
Frank Russell	Monthly	1 Day
Callan	Quarterly	25 Days after Quarter End
Mercer	Quarterly	25 Days after Quarter End
eVestment Alliance	Quarterly	25 Days after Quarter End
CRA RogersCasey	Quarterly	25 Days after Quarter End
Cambridge Associates	Quarterly	25 Days after Quarter End
Marco Consulting	Quarterly	25 Days after Quarter End
Wilshire	Quarterly	25 Days after Quarter End
Informa Investment
Services (Efron)	Quarterly	25 Days after Quarter End
CheckFree (Mobius)	Quarterly	25 Days after Quarter End
Nelsons Information	Quarterly	25 Days after Quarter End
Investors Tools	Daily	None
Advent	Daily	None
BARRA	Daily	None
Plexus	Quarterly	Sent the 1-3 business day following the end of a Quarter
Elkins/McSherry	Quarterly (Calendar)	Sent the first business day following the end of a Quarter
Quantitative Services Group	Daily	None
AMBAC	Daily	None
Deutsche Bank	Monthly	Sent 6-8 business days following month end
Fitch	Monthly	Sent 6-8 business days following month end
Liberty Hampshire	Weekly and Month End	None
Sun Trust	Weekly and Month End	None
New England Pension Consultants	Quarterly	25 Days after Quarter End
Evaluation Associates	Quarterly	25 days after Quarter End
Watson Wyatt	Quarterly	25 days after Quarter End
Moody’s	Weekly Tuesday Night	1 business day
S&P	Weekly Tuesday Night	1 business day

INVESTMENT RESTRICTIONS

The funds have adopted the following investment restrictions and policies that are “fundamental” and cannot be changed without the approval of a “majority of the outstanding voting securities” of the fund affected by the change, as defined under the 1940 Act (see “Other Information about the Company—Voting Rights”). Following the list of each fund’s fundamental investment restrictions which is set forth below is a list of other policies or restrictions that are not fundamental. Investment policies and restrictions that are not fundamental may be changed by the Company’s Board of Directors without shareholder approval. If a fund adheres to a percentage restriction at the time of an investment by the fund, a later increase or decrease in percentage resulting solely from a change in values of portfolio securities or amount of total or net assets will not be considered a violation of such percentage restriction.

Each of the Smith Barney International All Cap Growth and Smith Barney Large Cap Value Portfolios may not:

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

2. Invest more than 25% of its total assets in securities, the issuers of which conduct their principal business activities in the same industry. For purposes of this limitation, securities of the U.S. government

54

(including its agencies and instrumentalities) and securities of state or municipal governments and their political subdivisions are not considered to be issued by members of any industry.

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

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

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

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

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

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

Notwithstanding any other investment restriction of Smith Barney International All Cap Growth Portfolio or Smith Barney Large Cap Value Portfolio, each such fund may invest all of its investable assets in an open-end management investment company having the same investment objective and restrictions as the fund.

In addition, the following nonfundamental policies have also been adopted by Smith Barney International All Cap Growth Portfolio and Smith Barney Large Cap Value Portfolio. Each fund may not:

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

55

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

3. Purchase oil, gas or other mineral leases, rights or royalty contracts or exploration or development programs, except that the fund may invest in the securities of companies which operate, invest in, or sponsor such programs.

4. Invest more than 5% of its total assets in any issuer with less than three years of continuous operation (including that of predecessors) or so-called “unseasoned” equity securities that are not either admitted for trading on a national stock exchange or regularly quoted in the over-the-counter market.

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

6. Acquire securities subject to restrictions on disposition or securities for which there is no readily available market, enter into repurchase agreements or purchase time deposits or variable amount master demand notes, if any of the foregoing have a term or demand feature of more than seven days, or purchase OTC options or set aside assets to cover OTC options written by the fund if, immediately after and as a result, the value of such securities would exceed, in the aggregate, 15% of the fund’s net assets. Subject to this limitation, the Company’s Board of Directors has authorized the fund to invest in restricted securities if such investment is consistent with the fund’s investment objective and has authorized such securities to be considered to be liquid to the extent the Manager determines on a daily basis that there is a liquid institutional market for such securities. The Board of Directors retains ultimate ongoing responsibility for the determination that a restricted security is liquid.

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

The Smith Barney Large Capitalization Growth Portfolio may not:

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

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

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

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

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

56

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

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

In addition, the following nonfundamental policies have also been adopted by Smith Barney Large Capitalization Growth Portfolio. The fund may not:

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

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

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

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

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

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

Each of the Smith Barney Aggressive Growth Portfolio and the Smith Barney Mid Cap Core Portfolio may not:

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

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

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

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

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

57

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

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

In addition, the following nonfundamental policies have also been adopted by Smith Barney Aggressive Growth and Smith Barney Mid Cap Core Portfolios. Each fund may not:

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

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

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

4. Invest for the purpose of exercising control of management.

The Smith Barney High Income Portfolio may not:

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

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

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

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

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

58

on currencies to the extent consistent with the funds’ investment objective and policies); or (d) investing in real estate investment trust securities.

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

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

Notwithstanding any other investment restriction of the Smith Barney High Income Portfolio, the fund may invest all of its investable assets in an open-end management investment company having the same investment objective and restrictions as the fund.

The following nonfundamental investment policies have been adopted by the Smith Barney High Income Portfolio. The fund may not:

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

2. Invest in securities of other investment companies registered or required to be registered under the 1940 Act, except as they may be acquired as part of a merger, consolidation, reorganization, acquisition of assets or an offer of exchange, or to the extent permitted by the 1940 Act.

The SB Adjustable Rate Income Portfolio may not:

1. Issue “senior securities” as defined in the 1940 Act and the rules, regulations and orders thereunder, except as permitted under the 1940 Act and the rules, regulations and orders thereunder.

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

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

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

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

6. Purchase or sell real estate, real estate mortgages, commodities or commodity contracts, but this restriction shall not prevent the fund from (a) investing in securities of issuers engaged in the real estate

59

business or the business of investing in real estate (including interests in limited partnerships owning or otherwise engaging in the real estate business or the business of investing in real estate) and securities which are secured by real estate or interests therein; (b) holding or selling real estate received in connection with securities it holds or held; (c) trading in futures contracts and options on futures contracts (including options on currencies to the extent consistent with the fund’s investment objective and policies); and (d) investing in real estate investment trust securities.

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

8. Purchase securities on margin, except that the fund may obtain any short-term credits necessary for the clearance of purchases and sales of securities and except that the fund may pay initial or variation margin in connection with options or futures contracts.

9. Make short sales of securities, or maintain a short position if, when added together, more than 25% of the value of the fund’s net assets would be (a) deposited as collateral for the obligation to replace securities borrowed to effect the short sales and (b) allocated to segregated accounts in connection with the short sales. Short sales “against-the-box” are not subject to this restriction.

The following nonfundamental policies have been adopted by the SB Adjustable Rate Income Portfolio. The fund may not:

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

2. Write or purchase puts, calls, straddles, spreads or combinations of those transactions, except as consistent with the fund’s investment objectives and policies.

3. Purchase securities, other than MBSs, ABSs or U.S. government securities, of any issuer having a record, together with predecessors, of less than three years of continuous operations if, immediately after the purchase, more than 5% of the fund’s total assets would be invested in such securities.

4. Invest in interests in oil, gas or other mineral exploration or development programs, except that the fund may invest in the securities of companies that invest in or sponsor those programs.

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

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

7. Purchase or retain securities of any issuer if, to the knowledge of the fund, any of the fund’s officers or trustees or any officer or director of SBFM individually owns more than 1/2 of 1% of the outstanding securities of the issuer and together they own beneficially more than 5% of the securities.

The Smith Barney Money Market Portfolio may not:

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

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

60

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

4. Invest more than 25% of its assets in the securities of issuers in any industry, except it may not invest less than 25% of its assets in bank obligations (including both domestic and foreign bank obligations) and it reserves freedom of action to concentrate in securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities.

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

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

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

Notwithstanding any other investment restriction of Smith Barney Money Market Portfolio, the fund may invest all of its investable assets in an open-end management investment company having the same investment objective and restrictions as the fund.

The following non-fundamental investment policies have been adopted by Smith Barney Money Market Portfolio. The fund may not:

1. Acquire securities subject to restrictions on disposition or securities for which there is no readily available market, enter into repurchase agreements or purchase time deposits or variable amount master demand notes, if any of the foregoing have a term or demand feature of more than seven days if, immediately after and as a result, the value of such securities would exceed, in the aggregate, 10% of the fund’s total assets. Subject to this limitation, the fund’s Board of Directors has authorized the fund to invest in restricted securities if such investment is consistent with the fund’s investment objective and has authorized such securities to be considered to be liquid to the extent the manager determines on a daily basis that there is a liquid institutional market for such securities. The Board of Directors retains ultimate ongoing responsibility for the determination that a restricted security is liquid.

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

3. Write or purchase put or call options.

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

5. Purchase or sell oil and gas interests.

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

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

61

The Social Awareness Stock Portfolio has adopted the following fundamental investment policies:

1. Diversification:    with respect to 75% of its assets, the fund may not purchase a security other than a security issued or guaranteed by the U.S. government, its agencies, instrumentalities, or government-sponsored enterprises or a security of an investment company if, as a result: (1) more than 5% of the fund’s total assets would be invested in the securities of a single issuer, or (2) the fund would own more than 10% of the outstanding voting securities of any single issuer.

2. Industry Concentration:    the fund may not purchase a security if, as a result, more than 25% of the fund’s total assets would be invested in securities of issuers conducting their principal business activities in the same industry. For purposes of this policy, there is no limit on: (1) investments in U. S. government securities, in repurchase agreements covering U. S. government securities, in securities issued by the states, territories or possessions of the United States (“municipal securities”) or in foreign government securities; or (2) investment in issuers domiciled in a single jurisdiction. Notwithstanding anything to the contrary, to the extent permitted by the 1940 Act, the fund may invest in one or more investment companies; provided that, except to the extent that it invests in other investment companies pursuant to Section 12(d)(1)(A) of the 1940 Act, the fund treats the assets of the investment companies in which it invests as its own for purposes of this policy.

3. Borrowing:    the fund may not borrow money if, as a result, outstanding borrowings would exceed an amount equal to one-third of the fund’s total assets.

4. Real Estate:    the fund may not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from investing in securities or other instruments backed by real estate or in securities of companies engaged in the real estate business).

5. Lending:    the fund may not make loans to other parties if, as a result, more than one third of its total assets would be loaned to other parties. For purposes of this policy, entering into repurchase agreements, lending securities and acquiring any debt security are not deemed to be the making of loans.

6. Commodities:    the fund may not purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from purchasing or selling options and futures contracts and options on futures or from investing in securities or other instruments backed by physical commodities).

7. Underwriting:    the fund may not be an underwriter (as that term is defined in the 1933 Act) of securities issued by other persons except, to the extent that in connection with the disposition of its assets, the fund may be deemed to be an underwriter.

8. Senior Securities:    the fund may not issue any class of senior securities except to the extent consistent with the 1940 Act.

The following non-fundamental investment policies have been adopted by Social Awareness Stock Portfolio:

1. Borrowing:    for purpose of the borrowing limitation, the following are not treated as borrowings to the extent they are fully collateralized: (1) the delayed delivery of purchased securities (such as the purchase of when-issued securities); (2) reverse repurchase agreements; (3) dollar-roll transactions; and (4) the lending of securities (“leverage transactions”). (See Fundamental Policy No. 3, “Borrowing.”)

2. Liquidity:    the fund will not invest more than 15% of its net assets in: (1) securities that cannot be disposed of within seven days at their then-current value; (2) repurchase agreements not entitling the holder to payment of principal within seven days; and (3) securities subject to restrictions on the sale of the securities to the public without registration under the 1933 Act (“restricted securities”) that are not readily marketable. The fund may treat certain restricted securities as liquid pursuant to guidelines adopted by the Company’s Board of Directors.

62

3. Exercising Control of Issuers:    the fund will not make investments for the purpose of exercising control of an issuer. Investments by the fund in entities created under the laws of foreign countries solely to facilitate investment in securities in that country will not be deemed the making of investments for the purpose of exercising control.

4. Other Investment Companies:    the fund will not invest in securities of another investment company, except to the extent permitted by the 1940 Act and the rules, regulations and exemptions thereunder.

5. Purchasing on Margin:    the fund will not purchase securities on margin, except that the fund may use short-term credit for the clearance of its portfolio transactions, and provided that initial and variation margin payments in connection with futures contracts and options on futures contracts or other permissible investments shall not constitute purchasing securities on margin.

6. Lending:    the fund will not lend a security if, as a result, the amount of loaned securities would exceed an amount equal to one-third of the fund’s total assets.

7. Pledging:    the fund will not pledge its assets except as permitted by the 1940 Act.

8. Shareholder Notice:    the fund will notify shareholders at least 60 days prior to changing its 80% investment policy.

The fund, irrespective of any fundamental or non-fundamental, operating investment policies, may invest all or a portion of its assets in one or more investment companies without a shareholder vote.

PORTFOLIO TURNOVER

Although it is anticipated that most investments of each fund (except Smith Barney Money Market Portfolio) will be long-term in nature, the rate of portfolio turnover will depend upon market and other conditions, and it will not be a limiting factor when management believes that portfolio changes are appropriate. The historical portfolio turnover rates for each fund (except Smith Barney Money Market Portfolio) are included in the Financial Highlights tables in its Prospectus. A higher rate of portfolio turnover may result in higher transaction costs, including brokerage commissions. Portfolio turnover rates for Smith Barney Money Market Portfolio are not shown in its Prospectus because of the short-term nature of the investments owned by the fund.

TAXATION

The following is a summary of certain material Federal income tax considerations that may affect the funds and their shareholders. This summary does not address all of the potential Federal income tax consequences that may be applicable to the funds or to all categories of investors, some of which may be subject to special tax rules. Each prospective shareholder is urged to consult his or her own tax adviser with respect to the specific Federal, state, local and foreign tax consequences of investing in a fund. The summary is based on the laws in effect on the date of this SAI and existing judicial and administrative interpretations thereof, all of which are subject to change, possibly with retroactive effect.

Each fund will be treated as a separate taxpayer for Federal income tax purposes with the result that: (a) each fund must qualify separately as a regulated investment company; and (b) the amounts of investment income and capital gains earned will be determined on a fund-by-fund (rather than on a Company-wide) basis.

Each fund intends to continue to qualify separately each year as a “regulated investment company” under Subchapter M of the Code. To so qualify, each fund must, among other things: (a) derive at least 90% of its gross income in each taxable year from dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of stock or securities, foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in such

63

stock, securities or currencies; and (b) diversify its holdings so that, at the end of each quarter of the fund’s taxable year, (i) at least 50% of the market value of the fund’s assets is represented by cash, securities of other regulated investment companies, U.S. government securities and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the fund’s assets and not greater than 10% of the outstanding voting securities of such issuer and (ii) not more than 25% of the value of its assets is invested in the securities (other than U.S. government securities or securities of other regulated investment companies) of any one issuer or any two or more issuers that the fund controls and that are determined to be engaged in the same or similar trades or businesses or related trades or businesses.

As a regulated investment company, a fund will not be subject to Federal income tax on the portion of its taxable net investment income and net realized capital gains that it distributes to its shareholders, provided the fund satisfies a minimum distribution requirement. To satisfy the minimum distribution requirement, the fund must distribute to its shareholders at least the sum of (i) 90% of its “investment company taxable income” (i.e., income other than its net realized long-term capital gain over its net realized short-term capital loss), plus or minus certain adjustments, and (ii) 90% of its net tax-exempt income for the taxable year. A fund will be subject to income tax at regular corporation rates on any taxable income or gains that it does not distribute to its shareholders.

In addition, each fund intends to comply with the diversification requirements of Section 817(h) of the Code, which relate to the tax-deferred status of the Separate Accounts. To comply with Treasury Department regulations promulgated under Section 817(h) of the Code, each fund will be required to diversify its investments so that on the last day of each calendar quarter no more than 55% of the value of its assets is represented by any one investment, no more than 70% is represented by any two investments, no more than 80% is represented by any three investments and no more than 90% is represented by any four investments. Generally, all securities of the same issuer are treated as a single investment. For the purposes of Section 817(h), obligations of the U.S. Treasury and of each U.S. government agency or instrumentality are treated as securities of separate issuers. The Treasury Department has indicated that it may issue future pronouncements addressing the circumstances in which a Contract owner’s control of the investments of a Separate Account may cause the Contract owner, rather than the participating insurance company, to be treated as the owner of the assets held by the Separate Account. If the Contract owner is considered the owner of the securities underlying the Separate Account, income and gains produced by those securities would be included currently in the Contract owner’s gross income. It is not known what standards will be set forth in such pronouncements or when, if ever, these pronouncements may be issued. In the event that rules or regulations are adopted, there can be no assurance that the funds will be able to operate as currently described, or that the Company will not have to change the investment goal or investment policies of a fund. The Board of Directors reserves the right to modify the investment policies of a fund as necessary to prevent any such prospective rules and regulations from causing a Contract owner to be considered the owner of the shares of the fund underlying the Separate Account.

Each fund intends to accrue dividend income for Federal income tax purposes in accordance with the rules applicable to regulated investment companies. In some cases, these rules may have the effect of accelerating (in comparison to other recipients of the dividend) the time at which the dividend is taken into account by a fund as taxable income.

On October 31, 2005, the unused capital loss carryforwards, by fund, were approximately as follows: Smith Barney International All Cap Growth: $(61,381,331), Smith Barney Large Capitalization Growth Portfolio: $(64,924,813), Smith Barney Aggressive Growth Portfolio: $0, Smith Barney Mid Cap Core Portfolio: $0, Smith Barney High Income Portfolio: $(97,285,014), Smith Barney Large Cap Value Portfolio: $(29,341,801), SB Adjustable Rate Portfolio: $(119,240) and Social Awareness Stock Portfolio: $(9,663,564). For Federal income tax purposes, these amounts are available to be applied, by the fund that has the carryforwards, against future capital gains of the respective fund that are realized prior to the expiration of the applicable carryforward. The carryforwards expire as follows:

64

	October 31,
Name of Fund	2007			2008			2009			2010			2011			2012			2013
Smith Barney International All Cap Growth Portfolio		—			—		$	38,021,872		$	13,574,174		$	9,785,285			—			—
Smith Barney Large Capitalization Growth Portfolio		—		$	2,019,427		$	5,454,825		$	30,604,559		$	8,588,495		$	5,325,802		$	(12,933,705	)
Smith Barney Aggressive Growth Portfolio		—			—			—			—			—			—			—
Smith Barney Mid Cap Core Portfolio		—			—			—			—			—			—			—
Smith Barney High Income Portfolio	$	(9,630,515	)	$	(18,327,807	)	$	(42,940,350	)	$	(21,882,303	)	$	(4,504,039	)		—			—
Smith Barney Large Cap Value Portfolio		—			—			—		$	(6,191,123	)	$	(23,150,678	)		—			—
SB Adjustable Rate Portfolio		—			—			—			—		$	(2,911	)	$	(38,733	)	$	(77,596	)
Social Awareness Stock Portfolio		—			—			—		$	(8,102,950	)	$	(1,560,614	)		—			—

The Code imposes a 4% nondeductible excise tax on any fund to the extent it does not distribute by the end of any calendar year at least the sum of (i) 98% of its ordinary income for that year and (ii) 98% of its net capital gains (both long-term and short-term) for the one-year period ending, as a general rule, on October 31 of that year. For this purpose, however, any ordinary income or net capital gain retained by the fund that is subject to corporate income tax will be considered to have been distributed by year-end. In addition, the minimum amounts that must be distributed in any year to avoid the excise tax will be increased or decreased to reflect any underdistribution or overdistribution, as the case may be, from the previous year. Each fund anticipates that it will pay such dividends and will make such distributions as are necessary in order to avoid the application of this excise tax.

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

If, in any taxable year, a fund fails to qualify as a regulated investment company under the Code or fails to meet the distribution requirement, it would be taxed in the same manner as an ordinary corporation and distributions to its shareholders would not be deductible by the fund in computing its taxable income. If a fund fails to qualify as a regulated investment company in any year, it must pay out its earnings and profits accumulated in that year in order to qualify again as a regulated investment company. In addition, if a fund failed to qualify as a regulated investment company for a period greater than two taxable years, the fund may be required to recognize any net built-in gains (the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized if the fund had been liquidated) if it qualifies as a regulated investment company in a subsequent year. Further, if a fund should fail to qualify as a regulated investment company, such fund would be considered as a single investment, which may result in Contracts invested in that fund not being treated as annuity, endowment or life insurance contracts under the Code.

A fund’s transactions in foreign currencies, forward contracts, options and futures contracts (including options and futures contracts on foreign currencies) will be subject to special provisions of the Code (including provisions relating to “hedging transactions” and “straddles”) that, among other things, may affect the character of gains and losses realized by such fund (i.e., may affect whether gains or losses are ordinary or capital), accelerate recognition of income to such fund and defer fund losses. These rules could therefore affect the character, amount and timing of distributions to shareholders. These provisions also (a) will require the fund to

65

mark-to-market certain types of the positions in its portfolio (i.e., treat them as if they were closed out at the end of each year) and (b) may cause the fund to recognize income without receiving cash with which to pay dividends or make distributions in amounts necessary to satisfy the distribution requirements for avoiding income and excise taxes. Each fund will monitor its transactions, will make the appropriate tax elections and will make the appropriate entries in its books and records when it acquires any foreign currency, forward contract, option, futures contract or hedged investment in order to mitigate the effect of these rules and prevent disqualification of the fund as a regulated investment company.

A fund’s investment in so-called “section 1256 contracts,” such as regulated futures contracts, most foreign currency forward contracts traded in the interbank market and options on most stock indices, are subject to special tax rules. All section 1256 contracts held by such fund at the end of its taxable year are required to be marked to their market value, and any unrealized gain or loss on those positions will be included in the fund’s income as if each position had been sold for its fair market value at the end of the taxable year. The resulting gain or loss will be combined with any gain or loss realized by such fund from positions in section 1256 contracts closed during the taxable year. Provided such positions were held as capital assets and were not part of a “hedging transaction” nor part of a “straddle,” 60% of the resulting net gain or loss will be treated as long-term capital gain or loss, and 40% of such net gain or loss will be treated as short-term capital gain or loss, regardless of the period of time the positions were actually held by the fund.

Dividends or other income (including, in some cases, capital gains) received by a fund from investments in foreign securities may be subject to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes in some cases. A fund will not be eligible to elect to treat any foreign taxes it pays as paid by its shareholders, who therefore will not be entitled to credits or deductions for such taxes on their own tax returns. Foreign taxes paid by the fund will reduce the return from the fund’s investments.

Under Section 988 of 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 generally treated as ordinary income or ordinary loss. Similarly, gains or losses on foreign currency, foreign currency forward contracts, certain foreign currency options or futures contracts and 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 also treated as ordinary income or loss.

If a fund purchases shares in certain foreign investment entities, called “passive foreign investment companies” (“PFICs”), it may be subject to U.S. Federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable dividend by the fund to its shareholders. Additional charges in the nature of interest may be imposed on the fund in respect of deferred taxes arising from such distributions or gains.

If any fund were to invest in a PFIC and elect to treat the PFIC as a “qualified electing fund” under the Code, in lieu of the foregoing requirements, such fund might be required to include in income each year a portion of the ordinary earnings and net capital gains of the qualified electing fund, even if not distributed to the fund, and such amounts would be subject to the 90% and excise tax distribution requirements described above. In order to make this election, a fund would be required to obtain certain annual information from the PFICs in which it invests, which may be difficult or impossible to obtain. Alternatively, a fund may make a mark-to-market election that will result in the fund’s being treated as if it had sold and repurchased all of the PFIC stock at the end of each year. In such case, the fund would report any such gains as ordinary income and would deduct any such losses as ordinary losses to the extent of previously recognized gains. The election, once made, would be effective for all subsequent taxable years of the fund, unless revoked with the consent of the Internal Revenue Service (the “IRS”). By making the election, such fund could potentially ameliorate the adverse tax consequences with respect to its ownership of shares in a PFIC, but in any particular year may be required to recognize income in excess of the distributions it receives from PFICs and its proceeds from dispositions of PFIC stock. The fund

66

may have to distribute this “phantom” income and gain to satisfy the 90% distribution requirement and to avoid imposition of the 4% excise tax.

Each fund will make the appropriate tax elections, if possible, and take any additional steps that are necessary to mitigate the effect of these rules.

The foregoing is only a summary of certain material U.S. Federal income tax consequences affecting the funds and the investors. Prospective investors are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the funds.

DETERMINATION OF NET ASSET VALUE

The net asset value of each fund’s shares will be determined on any day that the New York Stock Exchange (“NYSE”) is open. The NYSE is closed in celebration of the following holidays: New Year’s Day, Martin Luther King, Jr. Day, President’s Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Each fund generally values its securities based on market prices determined at the close of regular trading on the NYSE. The fund’s currency valuations, if any, are done as of when the London stock exchange closes, which is usually at 12 noon Eastern time. For equity securities that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of securities not traded on an exchange, or if such closing prices are not otherwise available, the market price is typically determined by independent third party pricing vendors approved by the fund’s Board using a variety of pricing techniques and methodologies. The market price for debt obligations is generally the price supplied by an independent third party pricing service approved by the fund’s board, which may use a matrix, formula or other objective method that takes into consideration market indices, yield curves and other specific adjustments. Short-term debt obligations that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. If vendors are unable to supply a price, or if the price supplied is deemed by the manager to be unreliable, the market price may be determined using quotations received from one or more brokers/dealers that make a market in the security. When such prices or quotations are not available, or when the manager believes that they are unreliable, the manager may price securities using fair value procedures approved by the Board. The fund may also use fair value procedures if the manager determines that a significant event has occurred between the time at which a market price is determined and the time at which the fund’s net asset value is calculated. In particular, the value of foreign securities may be materially affected by events occurring after the close of the market on which they are valued, but before the fund prices its shares. The fund uses a fair value model developed by an independent third party pricing service to price foreign equity securities on days when there is a certain percentage change in the value of a domestic equity security index, as such percentage may be determined by the manager from time to time.

Valuing securities at fair value involves greater reliance on judgment than valuation of securities based on readily available market quotations. A fund that uses fair value to price securities may value those securities higher or lower than another fund using market quotations or its own fair value methodologies to price the same securities. There can be no assurance that the fund could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the fund determines its net asset value.

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

67

AVAILABILITY OF THE FUNDS

Investment in the Company is only available to owners of either variable annuity or variable life insurance contracts issued by insurance companies through their separate accounts and certain qualified plans. It is possible that in the future it may become disadvantageous for both variable annuity and variable life insurance separate accounts to be invested simultaneously in the Company. However, the Company does not currently foresee any disadvantages to the contractowners of the different contracts which are funded by such separate accounts. The Board monitors events for the existence of any material irreconcilable conflict between or among such owners, and each insurance company will take whatever remedial action may be necessary to resolve any such conflict. Such action could include the sale of fund shares by one or more of the insurance company separate accounts which fund these contracts, which could have adverse consequences to the fund. Material irreconcilable conflicts could result from, for example: (a) changes in state insurance laws; (b) changes in U.S. Federal income tax laws; or (c) differences in voting instructions between those given by variable annuity contractowners and those given by variable life insurance contractowners. If the Board were to conclude that separate series of the Company should be established for variable annuity and variable life separate accounts, each insurance company would bear the attendant expenses. Should this become necessary, contractowners would presumably no longer have the economies of scale resulting from a larger combined mutual fund.

REDEMPTION OF SHARES

Redemption payments shall be made wholly in cash unless the Directors believe that economic conditions exist that would make such a practice detrimental to the best interests of a fund and its remaining shareowners. If a redemption is paid in portfolio securities, such securities will be valued in accordance with the procedures described above under “Determination of Net Asset Value” and a shareholder would incur brokerage expenses if these securities were then converted to cash.

MANAGEMENT

The Investment Managers

SBFM serves as the investment manager to each fund pursuant to an investment management agreement (the “Investment Management Agreement”) with the Company with regard to each fund that was approved by the Board of Directors, including a majority of the Non-Interested Directors, on August 1, 2005 and by the funds’ shareholders on November 15, 2005. The Investment Management Agreements became effective on December 1, 2005 as a result of the sale of substantially all of Citigroup’s asset management business to Legg Mason. The manager is an indirect wholly-owned subsidiary of Legg Mason. Prior to December 1, 2005, the manager was an indirect wholly-owned subsidiary of Citigroup.

Under the Investment Management Agreements, subject to the supervision and direction of the fund’s Board of Directors, the manager manages each fund’s portfolio in accordance with the fund’s stated investment objective and policies, makes investment decisions for the fund, and places orders to purchase and sell securities. The manager also performs administrative and management services necessary for the operation of the fund, such as (i) supervising the overall administration of the fund, including negotiation of contracts and fees with and the monitoring of performance and billings of the fund’s transfer agent, shareholder servicing agents, custodian and other independent contractors or agents; (ii) providing certain compliance, fund accounting, regulatory reporting, and tax reporting services; (iii) preparing or participating in the preparation of Board materials, registration statements, proxy statements and reports and other communications to shareholders; (iv) maintaining the Fund’s existence, and (v) maintaining the registration and qualification of the fund’s shares under federal and state laws.

Each Investment Management Agreement further provides that all other expenses not specifically assumed by SBFM, under the Investment Management Agreement on behalf of a fund are borne by the Company.

68

Expenses payable by the Company include, but are not limited to, all charges of custodians and shareholder servicing agents, expenses of preparing, printing and distributing all prospectuses, proxy material, reports and notices to shareholders, all expenses of shareholders’ and Directors’ meetings, filing fees and expenses relating to the registration and qualification of the Company’s shares and the Company under federal and state securities laws and maintaining such registrations and qualifications (including the printing of the Company’s registration statements), fees of auditors and legal counsel, costs of performing portfolio valuations, out-of-pocket expenses of Directors and fees of Directors who are not “interested persons” of the Company as defined under the 1940 Act, interest, taxes and governmental fees, fees and commissions of every kind, expenses of issue, repurchase or redemption of shares, insurance expense, association membership dues, all other costs incident to the Company’s existence and extraordinary expenses such as litigation and indemnification expenses. Direct expenses are charged to each of the Company’s funds; general corporate expenses are allocated among the funds on the basis of relative net assets.

All orders for transactions in securities on behalf of a fund are made by management, with broker-dealers selected by management, including affiliated brokers. In placing orders management will seek to obtain the most favorable price and execution available. In selecting broker-dealers, management may consider research and brokerage services furnished to it and its affiliates.

Each Investment Management Agreement has an initial term of two years and continues in effect from year to year thereafter if such continuance is specifically approved at least annually (a) by the Company’s Board of Directors or by a majority of the outstanding voting securities of the fund (as defined in the 1940 Act), and (b) in either event, by a majority of the Non-Interested Directors with such Non-Interested Directors casting votes in person at a meeting called for such purpose. The Company on behalf of a fund or its manager may terminate the Investment Management Agreement with respect to each fund on 60 days’ written notice without penalty. The Investment Management Agreement will terminate automatically in the event of assignment (as defined in the 1940 Act).

The management fee payable by the fund under the Investment Management Agreement for the SB Adjustable Rate Income Portfolio is as follows:

Breakpoint Schedule Based on Net Assets of the Fund	Management Fee
First $1 billion	0.550	%
Next $1 billion	0.525	%
Next $3 billion	0.500	%
Next $5 billion	0.475	%
Over $10 billion	0.450	%

Prior to November 1, 2005, SB Adjustable Rate Income Portfolio paid the manager a management fee of 0.60% of its average daily net assets.

69

The management fee payable by the fund under the Investment Management Agreement for the Smith Barney Aggressive Growth Portfolio is as follows:

Breakpoint Schedule Based on Net Assets of the Fund	Management Fee
First $1 billion	0.750	%
Next $1 billion	0.725	%
Next $3 billion	0.700	%
Next $5 billion	0.675	%
Over $10 billion	0.650	%

Prior to November 1, 2005, Smith Barney Aggressive Growth Portfolio paid the manager a management fee of 0.80% of its average daily net assets.

The fee management fee payable by the fund under the Investment Management Agreement for the Smith Barney High Income Portfolio is 0.60% of the fund’s average daily net assets.

The management fee payable by the fund under the Investment Management Agreement for the Smith Barney International All Cap Growth is as follows:

Breakpoint Schedule Based on Net Assets of the Fund	Management Fee
First $1 billion	0.850	%
Next $1 billion	0.825	%
Next $3 billion	0.800	%
Next $5 billion	0.775	%
Over $10 billion	0.750	%

Prior to November 1, 2005 Smith Barney International All Cap Growth paid the manager a management fee of 0.75% of its average daily net assets.

The management fee payable by the fund under the Investment Management Agreement for the Smith Barney Large Cap Value Portfolio is as follows:

First $500 million	0.600	%
Next $500 million	0.550	%
Over $1 billion	0.500	%

The management fee payable by the fund under the Investment Management Agreement for the Smith Barney Large Capitalization Growth Portfolio is as follows:

Breakpoint Schedule Based on Net Assets of the Fund	Management Fee
First $1 billion	0.750	%
Next $1 billion	0.725	%
Next $3 billion	0.700	%
Next $5 billion	0.675	%
Over $10 billion	0.650	%

Prior to November 1, 2005 Smith Barney Large Capitalization Growth Portfolio paid the manager a management fee of 0.750% on the first $5 billion of average daily net assets, 0.725% on the next $2.5 billion of average daily net assets, 0.700% on the next $2.5 billion and 0.650% of average daily net assets, over $10 billion.

70

The management fee payable by the fund under the Investment Management Agreement for the Smith Barney Mid Cap Core Portfolio is as follows 0.75% of the fund’s average daily net assets.

The management fee payable by the fund under the Investment Management Agreement for the Smith Barney Money Market Portfolio is as follows:

Breakpoint Schedule Based on Net Assets of the Fund	Management Fee
First $1 billion	0.450	%
Next $1 billion	0.425	%
Next $3 billion	0.400	%
Next $5 billion	0.375	%
Over $10 billion	0.350	%

Prior to November 1, 2005, Smith Barney Money Market Portfolio paid the manager a management fee of 0.50% of its average daily net assets.

The management fee payable by the fund under the Investment Management Agreement for the Social Awareness Stock Portfolio is as follows:

Breakpoint Schedule Based on Net Assets of the Fund	Management Fee
First $50 million	0.71	%
Next $50 million	0.61	%
Next $100 million	0.51	%
Over $200 million	0.46	%

Prior to November 1, 2005, Social Awareness Stock Portfolio paid the manager an investment advisory fee of 0.61% and an administrative fee of 0.06% of its average daily net assets.

The fee under each Investment Management Agreement calculated daily and paid monthly.

Management Fees.    The manager has agreed to voluntarily waive its fee to the extent that the aggregate expenses of each of Smith Barney Large Cap Value Portfolio, Social Awareness Stock Portfolio, and Smith Barney Money Market Portfolio, exclusive of taxes, brokerage, interest and extraordinary expenses, such as litigation and indemnification expenses, exceed 1.25% of the fund’s average daily net assets for any fiscal year. The manager has agreed to waive its fee to the extent that the aggregate expenses of each of Smith Barney International All Cap Growth Portfolio, exclusive of taxes, brokerage, interest and extraordinary expenses, exceed 1.50% of the fund’s average daily net assets for any fiscal year. The manager has agreed to waive its fee to the extent that the aggregate expenses of Smith Barney Aggressive Growth Portfolio, exclusive of taxes, brokerage, interest and extraordinary expenses, such as litigation and indemnification expenses, exceed 1.00% of the fund’s average daily net assets for any fiscal year. The manager has agreed to waive its fee to the extent that the aggregate expenses of Smith Barney Mid Cap Core Portfolio, exclusive of taxes, brokerage, interest and extraordinary expenses, such as litigation and indemnification expenses, exceed 0.95% of the fund’s average daily net assets for any fiscal year. Each of these voluntary expense limitations shall be in effect until it is terminated by the manager and notice to shareholders is provided by supplement to the then-current Prospectus or SAI. The manager has contractually agreed to waive its fees and/or reimburse expenses of SB Adjustable Rate Income Portfolio through a period of 16 months from October 31, 2005 so that net annual operating expenses, exclusive of taxes, brokerage, interest and extraordinary expenses, such as litigation and indemnification, will not exceed 1.00% of the fund’s average daily net assets. This contractual arrangement may be terminated during the term only by written agreement of the fund and the manager and with notice to shareholders by supplement to the then current Prospectus and SAI.

71

For the periods shown, each fund paid the following management fee:

Fund	Fiscal Year Ended October 31, 2003			Fiscal Year Ended October 31, 2004		Fiscal Year Ended October 31, 2005
Smith Barney International All Cap Growth Portfolio	$	1,518,148		$	1,540,393	$	1,403,306
Smith Barney Large Cap Value Portfolio		2,256,242			2,303,815		1,957,470
Smith Barney Large Capitalization Growth Portfolio		1,971,543			3,010,901		2,936,582
Smith Barney Aggressive Growth Portfolio		3,940,249			6,441,853		8,084,509
Smith Barney Mid Cap Core Portfolio		496,901			758,853		890,458
Smith Barney High Income Portfolio		1,169,585			1,572,294		1,728,486
Smith Barney Money Market Portfolio**		3,369,520			2,689,274		2,458,420
SB Adjustable Rate Income Portfolio		8,379	*		93,092		196,871
Social Awareness Stock Portfolio*		N/A			N/A		460,861

* For the period from January 1, 2005 (commencement of operations) to October 31, 2005.

** The manager waived fees for the year ended October 31, 2005. If fees were not waived, the manager would have received $2,458,420 in management fees.

Code of Ethics.    Pursuant to Rule 17j-1 of the 1940 Act, the manager and the distributors have adopted codes of ethics that permit personnel to invest in securities for their own accounts, including securities that may be purchased or held by the funds. All personnel must place the interests of clients first and avoid activities, interests and relationships that might interfere with the duty to make decisions in the best interests of the clients. All personal securities transactions by employees must adhere to the requirements of the codes and must be conducted in such a manner as to avoid any actual or potential conflict of interest, the appearance of such a conflict, or the abuse of an employee’s position of trust and responsibility.

Copies of the Codes of Ethics of the manager and the distributors are on file with the SEC.

72

PORTFOLIO MANAGER DISCLOSURE

Portfolio Manager

The following tables set forth certain additional information with respect to each fund’s portfolio managers. Unless noted otherwise, all information is provided as of December 31, 2005.

Other Accounts Managed by Portfolio Manager

The table below identifies, for each portfolio manager, the number of accounts (other than the fund with respect to which information is provided) for which he or she has day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. Unless otherwise noted, no accounts had fees based on performance.

Fund	Portfolio Manager(s)	Registered Investment Companies	Other Pooled Investment Vehicles	Other Accounts
SB Adjustable Rate Income Portfolio	S. Kenneth Leech	36 registered investment companies with $23.6 billion in total assets under management	19 other pooled investment vehicles with $19.8 billion in assets under management	740 other accounts with $205.8 billion in total assets under management**
	Stephen A. Walsh	36 registered investment companies with $23.6 billion in total assets under management	19 other pooled investment vehicles with $19.8 billion in assets under management	740 other accounts with $205.8 billion in total assets under management**
	Ronald D. Mass	1 registered investment company with $173 billion in total assets under management	0 other pooled investment vehicles with $0 billion in assets under management	9 other accounts with $4.85 billion in total assets under management
	Mark Lindbloom*	2 registered investment companies with $0.7 billion in total assets under management	1 other pooled investment vehicle with $0.2 billion in assets under management	11 other accounts with $2.0 billion in total assets under management
	Theresa Veres*	2 registered investment companies with $0.8 billion in total assets under management	1 other pooled investment vehicle with $0.3 billion in assets under management	0 other accounts with $0 billion in total assets under management
Smith Barney Aggressive Growth Portfolio	Richard A. Freeman*	13 registered investment companies with $10.7 billion in total assets under management	2 other pooled investment vehicles with $0.3 billion in assets under management	125,510 other accounts with $10.1 billion in total assets under management
Smith Barney High Income Portfolio	S. Kenneth Leech	36 registered investment companies with $23.6 billion in total assets under management	19 other pooled investment vehicles with $19.8 billion in assets under management	740 other accounts with $205.8 billion in total assets under management**

* Information provided as of October 31, 2005.

** Includes 77 accounts managed, totaling $20.7 billion, for which advisory fee is performance-based.

73

Fund	Portfolio Manager(s)	Registered Investment Companies	Other Pooled Investment Vehicles	Other Accounts
	Stephen A. Walsh	36 registered investment companies with $23.67 billion in total assets under management	19 other pooled investment vehicles with $19.8 billion in assets under management	740 other accounts with $205.8 billion in total assets under management**
	Michael C. Buchanan	3 registered investment companies with $744 billion in total assets under management	2 other pooled investment vehicles with $2.13 billion in assets under management	10 other accounts with $1.41 billion in total assets under management
	Ian R. Edmonds	0 registered investment companies with $0 billion in total assets under management	0 other pooled investment vehicles with $0 billion in assets under management	1 other account with $46 billion in total assets under management
	Timothy J. Settel	0 registered investment companies with $0 billion in total assets under management	0 other pooled investment vehicles with $0 billion in assets under management	0 other account with $0 billion in total assets under management
Smith Barney Large Capitalization Growth Portfolio	Alan Blake*	17 registered investment companies with $6.7 billion in total assets under management	3 other pooled investment vehicles with $0.3 billion in assets under management	134,402 other accounts with $15.1 billion in total assets under management
Smith Barney Large Cap Value Portfolio	Robert Feitler*	17 registered investment companies with $8.1 billion in total assets under management	1 other pooled investment vehicle with $0.1 billion in assets under management	30,363 other accounts with $5.0 billion in total assets under management
	Mark McAllister*	17 registered investment companies with $8.1 billion in total assets under management	1 other pooled investment vehicle with $0.1 billion in assets under management	30,363 other accounts with $5.0 billion in total assets under management
Smith Barney Mid Cap Core Portfolio	Brian Angerame*	4 registered investment companies with $1.1 billion in total assets under management	1 other pooled investment vehicle with $0 billion in assets under management	3,333 other accounts with $0.1 billion in total assets under management
	Derek Deutsch*	4 registered investment companies with $1.1 billion in total assets under management	1 other pooled investment vehicle with $0 billion in assets under management	3,333 other accounts with $0.1 billion in total assets under management

* Information provided as of October 31, 2005.

** Includes 77 accounts managed, totaling $20.7 billion, for which advisory fee is performance-based.

74

Fund	Portfolio Manager(s)	Registered Investment Companies	Other Pooled Investment Vehicles	Other Accounts
	Peter Stournaras	4 registered investment companies with $1.1 billion in total assets under management	1 other pooled investment vehicle with $0 billion in assets under management	3,333 other accounts with $0.1 billion in total assets under management
Smith Barney International All Cap Growth Portfolio	Jeffrey J. Russell	4 registered investment companies with $0.2 billion in total assets under management	2 other pooled investment vehicles with $0.1 billion in assets under management	12,136 other accounts with $0.8 billion in total assets under management
Social Awareness Stock Portfolio	William Theriault	1 registered investment company with $0 billion in total assets under management	0 other pooled investment vehicles with $0 billion in assets under management	8 other accounts with $0 billion in total assets under management

Note: The numbers above reflect the overall number of portfolios managed by Ms. Veres and Messrs. Leech, Walsh, Buchanan, Edmonds, Settel, Mass and Lindbloom. In addition to the funds, they also are involved in the management of portfolios advised by Western Asset asset’s and its affiliates, but they are not solely responsible for particular portfolios. Western’s investment discipline emphasizes a team approach that combines the efforts of groups of specialists working in different market sectors. They are responsible for overseeing implementation of Western Asset’s overall investment ideas and coordinating the work of the various sector teams. This structure ensures that client portfolios benefit from a consensus that draws on the expertise of all team members.

Portfolio Manager Compensation

CAM investment professionals receive base salary and other employee benefits and are eligible to receive incentive compensation. Base salary is fixed and typically determined based on market factors and the skill and experience of individual investment personnel.

CAM has implemented an investment management incentive and deferred compensation plan (the “Plan”) for its investment professionals, including the funds’ portfolio managers. Each investment professional works as a part of an investment team. The Plan is designed to align the objectives of CAM investment professionals with those of fund shareholders and other CAM clients. Under the Plan a “base incentive pool” is established for each team each year as a percentage of CAM’s revenue attributable to the team (largely management and related fees generated by funds and other accounts). A team’s revenues are typically expected to increase or decrease depending on the effect that the team’s investment performance as well as inflows and outflows have on the level of assets in the investment products managed by the team. The “base incentive pool” of a team is reduced by base salaries paid to members of the team and employee benefits expenses attributable to the team.

The investment term’s incentive pool is then adjusted to reflect its ranking among a “peer group” of non-CAM investment managers and the team’s pre-tax investment performance against the applicable product benchmark (e.g. a securities index and, with respect to a fund, the benchmark set forth in the fund’s prospectus to which the fund’s average annual total returns are compared or, if none, the benchmark set forth in the fund’s annual report). CAM may also measure the team’s pre-tax investment performance against additional benchmarks, as it determines appropriate. Longer-term (5-year) performance will be more heavily weighted than shorter-term (1-year) performance in the calculation of the performance adjustment factor. The incentive pool for a team may also be adjusted to reflect other factors (e.g., severance pay to departing members of the team, and

75

discretionary allocations by the applicable CAM chief investment officer from one investment team to another). The incentive pool will be allocated by the applicable CAM chief investment officer to the team leader and, based on the recommendations of the team leader, to the other members of the team.

Up to 20% of an investment professional’s annual incentive compensation is subject to deferral. Of that principal deferred award amount, 50% will accrue a return based on the hypothetical returns of the investment fund or product that is the primary focus of the investment professional’s business activities with the Firm, and 50% may be received in the form of Legg Mason restricted stock shares.

With respect to the compensation of Ms. Veres and Messrs. Leech, Walsh, Buchanan, Edmonds, Settel, Mass and Lindbloom, Western Asset’s compensation system assigns each employee a total compensation “target” and a respective cap, which are derived from annual market surveys that benchmark each role with their job function and peer universe. This method is designed to reward employees with total compensation reflective of the external market value of their skills, experience, and ability to produce desired results. Standard compensation includes competitive base salaries, generous employee benefits, and a retirement plan.

In addition, Western Asset employees are eligible for bonuses. These are structured to closely align the interests of employees with those of Western Asset, and are determined by the professional’s job function and performance as measured by a formal review process. All bonuses are completely discretionary. One of the principal factors considered is a portfolio manager’s investment performance versus appropriate peer groups and benchmarks. Because portfolio managers are generally responsible for multiple accounts (including the funds) with similar investment strategies, they are compensated on the performance of the aggregate group of similar accounts, rather than a specific account. A smaller portion of a bonus payment is derived from factors that include client service, business development, length of service to the investment manager, management or supervisory responsibilities, contributions to developing business strategy and overall contributions to Western Asset’s business.

Finally, in order to attract and retain top talent, all professionals are eligible for additional incentives in recognition of outstanding performance. These are determined based upon the factors described above and include Legg Mason stock options and long-term incentives that vest over a set period of time past the award date.

Potential Conflicts of Interest

Potential conflicts of interest may arise when a fund’s portfolio manager has day-to-day management responsibilities with respect to one or more other funds or other accounts, as is the case for certain of the portfolio managers listed in the table above. These potential conflicts include:

Allocation of Limited Time and Attention.    A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. As a result, the portfolio manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those accounts as might be the case if he or she were to devote substantially more attention to the management of a single fund. The effects of this potential conflict may be more pronounced where funds and/or accounts overseen by a particular portfolio manager have different investment strategies.

Allocation of Limited Investment Opportunities.    If a portfolio manager identifies a limited investment opportunity that may be suitable for multiple funds and/or accounts, the opportunity may be allocated among these several funds or accounts, which may limit a fund’s ability to take full advantage of the investment opportunity.

Pursuit of Differing Strategies.    At times, a portfolio manager may determine that an investment opportunity may be appropriate for only some of the funds and/or accounts for which he or she exercises

76

investment responsibility, or may decide that certain of the funds and/or accounts should take differing positions with respect to a particular security. In these cases, the portfolio manager may place separate transactions for one or more funds or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other funds and/or accounts.

Selection of Brokers/Dealers.    Portfolio managers may be able to select or influence the selection of the brokers and dealers that are used to execute securities transactions for the funds and/or account that they supervise. In addition to executing trades, some brokers and dealers provide portfolio managers with brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934), which may result in the payment of higher brokerage fees than might have otherwise be available. These services may be more beneficial to certain funds or accounts than to others. Although the payment of brokerage commissions is subject to the requirement that the portfolio manager determine in good faith that the commissions are reasonable in relation to the value of the brokerage and research services provided to the fund, a portfolio manager’s decision as to the selection of brokers and dealers could yield disproportionate costs and benefits among the funds and/or accounts that he or she manages.

Variation in Compensation.    A conflict of interest may arise where the financial or other benefits available to the portfolio manager differ among the funds and/or accounts that he or she manages. If the structure of the investment adviser’s management fee and/or the portfolio manager’s compensation differs among funds and/or accounts (such as where certain funds or accounts pay higher management fees or performance-based management fees), the portfolio manager might be motivated to help certain funds and/or accounts over others. The portfolio manager might be motivated to favor funds and/or accounts in which he or she has an interest or in which the investment advisor and/or its affiliates have interests. Similarly, the desire to maintain or raise assets under management or to enhance the portfolio manager’s performance record or to derive other rewards, financial or otherwise, could influence the portfolio manager to lend preferential treatment to those funds and/or accounts that could most significantly benefit the portfolio manager.

Related Business Opportunities.    The investment adviser or its affiliates may provide more services (such as distribution or recordkeeping) for some types of funds or accounts than for others. In such cases, a portfolio manager may benefit, either directly or indirectly, by devoting disproportionate attention to the management of fund and/or accounts that provide greater overall returns to the investment manager and its affiliates.

Portfolio Manager Securities Ownership

The table below identifies ownership of fund securities by each Portfolio Manager. None of the portfolio managers own fund shares because fund shares are available only through the purchase of variable annuity or variable life insurance contracts issued by insurance companies through their separate accounts.

Fund	Portfolio Manager	Dollar Range of Ownership of Securities
SB Adjustable Rate Income Portfolio	S. Kenneth Leech Stephen A. Walsh Ronald D. Mass Mark Lindbloom Theresa Veres	none none none none none
Smith Barney Aggressive Growth Portfolio	Richard A. Freeman	none
Smith Barney High Income Portfolio	S. Kenneth Leech Stephen A. Walsh Michael C. Buchanan Ian R. Edmonds Timothy J. Settel	none none none none none

77

Fund	Portfolio Manager	Dollar Range of Ownership of Securities
Smith Barney Large Capitalization Growth Portfolio	Alan Blake	none
Smith Barney Large Cap Value Portfolio	Robert Feitler Mark McAllister	none none
Smith Barney Mid Cap Core Portfolio	Brian Angerame Derek Deutsch Peter Stournaras	none none none
Smith Barney International All Cap Growth Portfolio	Jeffrey J. Russell	none
Smith Barney Money Market Portfolio	Martin R. Hanley	none
Social Awareness Stock Portfolio	William Theriault	none

Proxy Voting Guidelines and Procedures

Although individual board members may not agree with particular policies or votes by the manager, the Board has approved delegating proxy voting discretion to the manager believing that the manager should be responsible for voting because it is a matter relating to the investment decision making process.

Attached as Appendix B is a summary of the guidelines and procedures that the funds use to determine how to vote proxies relating to portfolio securities, including the procedures that the funds use when a vote presents a conflict between the interests of fund shareholders, on the one hand, and those of the manager or any affiliated person of the funds or the manager, on the other. This summary of the guidelines gives a general indication as to how the manager will vote proxies relating to portfolio securities on each issue listed. However, the guidelines do not address all potential voting issues or the intricacies that may surround individual proxy votes. For that reason, there may be instances in which votes may vary from the guidelines presented. Notwithstanding the foregoing, the manager always endeavors to vote proxies relating to portfolio securities in accordance with each fund’s investment objectives.

Information on how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30 of each year is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the funds’ website at http://www.CitigroupAM.com and (3) on the SEC’s website at http://www.sec.gov.

Distribution

Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, located at 100 Light Street, Baltimore, Maryland 21202, and CGMI, an indirect wholly-owned subsidiary of Citigroup, serve as the Company’s distributors pursuant to separate written agreements or amendments to written agreements, in each case dated December 1, 2005 (the “distribution agreements”), which were approved by the Company’s Board of Directors and by a majority of the Non-Interested Directors, casting votes in person at a meeting called for such purpose, on November 21, 2005.

CGMI and LMIS may be deemed to be underwriters for purposes of the Securities Act of 1933.

The distributors’ obligation is an agency or “best efforts” arrangement under which the distributors are required to take and pay only for such shares of each fund as may be sold to the public. The distributors are not obligated to sell any stated number of shares. The distribution agreements have an initial term of two years and are renewable from year to year thereafter if approved (a) by the Directors or by a vote of a majority of the Company’s outstanding voting securities, and (b) by the affirmative vote of a majority of Directors who are not

78

parties to the agreements or interested persons of any party by votes cast in person at a meeting called for such purpose. Each 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. The distributors are not currently paid a fee for the provision of distribution services with respect to the funds.

Distribution Plan

The Company has adopted an amended shareholder services and distribution plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act with respect to the Smith Barney Class shares of the SB Adjustable Rate Income Portfolio. Under the Plan, the distribution fee may be used by a distributor or a life insurance company offering a Separate Account for which the SB Adjustable Rate Income Portfolio is a funding medium for expenses related to the Smith Barney Class shares, including without limitation: (a) costs of printing and distributing the fund’s prospectuses, statements of additional information and reports to prospective investors in the fund; (b) costs involved in preparing, printing and distributing sales literature pertaining to the fund and including materials intended for use within the insurance company and reports for persons other than existing Contract owners; (c) an allocation of overhead and other branch office distribution-related expenses of a distributor or life insurance company; (d) payments made to, and expenses of, a distributor’s financial consultants, other broker-dealers, financial intermediaries and other persons who provide support or personal services to fund shareholders in connection with the distribution of the fund’s shares, including but not limited to, office space, equipment, communication facilities, answering routine inquiries regarding the fund and its operations, processing shareholder transactions, promotional, advertising or marketing services intended for use within the insurance company, sub-accounting and recordkeeping services (in excess of ordinary payments made to the fund’s transfer agent or other recordkeeper), obtaining Contract owner information and providing information about the fund, asset allocation services, compensating sales personnel, training sales personnel regarding the fund, maintaining and servicing Contract accounts (including the payment of a continuing fee to financial consultants); and (e) interest-related expenses, or the cost of capital associated with, the amount of the foregoing expenses that exceed the distribution fee; provided, however, that (i) the distribution fee may be used by a distributor or insurance company to cover expenses primarily intended to result in the sale of shares, including, without limitation, payments to the distributor’s financial consultants and other persons as compensation for the sale of the shares and (ii) a distributor or life insurance company may retain portions of the distribution fee in excess of its expenses incurred. Under the Plan, the SB Adjustable Rate Income Portfolio pays a service and distribution fee not to exceed 0.25% of the average daily net assets of its shares.

The Plan is subject to annual approval by the Directors. The Plan is terminable at any time, without penalty, by a vote of a majority of the Non-Interested Directors or by vote of a majority of the outstanding Smith Barney Class shares of the fund. The Plan may not be amended to increase materially the amount that may be spent for distribution by the Smith Barney Class shares of the fund without the approval of a majority of the outstanding voting securities of the Smith Barney Class shares of the fund.

The Plan was adopted because of its anticipated benefits to the fund. These anticipated benefits include increased promotion and distribution of the fund’s shares, an enhancement in the fund’s ability to maintain accounts and improve asset retention and increased stability of net assets for the fund.

For the fiscal year ended October 31, 2005, the SB Adjustable Rate Income Portfolio paid CGMI $82,029 in fees under the prior distribution plan, of which $49,217 was waived by CGMI. For the fiscal year ended October 31, 2005, CGMI incurred $31,786 in distribution expenses for the SB Adjustable Rate Income Portfolio, consisting of:

Smith Barney Financial Consultant Compensation	Branch Expenses	Advertising Expenses	Printing Expenses	Total Expenses
$3,934	$7,458	$8,355	$12,039	$31,786

79

Portfolio Transactions

Shown below are the total brokerage commissions paid by the Company for the fiscal years ended October 31, 2003, October 31, 2004 and October 31, 2005 on behalf of the funds, the portion paid to CGMI and the portion paid to other brokers for the execution of orders allocated in consideration of research and statistical services or solely for their ability to execute the order. During the fiscal year ended October 31, 2003, the total amount of commissionable transactions was $3,919,974,511, of which $78,128,454 (1.99%) was directed to CGMI and executed by unaffiliated brokers and $3,841,846,057 (98.01%) was directed to other brokers. During the fiscal year ended October 31, 2004, the total amount of commissionable transactions was $4,633,843,562, of which $125,600,548 (2.71%) was directed to CGMI and executed by unaffiliated brokers and $4,508,243,014 (97.29%) was directed to other brokers. During the fiscal year ended October 31, 2005, the total amount of commissionable transactions was $907,316,710, of which $70,356,561 (7.75%) was directed to CGMI and executed by unaffiliated brokers and $836,960,149 (92.25%) was directed to other brokers.

Commissions:

Fiscal Year Ended	Total Brokerage Commissions		Commissions Paid to CGMI and Affiliates	To Others (for execution only)
October 31, 2003	$	5,226,361	$111,056    (2.12%)	$5,115,305    (97.88%)
October 31, 2004	$	6,968,603	$144,949    (2.08%)	$6,823,654    (97.92%)
October 31, 2005	$	1,192,520	$  61,140    (5.13%)	$1,131,380    (94.87%)

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

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

Effective December 1, 2005, CGMI is no longer an affiliated person of the Company or the funds under the 1940 Act. As a result, the funds are permitted to execute portfolio transactions with CGMI or an affiliate of CGMI as agent (but not as principal). Similarly, the funds are permitted to purchase securities in underwritings in which CGMI or an affiliate of CGMI is a member without the restrictions imposed by certain rules of the SEC. The manager’s use of CGMI or affiliates of CGMI as agent in portfolio transactions with the funds will be governed by the Company’s policy of seeking the best overall terms available.

80

For the fiscal year ended October 31, 2005, the funds held the following securities issued by their regular broker-dealers:

Issuer	D=Debt E=Equity	Par Value/Number of Shares
UBS AG	E	3,394,110
Bear Stearns & Co.	D	1,625,908
Morgan Stanley	D	310,378
Banc of America Securities	D	478,290
Deutsche Bank	D	416,888
Merrill Lynch, Pierce, Fenner & Smith, Inc.	D	265,678
Deutsche Bank	D	8,000,000
Banc of America LLC	D	12,952,736
Goldman Sachs & Co.	D	14,966,833
UBS Securities	D	15,000,000
Morgan Stanley	E	897,765
Bear Stearns & Co	E	751,180
Merrill Lynch, Pierce, Fenner & Smith	E	647,400

OTHER INFORMATION ABOUT THE COMPANY

The Company, an open-end managed investment company, was incorporated in Maryland on February 22, 1994. The Company has an authorized capital of 6,000,000,000 shares with a par value of $.00001 per share. The Board of Directors has authorized the issuance of nine series of shares, each representing shares in one of nine separate funds—Smith Barney International All Cap Growth Portfolio, Smith Barney Large Cap Value Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith Barney Aggressive Growth Portfolio, Smith Barney Mid Cap Core Portfolio, Smith Barney High Income Portfolio, SB Adjustable Rate Income Portfolio, Smith Barney Money Market Portfolio and Social Awareness Stock Portfolio. The assets of each fund are segregated and separately managed and a shareowner’s interest is in the assets of the fund in which he or she holds shares.

The Directors may authorize the creation of additional series of shares and additional classes of shares within any series. The investment objectives, policies and restrictions applicable to additional funds would be established by the Directors at the time such funds were established and may differ from those set forth in the Prospectuses and this SAI. In the event of liquidation or dissolution of a fund or of the Company, shares of a fund are entitled to receive the assets belonging to that fund and a proportionate distribution, based on the relative net assets of the respective funds, of any general assets not belonging to any particular fund that are available for distribution.

The Articles of Incorporation may be amended only upon the vote of a majority of the shares of capital stock of the Company outstanding and entitled to vote, and in accordance with applicable law, except for certain amendments that may be made by the Directors.

The Articles of Incorporation further provide that the Company shall indemnify its Directors, officers and employees against any liability to the Company or to a shareowner, except as such liability may arise from his or its own bad faith, willful misfeasance, gross negligence, or reckless disregard of his or its duties. With the exceptions stated, the Articles of Incorporation provide that a Director, Officer or employee is entitled to be indemnified against all liability in connection with the affairs of the Company.

The Company shall continue without limitation of time subject to the provisions in the Articles of Incorporation concerning termination of the corporation or any of the series of the corporation by action of the shareowners or by action of the Directors upon notice to the shareowners.

81

Licensing Agreement.    Under a licensing agreement between Citigroup and Legg Mason, the name of the funds, the names of any classes of shares of funds, and the names of investment advisers of funds, as well as all logos, trademarks and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason and by the fund. Citi Marks include, but are not limited to, “Smith Barney,” “Salomon Brothers,” “Citi,” and “Citigroup Asset Management,” Legg Mason and its affiliates, as well as the fund’s investment adviser, are not affiliated with Citigroup. All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement.

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

Each share of a fund represents an equal proportionate interest in that fund with each other share of the same fund and is entitled to such dividends and distributions out of the net income of that fund as are declared in the discretion of the Directors. Shareowners are entitled to one vote for each share held and will vote by individual fund except to the extent required by the 1940 Act. The Company is not required to hold shareowner meetings annually, although special meetings may be called for the Company as a whole, or a specific fund, for purposes such as electing or removing Directors, changing fundamental policies or approving a management contract.

Shares of the Company entitle their owners to one vote per share; however, on any matter submitted to a vote of the shareowners, all shares then entitled to vote will be voted by individual fund unless otherwise required by the 1940 Act (in which case all shares will be voted in the aggregate). For example, a change in investment policy for a fund would be voted upon only by shareowners of the fund involved. Additionally, approval of an amendment to a fund’s management or subadvisory agreement is a matter to be determined separately by that fund. Approval of a proposal by the shareowners of one fund is effective as to that fund whether or not enough votes are received from the shareowners of the other funds to approve the proposal as to that fund except for matters on which shares of the Company must be voted in the aggregate.

The Directors themselves have the power to alter the number and the terms of office of the Directors, and they may at any time lengthen their own terms or make their terms of unlimited duration (subject to certain removal procedures) and appoint their own successors, provided that in accordance with the 1940 Act always at least a majority, but in most instances, at least two-thirds, of the Directors have been elected by the shareowners of the Company. Shares do not have cumulative voting rights and therefore the owners of more than 50% of the outstanding shares of the Company may elect all of the Directors irrespective of the votes of other shareowners.

Custodian.    Portfolio securities and cash owned by the Company on behalf of each fund are held in the custody of State Street Bank and Trust Company (“State Street”), 225 Franklin Street, Boston, Massachusetts, 02110.

Transfer Agent.    PFPC Inc., whose address is P.O. Box 9699, Providence, Rhode Island 02940-9699, serves as the transfer agent and shareholder services agent of the funds.

Legal Counsel.    Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York 10019-6099, serves as legal counsel to the funds.

82

Independent Registered Public Accounting Firm.    KPMG LLP, 345 Park Avenue, New York, NY 10154, has been selected as the Company’s independent registered public accounting firm, to audit and report on the financial statements and financial highlights of the Company for the fiscal year ending October 31, 2006.

As of February 2, 2006, to the knowledge of the funds, no single shareholder or “group” (as that term is used in Section 13(d) of the Securities Exchange Act of 1934) beneficially owned 5% or more of the outstanding shares of the funds with the exception of the following:

Portfolio	Shareholder Name/Address	Shares Held	Percent
SB Adjustable Rate Income Portfolio	Travelers Insurance Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	2,150,823.618	53.7303
	Travelers Life & Annuity Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	1,851,477.033	46.2521
Smith Barney Aggressive Growth Portfolio	Travelers Life & Annuity Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	43,192,424.913	57.2776
	Travelers Insurance Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	31,634,413.929	41.9505
Smith Barney High Income Portfolio	Travelers Life & Annuity Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	26,092,015.767	66.4325
	Travelers Insurance Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	11,740,748.240	29.8929
International All Cap Growth Portfolio	Travelers Life & Annuity Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	5,637,050.476	48.8570
	Travelers Insurance Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	4,833,646.817	41.9024
	ING USA Annuity & Life Insurance Company Attn: Fund Accounting 1475 Dunwoody Drive West Chester PA 19380	825,994.293	7.1605

83

Portfolio	Shareholder Name/Address	Shares Held	Percent
Smith Barney Large Capitalization Growth Portfolio	Travelers Life & Annuity Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	15,667,945.400	62.9980
	Travelers Insurance Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	9,158,864.390	36.8261
Smith Barney Large Cap Value Portfolio	Travelers Life & Annuity Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	8,287,188.917	52.5666
	Travelers Insurance Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	5,307,574.115	33.6665
	ING USA Annuity & Life Insurance Company Attn: Fund Accounting 1475 Dunwoody Drive West Chester PA 19380	1,909,393.928	12.1115
Smith Barney Mid Cap Core Portfolio	Travelers Life & Annuity Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	6,453,852.202	74.8844
	Travelers Insurance Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	2,135,750.827	24.7812
Smith Barney Money Market Portfolio	Travelers Insurance Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	298,020,877.110	63.3596
	Travelers Life & Annuity Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	165,142,909.240	35.1096
Social Awareness Stock Portfolio	Travelers Insurance Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	2,605,948.519	71.5105
	Travelers Life & Annuity Company Attn: Shareholder Accounting, GMS PO Box 990027 Hartford CT 06199-0027	1,038,200.313	28.4895

84

Legal Matters

Beginning in June 2004, class action lawsuits alleging violations of the federal securities laws were filed against CGMI, SBFM and Salomon Brothers Asset Management Inc (“SBAM”) (collectively, the “Advisers”), substantially all of the mutual funds managed by the Advisers, including the funds (the “Funds”), and directors or trustees of the Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGMI 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 CGMI 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, CAM 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 could be filed against the Defendants in the future.

CAM 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.

The Defendants have moved to dismiss the Complaint. Those motions are pending before the court.

*  *  *  *

Beginning in August 2005, five putative class action lawsuits alleging violations of federal securities laws and state law were filed against CGMI and SBFM collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC described in the prospectus. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the advisor for the Smith Barney family of funds (the “Funds”), rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses.

On October 5, 2005, a motion to consolidate the five actions and any subsequently-filed, related action, was filed. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future.

As of the date of this SAI, SBFM believes that 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 SBFM and its affiliates to continue to render service to the funds under their respective contracts.

On May 31, 2005, the SEC issued an order in connection with the settlement of an administrative proceeding against SBFM and CGMI relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).

85

The SEC order finds that SBFM and CGMI willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGMI knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that CAM, the Citigroup business unit that, at the time, included the fund’s investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGMI. The order also finds that SBFM and CGMI willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGMI do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

The SEC censured SBFM and CGMI and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan prepared and submitted for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.

The order required SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGMI would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Company Board selected a new transfer agent for the funds. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.

On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason.

86

Additional Developments.    The fund has received information from CAM concerning SBFM and SBAM. The fund receives investment management services from SBFM. The information received from CAM is as follows:

On September 16, 2005, the staff of the SEC informed SBFM and SBAM that the staff is considering recommending that the SEC institute administrative proceedings against SBFM and SBAM for alleged violations of Section 19(a) and 34(b) of the 1940 Act (and related Rule 19a-1). The notification is a result of an industry wide inspection by the SEC and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM or SBAM.

SBFM and SBAM are cooperating with the SEC. Although there can be no assurance, SBFM believes that these matters are not likely to have a material adverse effect on the fund or its ability to perform investment management services relating to the fund.

FINANCIAL STATEMENTS

The Company’s Annual Reports for the fiscal year ended October 31, 2005 are incorporated herein by reference in its entirety. They were filed with the Securities and Exchange Commission on January 9, 2006 (Accession Numbers 0001193125-06-003479, 0001193125-06-003472, 0001193125-06-003446 and 0001193125-06-003424).

87

OTHER INFORMATION

Smith Barney mutual funds offer 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 three “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.

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.

88

APPENDIX A

RATINGS ON DEBT OBLIGATIONS

Moody’s Investors Service, Inc. (“Moody’s”)

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, a Division of The McGraw-Hill Companies, Inc. (“S&P”)

AAA—Debt rated “AAA” has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.

AA—Debt rated “AA” has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree.

A-1

A—Debt rated “A” has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.

BBB—Debt rated “BBB” is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories.

BB, B, CCC, CC, C—Debt rated “BB”, “B”, “CCC”, “CC” or “C” is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. ‘BB’ indicates the lowest degree of speculation and ‘C’ the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.

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

Provisional Ratings:    The letter “p” indicates that the rating is provisional. A provisional rating assumes the successful completion of the project being financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk of default upon failure of, such completion. The investor should exercise judgment with respect to such likelihood and risk.

L—The letter “L” indicates that the rating pertains to the principal amount of those bonds where the underlying deposit collateral is fully insured by the Federal Savings & Loan Insurance Corp. or the Federal Deposit Insurance Corp.

+—Continuance of the rating is contingent upon S&P’s receipt of closing documentation confirming investments and cash flow.

*—Continuance of the rating is contingent upon S&P’s receipt of an executed copy of the escrow agreement.

NR—Indicates no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.

Fitch, Inc. (“Fitch”)

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

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

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

A-2

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

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

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

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

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

COMMERCIAL PAPER RATINGS

Moody’s

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.

S&P

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

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.

A-3

Fitch’s short-term ratings are as follows:

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

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

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

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

A-4

APPENDIX B

CITIGROUP ASSET MANAGEMENT

Proxy Voting Policies and Procedures

The Board of Directors of each Fund has delegated the authority to develop policies and procedures relating to proxy voting to Smith Barney Fund Management LLC (the “Investment Manager”). The Investment Manager is part of Citigroup Asset Management (“CAM”), a group of investment adviser affiliates of Legg Mason, Inc. (“Legg Mason”). Along with the other investment advisers that comprise CAM, the Investment Manager has adopted a set of proxy voting policies and procedures (the “Policies”) to ensure that it votes proxies relating to equity securities in the best interest of clients.

In voting proxies, the Investment Manager is guided by general fiduciary principles and seeks to act prudently and solely in the best interest of clients. The Investment Manager attempts to consider all factors that could affect the value of the investment and will vote proxies in the manner that it believes will be consistent with efforts to maximize shareholder values. The Investment Manager may utilize an external service provider to provide it with information and/or a recommendation with regard to proxy votes. However, such recommendations do not relieve the Investment Manager of its responsibility for the proxy vote.

In the case of a proxy issue for which there is a stated position in the Policies, the Investment Manager generally votes in accordance with such stated position. In the case of a proxy issue for which there is a list of factors set forth in the Policies that CAM considers in voting on such issue, CAM votes on a case-by-case basis in accordance with the general principles set forth above and considering such enumerated factors. In the case of a proxy issue for which there is no stated position or list of factors that CAM considers in voting on such issue, CAM votes on a case-by-case basis in accordance with the general principles set forth above. Issues for which there is a stated position set forth in the Policies or for which there is a list of factors set forth in the Policies that CAM considers in voting on such issues fall into a variety of categories, including election of directors, ratification of auditors, proxy and tender offer defenses, capital structure issues, executive and director compensation, mergers and corporate restructurings, and social and environmental issues. The stated position on an issue set forth in the Policies can always be superseded, subject to the duty to act solely in the best interest of the beneficial owners of accounts, by the investment management professionals responsible for the account whose shares are being voted. Issues applicable to a particular industry may cause CAM to abandon a policy that would have otherwise applied to issuers generally. As a result of the independent investment advisory services provided by distinct CAM business units, there may be occasions when different business units or different portfolio managers within the same business unit vote differently on the same issue.

In furtherance of the Investment Manager’s goal to vote proxies in the best interest of clients, the Investment Manager follows procedures designed to identify and address material conflicts that may arise between the Investment Manager’s interests and those of its clients before voting proxies on behalf of such clients. To seek to identify conflicts of interest, CAM periodically notifies CAM employees (including employees of the Investment Manager) in writing that they are under an obligation (i) to be aware of the potential for conflicts of interest with respect to voting proxies on behalf of client accounts both as a result of their personal relationships and due to special circumstances that may arise during the conduct of CAM’s and the Investment Manager’s business, and (ii) to bring conflicts of interest of which they become aware to the attention of compliance personnel. The Investment Manager also maintains and considers a list of significant relationships that could present a conflict of interest for the Investment Manager in voting proxies. The Investment Manager is also sensitive to the fact that a significant, publicized relationship between an issuer and a non-CAM Legg Mason affiliate might appear to the public to influence the manner in which the Investment Manager decides to vote a proxy with respect to such issuer. Absent special circumstances or a significant, publicized non-CAM Legg Mason affiliate relationship that CAM or the Investment Manager for prudential reasons treats as a potential conflict of interest because such relationship might appear to the public to influence the manner in which the Investment Manager decides to vote a proxy, the Investment Manager generally takes the position that non-CAM relationships between Legg Mason

B-1

and an issuer do not present a conflict of interest for the Investment Manager in voting proxies with respect to such issuer. Such position is based on the fact that the Investment Manager is operated as an independent business unit from other Legg Mason business units as well as on the existence of information barriers between the Investment Manager and certain other Legg Mason business units.

CAM maintains a Proxy Voting Committee, of which the Investment Manager personnel are members, to review and address conflicts of interest brought to its attention by compliance personnel. A proxy issue that will be voted in accordance with a stated position on an issue or in accordance with the recommendation of an independent third party is not brought to the attention of the Proxy Voting Committee for a conflict of interest review because the Investment Manager’s position is that to the extent a conflict of interest issue exists, it is resolved by voting in accordance with a pre-determined policy or in accordance with the recommendation of an independent third party. With respect to a conflict of interest brought to its attention, the Proxy Voting Committee first determines whether such conflict of interest is material. A conflict of interest is considered material to the extent that it is determined that such conflict is likely to influence, or appear to influence, the Investment Manager’s decision-making in voting proxies.

If it is determined by the Proxy Voting Committee that a conflict of interest is not material, the Investment Manager may vote proxies notwithstanding the existence of the conflict. If it is determined by the Proxy Voting Committee that a conflict of interest is material, the Proxy Voting Committee is responsible for determining an appropriate method to resolve such conflict of interest before the proxy affected by the conflict of interest is voted. Such determination is based on the particular facts and circumstances, including the importance of the proxy issue and the nature of the conflict of interest. Methods of resolving a material conflict of interest may include, but are not limited to, disclosing the conflict to clients and obtaining their consent before voting, or suggesting to clients that they engage another party to vote the proxy on their behalf.

B-2

EX-99.17.C

EXPERIENCE

ANNUAL REPORT

OCTOBER 31, 2005

Travelers Series Fund Inc.

Smith Barney Large Cap Value Portfolio

Smith Barney Large Capitalization Growth Portfolio

Smith Barney Mid Cap Core Portfolio

Smith Barney Aggressive Growth Portfolio

Smith Barney International All Cap Growth Portfolio

NOT  FDIC  INSURED  •  NO  BANK  GUARANTEE  •  MAY  LOSE  VALUE

Travelers Series Fund Inc.

Annual Report  •  October 31, 2005

What’s

Inside

Letter from the Chairman	1
Manager Overview:
Smith Barney Large Cap Value Portfolio	5
Smith Barney Large Capitalization Growth Portfolio	8
Smith Barney Mid Cap Core Portfolio	11
Smith Barney Aggressive Growth Portfolio	14
Smith Barney International All Cap Growth Portfolio	17
Fund at a Glance	20
Fund Expenses	25
Fund Performance	27
Historical Performance	32
Schedules of Investments	37
Statements of Assets and Liabilities	56
Statements of Operations	58
Statements of Changes in Net Assets	60
Financial Highlights	65
Notes to Financial Statements	70
Report of Independent Registered Public Accounting Firm	82
Board Approval of Management Agreements	83
Additional Information	92
Important Tax Information	97

Under a licensing agreement between Citigroup and Legg Mason, the names of funds, the names of any classes of shares of funds, and the names of investment advisers of funds, as well as all logos, trademarks and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason. Citi Marks include, but are not limited to, “Smith Barney,” “Salomon Brothers,” “Citi,” “Citigroup Asset Management,” and “Davis Skaggs Investment Management”. Legg Mason and its affiliates, as well as the Funds’ investment manager, are not affiliated with Citigroup.

All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement.

Letter from the Chairman

R. JAY GERKEN, CFA

Chairman, President and Chief Executive Officer

Dear Shareholder,

The U.S. economy was surprisingly resilient during the fiscal year. While surging oil prices, rising interest rates, and the impact of Hurricanes Katrina and Rita threatened to derail the economic expansion, growth remained solid throughout the period. After a 3.3% advance in the second quarter of 2005, third quarter gross domestic product (“GDP”)ⁱ growth grew to 4.3%, marking the tenth consecutive quarter in which GDP growth grew 3.0% or more.

As expected, the Federal Reserve Board (“Fed”)ⁱⁱ continued to raise interest rates in an attempt to ward off inflation. After raising rates three times from June 2004 through September 2004, the Fed increased its target for the federal funds rateⁱⁱⁱ in 0.25% increments eight additional times over the reporting period. The Fed again raised rates in early November, after the Funds’ reporting period had ended. All told, the Fed’s twelve rate hikes have brought the target for the federal funds rate from 1.00% to 4.00%. This represents the longest sustained Fed tightening cycle since 1976-1979.

During the 12-month period covered by this report, the U.S. stock market generated solid results, with the S&P 500 Index^iv returning 8.72%. Generally positive economic news, relatively benign core inflation, and strong corporate profits supported the market during much of the period.

Looking at the fiscal year as a whole, mid-cap stocks generated superior returns, with the Russell Midcap^v, Russell 1000^vi, and Russell 2000^vii Indexes returning 18.09%, 10.47%, and 12.08%, respectively. From a market style perspective, value-oriented stocks significantly outperformed their growth counterparts, with the Russell 3000 Value^viii and Russell 3000 Growth^ix Indexes returning 11.96% and 8.99%, respectively.

Travelers Series Fund Inc.         1

International stocks generated strong returns over the fiscal year, with the MSCI EAFE Growth Index^x returning 17.65% during the 1-year period ended October 31, 2005. European stocks were supported by increased confidence over the strength of corporate earnings. Japanese stocks also performed well, as investors became increasingly optimistic regarding the country’s long anemic economy. In addition, the landslide victory of Prime Minister Koizumi’s Liberal Democratic Party improved market sentiment, especially among non-Japanese investors.

Within this environment, the Funds performed as follows:

Fund Performance as of October 31, 2005 (unaudited)
	6 Months	12 Months
Smith Barney Large Cap Value Portfolio	7.43%	10.26%
S&P 500/Barra Value Index	6.44%	10.17%
Lipper Variable Large-Cap Value Funds Category Average	4.34%	9.27%
Smith Barney Large Capitalization Growth Portfolio	9.92%	10.74%
Russell 1000 Growth Index	7.59%	8.81%
Lipper Variable Large-Cap Growth Funds Category Average	9.93%	11.36%
Smith Barney Mid Cap Core Portfolio	10.81%	12.33%
S&P MidCap 400 Index	11.33%	17.65%
Lipper Variable Mid-Cap Core Funds Category Average	10.54%	16.29%
Smith Barney Aggressive Growth Portfolio	15.56%	16.94%
Russell 3000 Growth Index	8.04%	8.99%
Lipper Variable Multi-Cap Growth Funds Category Average	12.84%	14.64%
Smith Barney International All Cap Growth Portfolio	7.53%	16.21%
MSCI EAFE Growth Index	8.63%	17.65%
Lipper Variable International Growth Funds Category Average	9.60%	18.01%
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.citigroupam.com.
Fund returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the deduction of all Fund expenses.
Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the period ended October 31, 2005 and include the reinvestment of all distributions, including returns of capital, if any. Returns were calculated among the 97 funds for the six-month period and among the 94 funds for the 12-month period in the variable large-cap value funds category. Returns were calculated among the 185 funds for the six-month period and among the 184 funds for the 12-month period in the variable large-cap growth funds category. Returns were calculated among the 82 funds for the six-month period and among the 77 funds for the 12-month period in the variable mid-cap core funds category. Returns were calculated among the 117 funds for the six-month period and among the 116 funds for the 12-month period in the variable multi-cap growth funds category. Returns were calculated among the 57 funds for the six-month period and among the 50 funds for the 12-month period in the variable international growth funds category.

2         Travelers Series Fund Inc.

Please read on for a more detailed look at prevailing economic and market conditions during the Funds’ fiscal year and to learn how those conditions have affected Funds performance.

Special Shareholder Notice

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management, to Legg Mason, Inc. (“Legg Mason”). As a result, the Funds’ investment manager, Smith Barney Fund Management LLC (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a whole-owned subsidiary of Legg Mason. Completion of the sale caused the existing investment management contracts to terminate. Each Fund’s shareholders previously approved a new investment management contract between the Funds and the Manager, which became effective December 1, 2005.

Information About Your Fund

As you may be aware, several issues in the mutual fund industry have recently come under the scrutiny of federal and state regulators. The Funds’ Manager and some of its affiliates have received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the Funds’ response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The Funds have been informed that the Manager and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.

Important information concerning the Funds and their Manager with regard to recent regulatory developments is contained in the Notes to the Financial Statements included in this report.

Travelers Series Fund Inc.         3

As always, thank you for your confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.

Sincerely,

R. Jay Gerken, CFA

Chairman, President and Chief Executive Officer

December 1, 2005

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ Gross domestic product is a market value of goods and services produced by labor and property in a given country.

ⁱⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱⁱ The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.

^iv The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

^v The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index whose average market capitalization was approximately $4.7 billion as of 6/24/05.

^vi The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.

^vii The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

^viii The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.)

^ix The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

^x The MSCI EAFE Growth Index is an unmanaged index of growth stocks of companies located in Europe, Australasia and the Far East.

4         Travelers Series Fund Inc.

Manager Overview

Smith Barney Large Cap Value Portfolio

Q. What were the overall market conditions during the Fund’s reporting period?

A. There was no shortage of problems for the U.S. economy to overcome during the reporting period. These included record high oil prices, rising short-term interest rates, the devastation inflicted by Hurricanes Katrina and Rita, geopolitical issues and falling consumer confidence. However, the economy proved to be surprisingly resilient during the fiscal year.

The Federal Reserve Board (“Fed”)ⁱ continued to raise interest rates over the period in an attempt to ward off inflation. All told, the Fed’s eleven rate hikes have brought the target for the federal funds rateⁱⁱ from 1.00% to 3.75%. This represents the longest sustained Fed tightening cycle since 1976-1979. Following the end of the Fund’s reporting period, at its November meeting, the Fed once again raised the target rate by 0.25% to 4.00%.

The top-performing sector of the S&P 500 Indexⁱⁱⁱ was energy, gaining 33.71% during the period. Other leading sectors included utilities (23.86%) and consumer staples (10.18%). All sectors had positive returns during the period with the exception of consumer discretionary (-1.06%) and telecommunications (-0.46%).

Performance Update¹

For the 12 months ended October 31, 2005, the Smith Barney Large Cap Value Portfolio returned 10.26%. The Fund outperformed its unmanaged benchmark, the S&P 500/Barra Value Index,^iv which returned 10.17% for the same period. It also outperformed the Lipper Variable Large-Cap Value Funds Category Average², which increased 9.27%.

Q. What were the most significant factors affecting Fund performance?

A. The Fund’s outperformance relative to the S&P 500/Barra Value Index during the period was attributable to both sector allocation and security selection. An overweight position in both energy and technology contributed positively to performance; however, this benefit was partially offset by the underweight position in utilities and the overweight position in consumer discretionary, which held back performance. Security selection was strongest in the consumer discretionary and consumer staples sectors and weakest in the technology and health care sectors.

¹ The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

² Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 94 funds in the Fund’s Lipper category.

Travelers Series Fund Inc. 2005 Annual Report         5

What were the leading contributors to performance?

A. Top contributors during the period included Altria Group Inc., ENSCO International Inc., Marathon Oil Corp., Loews Corp. and Boeing Co.

What were the leading detractors from performance?

A. Stocks that detracted from performance came from a number of different sectors and included Lexmark International Inc., Pfizer Inc., News Corp., Solectron Corp. and Sprint Nextel Corp. In October, Lexmark shares fell sharply after the company pre-announced it was slashing its profit forecast. The company underestimated the competitive pressures in the printer industry and was forced to cut prices to stem market share losses. We sold our position in the Fund since we believe the investment thesis is impaired.

Q. Were there any significant changes to the Fund during the reporting period?

A. During the period, we have reduced our technology and utilities exposure in the portfolio and increased our financials weighting. We are currently overweight in the consumer staples, health care and energy sectors and underweight in the financials, utilities and materials sectors versus the S&P 500/Barra Value Index.

Thank you for your investment in the Smith Barney Large Cap Value Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.

Sincerely,

Mark J. McAllister, CFA Co-Portfolio Manager	Robert Feitler Co-Portfolio Manager

December 1, 2005

6         Travelers Series Fund Inc. 2005 Annual Report

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of October 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: Altria Group Inc. (3.4%), Bank of America Corp. (3.3%), Sprint Nextel Corp. (3.1%), News Corp., Class B Shares (2.3%), American International Group Inc. (2.3%), Total SA, Sponsored ADR (2.3%), Capital One Financial Corp. (2.3%), Merrill Lynch & Co. Inc. (2.2%), ENSCO International Inc. (2.2%) and Wells Fargo & Co. (2.1%). Please refer to pages 37 through 40 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Financials (30.2%), Consumer Discretionary (13.1%), Energy (11.3%), Health Care (9.7%) and Consumer Staples (8.3%). The Fund’s portfolio composition is subject to change at any time.

RISKS: Keep in mind, common stocks are subject to market fluctuations. Foreign stocks are subject to certain risks of overseas investing, including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱ The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.

ⁱⁱⁱ The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

^iv The S&P 500/Barra Value Index is a market-capitalization weighted index of stocks in the S&P 500 having lower price-to-book ratios relative to the S&P 500 as a whole.

Travelers Series Fund Inc. 2005 Annual Report         7

Manager Overview

Smith Barney Large Capitalization Growth Portfolio

Special Shareholder Notice

Effective November 1, 2005, the management fee payable by Smith Barney Large Capitalization Growth Portfolio is calculated in accordance with the following breakpoint schedule with the management fee reduced at breakpoints at asset levels over $1 billion:

Breakpoint Schedule Based on Net Assets of the Fund	Management Fee
First $1 Billion	0.750%
Next $1 Billion	0.725%
Next $3 Billion	0.700%
Next $5 Billion	0.675%
Over $10 Billion	0.650%

Q. What were the overall market conditions during the Fund’s reporting period?

A. Despite a number of setbacks and obstacles, the domestic economy continued to expand during the 12-month reporting period. The major roadblocks to progress were the same for much of the past year: the Federal Reserve Board (“Fed”)ⁱ continued to raise interest rates; oil and energy prices reached new record highs; and the effects of the hurricanes on the Gulf Coast. The price of oil skyrocketed throughout the year, from $43 per barrel at the start of 2005 to a high of just under $70 at the end of August, as a result of tension in the Middle East, increased demand from China, labor strikes in Venezuela, and weather-related supply interruptions. Several of these factors, especially higher energy prices, have weighed heavily on the consumer resulting in some reining-in of consumer spending. The housing market continued at a torrid pace throughout the year, showing signs of cooling only in the last few months, despite increasing short-term interest rates throughout the year and recent credit tightening from banks. The war in Iraq continued to put a strain on international relations and domestic spending. The continued dual deficits (both trade and budget deficits) have become a concern to the market with regard to their effect on long-term growth.

While the market experienced some short-term volatility during the period, especially in the first quarter of 2005, the domestic stock market in general registered gains over the past twelve months. However, most of the gains occurred at the end of 2004 following the Presidential election. With the uncertainty from the election removed, the S&P 500 Indexⁱⁱ rallied over 7% from Election Day until the end of year. But in 2005, the equity market has stayed within a narrow range, with the S&P 500 Index ending the third quarter of 2005 virtually flat for the year. In general, market leadership over the period came from the mid- and small-cap stocks, as large-caps had positive returns but lagged their smaller counterparts, while value-oriented stocks continued to outperform growth-oriented stocks.

8         Travelers Series Fund Inc. 2005 Annual Report

Performance Update¹

For the 12 months ended October 31, 2005, the Smith Barney Large Capitalization Growth Portfolio, returned 10.74%. The Fund outperformed its unmanaged benchmark, the Russell 1000 Growth Index,ⁱⁱⁱ which returned 8.81% for the same period. The Fund’s Lipper Variable Large-Cap Growth Funds Category Average² increased 11.36% over the same time frame.

Q. What were the most significant factors affecting Fund performance?

A. Compared to the benchmark index, the Portfolio’s sector allocation had a negative effect on performance while stock selection had a significant positive effect. Stock selection in information technology, consumer staples and health care made a significant contribution to performance, while sector allocation in energy and consumer discretionary had a negative effect on performance.

What were the leading contributors to performance?

A. In terms of individual stock holdings, the leading contributors to performance included positions in Genentech Inc. and Amgen Inc. in health care, Gillette Co. in consumer staples (which was acquired by Procter & Gamble Co. during the period) and Motorola Inc. and Red Hat Inc., both in information technology.

What were the leading detractors from performance?

A. In terms of individual stock holdings, the leading detractors from performance included positions in Biogen Idec Inc. and Pfizer Inc. in health care, Xilinx Inc., Lucent Technologies Inc. and Juniper Networks Inc. in information technology, and Expedia Inc. (which was spun-off from IAC/InterActive Corp. during the period) in consumer discretionary.

Q. Were there any significant changes to the Fund during the reporting period?

A. New positions established during the period included Bed Bath & Beyond Inc., Amazon.com Inc. and new spin-off Expedia Inc. in consumer discretionary, as well as Yahoo! Inc. and Electronic Arts Inc. in information technology. One of the Portfolio’s top ten holdings, Gillette, was acquired during the period by Procter & Gamble Co. Several positions were eliminated during the period including holdings in Veritas Software Corp., Lucent Technologies Inc. and Freescale Semiconductor Inc. in information technology,

¹ The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

² Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of distributions, including returns of capital, if any, calculated among the 184 funds in the Fund’s Lipper category.

Travelers Series Fund Inc. 2005 Annual Report         9

Viacom Inc. in consumer discretionary, and Cendant Corp. in industrials. At the close of the period, the Portfolio remained overweight consumer discretionary, financials, information technology and health care, underweight industrials and consumer staples, and did not have significant holdings in energy, materials, telecommunication services or utilities.

Thank you for your investment in the Smith Barney Large Capitalization Growth Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.

Sincerely,

Alan Blake

Portfolio Manager

December 1, 2005

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of October 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: Genentech Inc. (6.2%) Amazon.com Inc., (5.5%), Amgen Inc. (5.2%), Merrill Lynch and Co. Inc. (4.2%), Texas Instruments Inc. (4.0%), Proctor and Gamble Co. (3.9%), Motorola Inc. (3.9%), Time Warner Inc. (3.8%), Home Depot Inc. (3.7%) and Berkshire Hathaway Inc. (3.0%). Please refer to pages 41 and 42 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Information Technology (29.8%), Consumer Discretionary (22.3%), Health Care (22.0%), Financials (12.8%) and Consumer Staples (10.9%). The Fund’s portfolio composition is subject to change at any time.

RISKS: Keep in mind, common stocks are subject to market fluctuations. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱ The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

ⁱⁱⁱ The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

10         Travelers Series Fund Inc. 2005 Annual Report

Manager Overview

Smith Barney Mid Cap Core Portfolio

Q. What were the overall market conditions during the Fund’s reporting period?

A. Despite some headwinds, the domestic economy continued to expand during the 12-month reporting period as gross domestic product (“GDP”)ⁱ grew in excess of 3% during the first three quarters 2005 and the mid-cap indexes advanced at very respectable double-digit rates.

The major roadblocks to progress were the same for much of the past year: the Federal Reserve Board (“Fed”)ⁱⁱ continued to raise interest rates; oil and energy prices reached new highs; and weather-related catastrophes took a heavy human and economic toll in the Gulf region. The price of oil skyrocketed throughout the year, from $43 per barrel at the start of 2005 to a high of just under $70 at the end of August, as a result of tension in the Middle East, increased demand from China, labor strikes in Venezuela, and weather-related supply interruptions. During this period, the Fed continued its tightening policy with 12 consecutive fed funds rateⁱⁱⁱ hikes occurring between June 2004 (before the start of the annual period) and November 2005. The Gulf region hurricanes added insult to injury for the consumer and certain business segments already feeling the strain from higher energy prices and interest rates. Despite this difficult economic environment, equities were able to advance, in part due to attractive valuations and strong corporate profits: for the past fourteen consecutive quarters companies in the S&P 500 Index^iv have reported double-digit profit growth and corporate balance sheets of remain in very good shape, with the highest percentage of cash on their books since 1988.

In the mid-cap equity market, industry leadership during this period was dominated by the energy sector, which advanced by more than 50% driven by sharply higher commodity prices, followed by consumer staples and health care, as measured by the S&P MidCap 400 Index.^v No sectors had negative returns during the period but the worst performing sectors were telecommunication services, materials and consumer discretionary.

Performance Update¹

For the 12 months ended October 31, 2005, the Smith Barney Mid Cap Core Portfolio, excluding sales charges, returned 12.33%. These shares underperformed the Lipper Variable Mid-Cap Core Funds Category Average,² which increased 16.29%. The Fund’s unmanaged benchmark, the S&P MidCap 400 Index, returned 17.65% for the same period.

¹ The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

² Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of distributions, including returns of capital, if any, calculated among the 77 funds in the Fund’s Lipper category.

Travelers Series Fund Inc. 2005 Annual Report         11

Q. What were the most significant factors affecting Fund performance?

A. In the middle of the annual period in May of 2005 the Fund’s previous Portfolio Manager was replaced with a new team of managers. The current Portfolio Management team restructured the Fund, replacing much of the Fund’s holdings to better reflect the new team’s investment philosophy and process. Portfolio turnover for the entire period, including changes made by the former manager, exceeded 100%. The Fund’s returns for the most recent six-month period largely reflect the current Fund and Portfolio Management, as opposed to the returns for the full 12-month period, which include returns achieved under the previous manager, prior to the restructuring. Compared to the benchmark index, both the Fund’s sector allocation and stock selection had a negative effect, but the impact of stock selection accounted for the majority of the underperformance over the annual period.

What were the leading contributors to performance?

A. In terms of individual stock holdings, the leading contributors to performance included positions in SanDisk Corp. in information technology, Legg Mason Inc. in financials, Boyd Gaming Corp. and Ryland Group, Inc. in consumer discretionary, and Nexen Inc. in energy. In terms of sectors, the greatest contributors to relative performance were the consumer discretionary, financials, and the information technology sectors.

What were the leading detractors from performance?

A. In terms of individual stock holdings, the leading detractors from performance included positions in DreamWorks Animation SKG, Inc. in consumer discretionary, Medicis Pharmaceutical Corp., OSI Pharmaceuticals, Inc. and MGI Pharma Inc. in health care, and Cytec Industries Inc. in materials. In terms of sectors, the greatest detractors from relative performance were the health care, materials, industrials, consumer staples and utilities sectors.

Q. Were there any significant changes to the Fund during the reporting period?

A. As noted earlier, the Portfolio Management team was replaced during the period, and a subsequent restructuring of the Portfolio resulted in many of the existing holdings being replaced. The portfolio was brought into better alignment with the new Managers’ emphasis on companies that generate abundant cash flow, have strong or improving balance sheets, and/or whose share prices reflect unappreciated growth expectations.

At the close of the period, the Fund was overweight the health care, information technology, energy and consumer staples sectors, approximately market weight in the consumer discretionary sector, and underweight the industrials, financials, utilities, materials and telecommunications services sectors.

12         Travelers Series Fund Inc. 2005 Annual Report

Thank you for your investment in the Smith Barney Mid Cap Core Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.

Sincerely,

Brian M. Angerame	Derek J. Deutsch	Peter C. Stournaras
Portfolio Manager	Portfolio Manager	Portfolio Manager

December 1, 2005

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of October 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: SanDisk Corp. (2.6%), ImClone Systems Inc. (2.1%), Bed Bath & Beyond Inc. (2.0%), New York Community Bancorp Inc. (1.9%), Weatherford International Ltd. (1.9%), Acxiom Corp. (1.8%), Hormel Foods Corp. (1.8%), Thermo Electron Corp. (1.8%), Laureate Education Inc. (1.8%) and DaVita Inc. (1.8%). Please refer to pages 43 through 47 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Information Technology (17.5%), Consumer Discretionary (16.3%), Financials (15.5%), Health Care (13.8%) and Energy (9.5%). The Fund’s portfolio composition is subject to change at any time.

RISKS: Mid-cap stocks may be more volatile than large-cap stocks. Additionally, the Fund’s performance may be influenced by political, social and economic factors affecting investments in companies in foreign countries. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ Gross domestic product is a market value of goods and services produced by labor and property in a given country.

ⁱⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱⁱ The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.

^iv The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

^v The S&P MidCap 400 Index is a market-value weighted index which consists of 400 domestic stocks chosen for market size, liquidity, and industry group representation.

Travelers Series Fund Inc. 2005 Annual Report         13

Manager Overview

Smith Barney Aggressive Growth Portfolio

Special Shareholder Notice

Effective November 1, 2005, the management fee payable by Smith Barney Aggressive Growth Portfolio was reduced from 0.80% to 0.75% for asset levels up to $1 billion and is calculated in accordance with the following breakpoint schedule with the management fee reduced at breakpoints beginning at asset levels over $1 billion:

Breakpoint Schedule Based on Net Assets of the Fund	Management Fee
First $1 Billion	0.750%
Next $1 Billion	0.725%
Next $3 Billion	0.700%
Next $5 Billion	0.675%
Over $10 Billion	0.650%

Q. What were the overall market conditions during the Fund’s reporting period?

A. Despite a number of setbacks and obstacles, the domestic economy continued to expand during the 12-month reporting period. The major roadblocks to progress were the same for much of the past year: the Federal Reserve Board (“Fed”)ⁱ continued to raise interest rates; oil and energy prices reached new record highs; and the effects of the hurricanes on the Gulf Coast. The price of oil skyrocketed throughout the year, from $43 per barrel at the start of 2005 to a high of just under $70 at the end of August, as a result of tension in the Middle East, increased demand from China, labor strikes in Venezuela, and weather-related supply interruptions. Several of these factors, especially higher energy prices, have weighed heavily on the consumer resulting in some reining-in of consumer spending. The housing market continued at a torrid pace throughout the year, showing signs of cooling only in the last few months, despite increasing short-term interest rates throughout the year and recent credit tightening from banks. The war in Iraq continued to put a strain on international relations and domestic spending. The continued dual deficits (both trade and budget deficits) have become a concern to the market with regard to their effect on long-term growth.

While the market experienced some short-term volatility during the period, especially in the first quarter of 2005, the domestic stock market in general registered gains over the past twelve months. However, most of the gains occurred at the end of 2004 following the Presidential election. With the uncertainty from the election removed, the S&P 500 Indexⁱⁱ rallied over 7% from Election Day until the end of year. But in 2005, the equity market has stayed within a narrow range, with the S&P 500 Index ending the third quarter of 2005 virtually flat for the year. In general, market leadership over the period came from the mid- and small-cap stocks, as large-caps had positive returns but lagged their smaller counterparts, while value-oriented stocks continued to outperform growth-oriented stocks.

14         Travelers Series Fund Inc. 2005 Annual Report

Performance Update¹

For the 12 months ended October 31, 2005, the Smith Barney Aggressive Growth Portfolio returned 16.94%. The Fund outperformed its unmanaged benchmark, the Russell 3000 Growth Index,ⁱⁱⁱ which returned 8.99% for the same period. It also outperformed the Fund’s Lipper Variable Multi-Cap Growth Funds Category Average², which increased 14.64%.

Q. What were the most significant factors affecting Fund performance?

A. Compared to the benchmark index, both the Fund’s sector allocation and stock selection had a significant positive effect. The Fund remained fairly concentrated throughout the period, with considerable overweights to the energy, health care, and financials sectors, and a sizable underweight to information technology, all of which made significant contributions to the Fund’s outperformance of the benchmark. In particular, the Fund’s overweight allocation to energy stocks — more than three times that of the benchmark index — and its focus on oil drilling, production and related services and equipment stocks, had an especially large impact on Fund outperformance due in part to the record high prices set for oil during the period. Stock selection in information technology and financials also made a very large contribution to performance for the period.

What were the leading contributors to performance?

A. In terms of individual stock holdings, the leading contributors to performance included positions in UnitedHealth Group Inc., Genzyme Corp. and Amgen Inc. in health care, Lehman Brothers Holdings Inc. in financials and Anadarko Petroleum Corp. in energy.

What were the leading detractors from performance?

A. In terms of individual stock holdings, the leading detractors from performance included positions in Biogen Idec Inc., Forest Laboratories Inc., ImClone Systems Inc., and Millennium Pharmaceuticals Inc., all in health care, and Tyco International Ltd. in industrials.

Q. Were there any significant changes to the Fund during the reporting period?

A. No significant changes were made during the period. At the close of the period, the portfolio remained overweight health care, energy, and financials, market weight consumer discretionary, underweight information technology, industrials and telecommunication services, with no significant holdings in consumer staples, materials or utilities.

¹ The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund.

² Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of distributions, including returns of capital, if any, calculated among the 116 funds in the Fund’s Lipper category.

Travelers Series Fund Inc. 2005 Annual Report         15

Thank you for your investment in the Smith Barney Aggressive Growth Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.

Sincerely,

Richard Freeman

Portfolio Manager

December 1, 2005

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of October 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: UnitedHealth Group Inc. (9.0%), Lehman Brothers Holdings Inc. (6.8%), Anadarko Petroleum Corp. (6.7%), Genzyme Corp. (5.3%), Amgen Inc. (5.2%), Weatherford International Ltd. (4.3%), Forest Laboratories Inc. (3.5%), Chiron Corp. (3.5%), Comcast Corp. Special Class A Shares (3.4%) and Time Warner Inc. (3.0%). Please refer to pages 48 through 51 for a list and percentage breakdown of the fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Health Care (37.4%), Consumer Discretionary (14.6%), Energy (13.6%), Information Technology (12.8%) and Financials (11.0%). The Fund’s portfolio composition is subject to change at any time.

RISKS: The Fund may invest a significant portion of its assets in small- and mid-cap companies which may be more volatile than an investment that focuses only on large-cap companies. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱ The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

ⁱⁱⁱ The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

16         Travelers Series Fund Inc. 2005 Annual Report

Manager Overview

Smith Barney International All Cap Growth Portfolio

Special Shareholder Notice

Effective November 1, 2005, the management fee payable by Smith Barney International All Cap Growth Portfolio is calculated in accordance with the following breakpoint schedule with the management fee reduced at breakpoints beginning at asset levels over $1 billion:

Breakpoint Schedule Based on Net Assets of the Fund	Management Fee
First $1 Billion	0.850%
Next $1 Billion	0.825%
Next $3 Billion	0.800%
Next $5 Billion	0.775%
Over $10 Billion	0.750%

Q. What were the overall market conditions during the Fund’s reporting period?

A. International equity markets in general rewarded investors over the twelve months ended October 2005 with positive returns. The period was marked by good corporate earnings gains in many sectors. Many corporate management teams used improved cash flows to further strengthen already robust balance sheets and increase cash returns to shareholders.

Though the rapid rise of energy and other commodity prices caused some cost pressure and operating profit margin contraction in selected sectors, companies overall were able to handle the cost increases through modest price increases and improved productivity. International merger and acquisition activity increased sharply, a reflection, in the Manager’s view, of attractive valuations and management confidence in underlying business conditions as well as the availability of capital at favorable cost.

International stocks in general outperformed U.S. equities during the period. The outperformance occurred despite the substantial increase of the U.S. dollar versus the currencies underlying the benchmark index, which decreased portfolio returns. The U.S. dollar increased versus major trading currencies as a result of the increase of U.S. short-term interest rates and due to the preferential tax treatment of U.S. multinationals repatriating foreign earnings.

Performance Update¹

For the 12 months ended October 31, 2005, the Smith Barney International All Cap Growth Portfolio, returned 16.21%. In comparison, the Fund’s unmanaged benchmark,

1 The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

Travelers Series Fund Inc. 2005 Annual Report         17

the MSCI EAFE Growth Indexⁱ, returned 17.65% for the same period. The Fund’s Lipper Variable International Growth Funds Category Average² increased 18.01%.

Q. What were the most significant factors affecting Fund performance?

A. The overall effect of sector allocation during the period was positive, but the impact of stock selection was slightly negative. Stock selection in the industrials, consumer discretionary and financials sectors detracted from relative performance while it contributed to performance in the information technology (IT), telecommunication services (telecom) and health care sectors. In terms of the portfolio’s sector allocation, an overweight to IT had a negative effect while underweights to consumer discretionary and telecom and an overweight to financials contributed to relative performance.

What were the leading contributors to performance?

A. In terms of individual stock holdings, the leading contributors to performance included positions in Roche Holding AG in health care, O2 PLC in telecom, Wal-Mart de Mexico SA de C.V. in consumer staples, Macquarie Bank Ltd. in financials and Indra Sistemas SA in IT.

What were the leading detractors from performance?

A. In terms of individual stock holdings, the leading detractors from performance included positions in Daiichikosho Co. Ltd., News Corp. and Rakuten Inc. in consumer discretionary, Trend Micro Inc. in IT and Nichii Gakkan Co. in health care.

Q. Were there any significant changes to the Fund during the reporting period?

A. The Manager took a more positive outlook on the Japanese economy and stock market as the year progressed. In the Manager’s opinion, the economic recovery in Japan, based on exports to China and other Asian markets, combined with an upturn of domestic demand, has led to a good earnings recovery in Japan. In addition, in the Manager’s view, financial institutions are presently in the best condition of the past decade.

The portfolio allocation to the Japanese equity market increased as the fiscal year progressed, from an underweight to a modest overweight position, partly due to stock price increases as well as to capital reallocation from European stocks to the Japanese market.

² Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 50 funds in the Fund’s Lipper category.

18         Travelers Series Fund Inc. 2005 Annual Report

Thank you for your investment in the Smith Barney International All Cap Growth Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.

Sincerely,

Jeffrey Russell

Portfolio Manager

December 1, 2005

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of October 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: Roche Holding AG (4.3%), Grafton Group PLC (3.6%), Serco Group PLC (3.1%), Mettler-Toledo International Inc. (3.1%), Vodafone Group PLC (3.0%), Mitsubishi Tokyo Financial Group Inc. (3.0%), Indra Sistemas SA (2.6%), Nokia Oyj (2.4%), BP PLC (2.3%) and Capita Group PLC (2.2%). Please refer to pages 52 through 55 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Consumer Discretionary (33.4%), Telecommunication Services (15.2%), Financials (13.5%), Industrials (12.6%) and Energy (7.5%) . The Fund’s portfolio composition is subject to change at any time.

RISKS: Keep in mind, the Fund is subject to certain risks of overseas investing, not associated with domestic investing, including currency fluctuations, change in political and economic conditions, differing securities regulations and periods of illiquidity, which could result in significant market fluctuations. These risks are magnified in emerging markets. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Please see the Fund’s prospectus for more information on these and other risks

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ The MSCI EAFE Growth Index is an unmanaged index of growth stocks of companies located in Europe, Australasia and the Far East.

Travelers Series Fund Inc. 2005 Annual Report         19

Fund at a Glance (unaudited)

Smith Barney Large Cap Value Portfolio

20         Travelers Series Fund Inc. 2005 Annual Report

Fund at a Glance (unaudited)

Smith Barney Large Capitalization Growth Portfolio

Travelers Series Fund Inc. 2005 Annual Report         21

Fund at a Glance (unaudited)

Smith Barney Mid Cap Core Portfolio

22         Travelers Series Fund Inc. 2005 Annual Report

Fund at a Glance (unaudited)

Smith Barney Aggressive Growth Portfolio

Travelers Series Fund Inc. 2005 Annual Report         23

Fund at a Glance (unaudited)

Smith Barney International All Cap Growth Portfolio

24         Travelers Series Fund Inc. 2005 Annual Report

Fund Expenses (unaudited)

As a shareholder of the Funds, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested on May 1, 2005 and held for the six months ended October 31, 2005.

Actual Expenses

The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

Based on Actual Total Return(1)
	Actual Total Return(2)		Beginning Account Value		Ending Account Value		Annualized Expense Ratio		Expenses Paid During the Period(3)
Smith Barney Large Cap Value Portfolio	7.43	%	$	1,000.00	$	1,074.30	0.64	%	$	3.35
Smith Barney Large Capitalization Growth Portfolio	9.92			1,000.00		1,099.20	0.79			4.18
Smith Barney Mid Cap Core Portfolio	10.81			1,000.00		1,108.10	0.81			4.30
Smith Barney Aggressive Growth Portfolio	15.56			1,000.00		1,155.60	0.82			4.46
Smith Barney International All Cap Growth Portfolio	7.53			1,000.00		1,075.30	1.02			5.34

⁽¹⁾ For the six months ended October 31, 2005.

⁽²⁾ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

⁽³⁾ Expenses are equal to each Fund’s respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

Travelers Series Fund Inc. 2005 Annual Report         25

Fund Expenses (unaudited) (continued)

Hypothetical Example for Comparison Purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

Based on Hypothetical Total Return(1)
	Hypothetical Annualized Total Return		Beginning Account Value		Ending Account Value		Annualized Expense Ratio		Expenses Paid During the Period(2)
Smith Barney Large Cap Value Portfolio	5.00	%	$	1,000.00	$	1,021.98	0.64	%	$	3.26
Smith Barney Large Capitalization Growth Portfolio	5.00			1,000.00		1,021.22	0.79			4.02
Smith Barney Mid Cap Core Portfolio	5.00			1,000.00		1,021.12	0.81			4.13
Smith Barney Aggressive Growth Portfolio	5.00			1,000.00		1,021.07	0.82			4.18
Smith Barney International All Cap Growth Portfolio	5.00			1,000.00		1,020.06	1.02			5.19

⁽¹⁾ For the six months ended October 31, 2005.

⁽²⁾ Expenses are equal to each Fund’s respective annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

26         Travelers Series Fund Inc. 2005 Annual Report

Fund Performance

Smith Barney Large Cap Value Portfolio

Average Annual Total Returns† (unaudited)
Twelve Months Ended 10/31/05	10.26	%
Five Years Ended 10/31/05	0.32
Ten Years Ended 10/31/05	7.27
6/16/94* through 10/31/05	8.23

Cumulative Total Return† (unaudited)
10/31/95 through 10/31/05	101.78	%

† Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

* Commencement of operations.

Travelers Series Fund Inc. 2005 Annual Report         27

Fund Performance (continued)

Smith Barney Large Capitalization Growth Portfolio

Average Annual Total Returns† (unaudited)
Twelve Months Ended 10/31/05	10.74	%
Five Years Ended 10/31/05	(1.83	)
5/1/98* through 10/31/05	5.26

Cumulative Total Return† (unaudited)
5/1/98* through 10/31/05	46.85	%

† Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

* Commencement of operations.

28         Travelers Series Fund Inc. 2005 Annual Report

Fund Performance (continued)

Smith Barney Mid Cap Core Portfolio

Average Annual Total Returns† (unaudited)
Twelve Months Ended 10/31/05	12.33	%
Five Years Ended 10/31/05	0.84
11/1/99* through 10/31/05	6.81

Cumulative Total Return† (unaudited)
11/1/99* through 10/31/05	48.45	%

† Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

* Commencement of operations.

Travelers Series Fund Inc. 2005 Annual Report         29

Fund Performance (continued)

Smith Barney Aggressive Growth Portfolio

Average Annual Total Returns† (unaudited)
Twelve Months Ended 10/31/05	16.94	%
Five Years Ended 10/31/05	(0.97	)
11/1/99* through 10/31/05	6.17

Cumulative Total Return† (unaudited)
11/1/99* through 10/31/05	43.24	%

† Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

* Commencement of operations.

30         Travelers Series Fund Inc. 2005 Annual Report

Fund Performance (continued)

Smith Barney International All Cap Growth Portfolio

Average Annual Total Returns† (unaudited)
Twelve Months Ended 10/31/05	16.21	%
Five Years Ended 10/31/05	(5.48	)
Ten Years Ended 10/31/05	3.04
6/16/94* through 10/31/05	3.09

Cumulative Total Return† (unaudited)
10/31/95 through 10/31/05	34.92	%

† Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

* Commencement of operations.

Travelers Series Fund Inc. 2005 Annual Report         31

Historical Performance (unaudited)

Value of $10,000 Invested in Shares of the Smith Barney Large Cap Value Portfolio vs. S&P 500/Barra Value Index^† (October 1995 — October 2005)

† Hypothetical illustration of $10,000 invested in shares of the Smith Barney Large Cap Value Portfolio on October 31, 1995, assuming reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2005. The S&P 500/Barra Value Index is a market-capitalization weighted index of stocks in the S&P 500 Index having lower price-to-book ratios relative to the S&P 500 Index as a whole. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.) The Index is unmanaged and is not subject to the same management and trading expenses of a mutual fund. Please note that an investor cannot invest directly in an index.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which if reflected would reduce the total returns.

32         Travelers Series Fund Inc. 2005 Annual Report

Historical Performance (unaudited) (continued)

Value of $10,000 Invested in Shares of the Smith Barney Large Capitalization Growth Portfolio vs. Russell 1000 Growth Index^† (May 1998 — October 2005)

† Hypothetical illustration of $10,000 invested in shares of the Smith Barney Large Capitalization Growth Portfolio on May 1, 1998 (commencement of operations), assuming reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2005. The Russell 1000 Growth Index is considered indicative of the growth-oriented domestic stock market in general and is comprised of stocks in the Russell 1000 Index that have higher price-to-book ratios and higher forecasted growth values as a whole. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.) Figures for the Index include reinvestment of dividends. The Index is unmanaged and is not subject to the same management and trading expenses of a mutual fund. Please note that an investor cannot invest directly in an index.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which if reflected, would reduce the total returns.

Travelers Series Fund Inc. 2005 Annual Report         33

Historical Performance (unaudited) (continued)

Value of $10,000 Invested in Shares of the Smith Barney Mid Cap Core Portfolio vs. the S&P MidCap 400 Index^† (November 1999 — October 2005)

† Hypothetical illustration of $10,000 invested in shares of the Smith Barney Mid Cap Core Portfolio on November 1, 1999 (commencement of operations), assuming reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2005. The S&P MidCap 400 Index is a widely recognized index of 400 medium-capitalization stocks. Figures for the S&P MidCap 400 Index include reinvestment of dividends. The Index is unmanaged and is not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which if reflected, would reduce the total returns.

34         Travelers Series Fund Inc. 2005 Annual Report

Historical Performance (unaudited) (continued)

Value of $10,000 Invested in Shares of the Smith Barney Aggressive Growth Portfolio vs. Russell 3000 Growth Index^† (November 1999 — October 2005)

† Hypothetical illustration of $10,000 invested in shares of the Smith Barney Aggressive Growth Portfolio on November 1, 1999 (commencement of operations), assuming reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2005. The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values as a whole. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.) The Index is unmanaged and is not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which if reflected, would reduce the total returns.

Travelers Series Fund Inc. 2005 Annual Report         35

Historical Performance (unaudited) (continued)

Value of $10,000 Invested in Shares of the Smith Barney International All Cap Growth Portfolio vs. MSCI EAFE Growth Index^† (October 1995 — October 2005)

† Hypothetical illustration of $10,000 invested in shares of the Smith Barney International All Cap Growth Portfolio on October 31, 1995, assuming reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2005. The Morgan Stanley Capital International Europe, Australasia and the Far East Growth Index (“MSCI EAFE Growth Index”) is an unmanaged index composed of growth stocks of companies located in Europe, Australasia and the Far East. The Index is unmanaged and is not subject to the same management and trading expenses of a mutual fund. Please note that an investor cannot invest directly in an index.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns.

36         Travelers Series Fund Inc. 2005 Annual Report

Schedules of Investments (October 31, 2005)

SMITH BARNEY LARGE CAP VALUE PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 96.6%
CONSUMER DISCRETIONARY — 13.1%
Hotels, Restaurants & Leisure — 1.5%
145,000	McDonald’s Corp.	$	4,582,000
Household Durables — 1.0%
136,500	Newell Rubbermaid Inc.		3,138,135
Media — 8.5%
162,300	Comcast Corp., Class A Shares*		4,516,809
101,900	EchoStar Communications Corp., Class A Shares*		2,738,053
	Liberty Global Inc.:
20,700	Class A Shares*		512,739
20,700	Series C Shares*		491,004
413,100	Liberty Media Corp., Class A Shares*		3,292,407
470,800	News Corp., Class B Shares		7,090,248
112,700	SES Global SA, FDR (a)		1,782,362
296,800	Time Warner Inc.		5,291,944
	Total Media		25,715,566
Multiline Retail — 2.1%
63,400	J.C. Penney Co. Inc.		3,246,080
53,200	Target Corp.		2,962,708
	Total Multiline Retail		6,208,788
	TOTAL CONSUMER DISCRETIONARY		39,644,489
CONSUMER STAPLES — 8.3%
Food & Staples Retailing — 3.0%
258,400	Kroger Co.*		5,142,160
82,900	Wal-Mart Stores Inc.		3,921,999
	Total Food & Staples Retailing		9,064,159
Food Products — 0.8%
145,100	Sara Lee Corp.		2,590,035
Household Products — 1.1%
57,900	Kimberly-Clark Corp.		3,291,036
Tobacco — 3.4%
136,100	Altria Group Inc.		10,214,305
	TOTAL CONSUMER STAPLES		25,159,535
ENERGY — 11.3%
Energy Equipment & Services — 4.1%
146,100	ENSCO International Inc.		6,660,699
84,500	GlobalSantaFe Corp.		3,764,475
33,600	Halliburton Co.		1,985,760
	Total Energy Equipment & Services		12,410,934

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         37

Schedules of Investments (October 31, 2005) (continued)

Shares	Security	Value
Oil, Gas & Consumable Fuels — 7.2%
38,300	Burlington Resources Inc.	$	2,766,026
90,000	Marathon Oil Corp.		5,414,400
24,200	Nexen Inc.		1,000,428
51,600	Royal Dutch Shell PLC, ADR, Class A Shares		3,201,264
47,600	Suncor Energy Inc.		2,552,788
54,600	Total SA, Sponsored ADR		6,880,692
	Total Oil, Gas & Consumable Fuels		21,815,598
	TOTAL ENERGY		34,226,532
FINANCIALS — 30.2%
Capital Markets — 3.8%
37,900	Goldman Sachs Group Inc.		4,789,423
103,500	Merrill Lynch & Co. Inc.		6,700,590
	Total Capital Markets		11,490,013
Commercial Banks — 9.0%
228,500	Bank of America Corp.		9,994,590
53,800	Comerica Inc.		3,108,564
101,000	U.S. Bancorp		2,987,580
92,900	Wachovia Corp.		4,693,308
105,700	Wells Fargo & Co.		6,363,140
	Total Commercial Banks		27,147,182
Consumer Finance — 4.3%
90,800	American Express Co.		4,519,116
89,500	Capital One Financial Corp.		6,833,325
70,500	MBNA Corp.		1,802,685
	Total Consumer Finance		13,155,126
Diversified Financial Services — 1.6%
136,000	JPMorgan Chase & Co.		4,980,320
Insurance — 6.4%
108,600	American International Group Inc.		7,037,280
38,700	Chubb Corp.		3,597,939
56,300	Loews Corp.		5,234,774
76,400	St. Paul Travelers Cos. Inc.		3,440,292
	Total Insurance		19,310,285
Real Estate — 2.1%
96,200	Equity Office Properties Trust		2,962,960
83,600	Equity Residential		3,281,300
	Total Real Estate		6,244,260
Thrifts & Mortgage Finance — 3.0%
73,000	Freddie Mac		4,478,550
77,240	Golden West Financial Corp.		4,536,305
	Total Thrifts & Mortgage Finance		9,014,855
	TOTAL FINANCIALS		91,342,041

See Notes to Financial Statements.

38         Travelers Series Fund Inc. 2005 Annual Report

Schedules of Investments (October 31, 2005) (continued)

Shares	Security	Value
HEALTH CARE — 9.7%
Health Care Providers & Services — 3.6%
106,300	UnitedHealth Group Inc.	$	6,153,707
64,700	WellPoint Inc.*		4,831,796
	Total Health Care Providers & Services		10,985,503
Pharmaceuticals — 6.1%
70,100	Abbott Laboratories		3,017,805
57,100	Johnson & Johnson		3,575,602
85,300	Novartis AG, Sponsored ADR		4,590,846
138,300	Pfizer Inc.		3,006,642
103,100	Sanofi-Aventis, ADR		4,136,372
	Total Pharmaceuticals		18,327,267
	TOTAL HEALTH CARE		29,312,770
INDUSTRIALS — 6.9%
Aerospace & Defense — 4.4%
93,600	Boeing Co.		6,050,304
85,100	Raytheon Co.		3,144,445
80,100	United Technologies Corp.		4,107,528
	Total Aerospace & Defense		13,302,277
Commercial Services & Supplies — 1.1%
61,000	Avery Dennison Corp.		3,455,650
Industrial Conglomerates — 1.4%
59,100	Textron Inc.		4,257,564
	TOTAL INDUSTRIALS		21,015,491
INFORMATION TECHNOLOGY — 6.7%
Communications Equipment — 3.4%
113,600	Comverse Technology Inc.*		2,851,360
275,200	Nokia Oyj, Sponsored ADR		4,628,864
895,300	Nortel Networks Corp.*		2,909,725
	Total Communications Equipment		10,389,949
Computers & Peripherals — 1.0%
37,500	International Business Machines Corp.		3,070,500
Semiconductors & Semiconductor Equipment — 0.3%
27,600	Maxim Integrated Products Inc.		957,168
Software — 2.0%
227,500	Microsoft Corp.		5,846,750
	TOTAL INFORMATION TECHNOLOGY		20,264,367
MATERIALS — 1.9%
Chemicals — 1.9%
48,000	Air Products & Chemicals Inc.		2,747,520
74,500	E.I. du Pont de Nemours & Co.		3,105,905
	TOTAL MATERIALS		5,853,425

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         39

Schedules of Investments (October 31, 2005) (continued)

Shares		Security	Value
	TELECOMMUNICATION SERVICES — 7.0%
	Diversified Telecommunication Services — 2.0%
	76,900	AT&T Corp.	$	1,521,082
	191,100	SBC Communications Inc.		4,557,735
		Total Diversified Telecommunication Services		6,078,817
	Wireless Telecommunication Services — 5.0%
	94,800	ALLTEL Corp.		5,864,328
	397,802	Sprint Nextel Corp.		9,272,765
		Total Wireless Telecommunication Services		15,137,093
		TOTAL TELECOMMUNICATION SERVICES		21,215,910
	UTILITIES — 1.5%
	Multi-Utilities — 1.5%
	104,200	Sempra Energy		4,616,060
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $252,031,349)		292,650,620
Face Amount
	SHORT-TERM INVESTMENT — 2.8%
	Repurchase Agreement — 2.8%
$	8,506,000	Interest in $164,777,000 joint tri-party repurchase agreement dated 10/31/05 with Barclays Capital Inc., 3.930% due 11/1/05; Proceeds at maturity — $8,506,929; (Fully collateralized by various U.S. Treasury Strips, due 2/15/11 to 2/15/19; Market value - $8,761,204) (Cost — $8,506,000)		8,506,000
		TOTAL INVESTMENTS — 99.4% (Cost — $260,537,349#)		301,156,620
		Other Assets in Excess of Liabilities — 0.6%		1,810,622
		TOTAL NET ASSETS — 100.0%	$	302,967,242

* Non-income producing security.

(a) Securities are fair valued in good faith by or under the direction of the Board of Directors (See Note 1).

# Aggregate cost for federal income tax purposes is $262,682,413.

Abbreviations used in this schedule:

ADR — American Depositary Receipt

FDR  — Foreign Depositary Receipt

See Notes to Financial Statements.

40         Travelers Series Fund Inc. 2005 Annual Report

Schedules of Investments (October 31, 2005) (continued)

SMITH BARNEY LARGE CAPITALIZATION GROWTH PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 100.2%
CONSUMER DISCRETIONARY — 22.3%
Hotels, Restaurants & Leisure — 1.2%
231,900	Expedia Inc.*	$	4,357,401
Internet & Catalog Retail — 9.9%
521,100	Amazon.com Inc.*		20,781,468
265,100	eBay Inc.*		10,497,960
246,800	IAC/InterActiveCorp.*		6,318,080
	Total Internet & Catalog Retail		37,597,508
Media — 6.0%
799,920	Time Warner Inc.		14,262,574
351,615	Walt Disney Co.		8,568,857
	Total Media		22,831,431
Specialty Retail — 5.2%
132,500	Bed Bath & Beyond Inc.*		5,368,900
344,150	Home Depot Inc.		14,123,916
	Total Specialty Retail		19,492,816
	TOTAL CONSUMER DISCRETIONARY		84,279,156
CONSUMER STAPLES — 10.9%
Beverages — 4.6%
225,790	Coca-Cola Co.		9,659,296
127,200	PepsiCo Inc.		7,514,976
	Total Beverages		17,174,272
Food Products — 2.4%
132,340	Wm. Wrigley Jr. Co.		9,197,630
Household Products — 3.9%
265,755	Procter & Gamble Co.		14,879,623
	TOTAL CONSUMER STAPLES		41,251,525
FINANCIALS — 12.8%
Capital Markets — 7.1%
245,230	Merrill Lynch & Co. Inc.		15,876,190
198,870	Morgan Stanley		10,820,517
	Total Capital Markets		26,696,707
Insurance — 5.7%
158,856	American International Group Inc.		10,293,869
133	Berkshire Hathaway Inc., Class A Shares*		11,424,700
	Total Insurance		21,718,569
	TOTAL FINANCIALS		48,415,276

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         41

Schedules of Investments (October 31, 2005) (continued)

Shares	Security	Value
HEALTH CARE — 22.0%
Biotechnology — 14.2%
259,380	Amgen Inc.*	$	19,650,629
253,450	Biogen Idec Inc.*		10,297,673
260,600	Genentech Inc.*		23,610,360
	Total Biotechnology		53,558,662
Pharmaceuticals — 7.8%
198,550	Eli Lilly & Co.		9,885,805
145,570	Johnson & Johnson		9,115,593
478,270	Pfizer Inc.		10,397,590
	Total Pharmaceuticals		29,398,988
	TOTAL HEALTH CARE		82,957,650
INDUSTRIALS — 2.4%
Industrial Conglomerates — 2.4%
265,320	General Electric Co.		8,997,001
INFORMATION TECHNOLOGY — 29.8%
Communications Equipment — 9.5%
465,608	Cisco Systems Inc.*		8,124,859
364,700	Juniper Networks Inc.*		8,508,451
661,680	Motorola Inc.		14,662,829
113,200	QUALCOMM Inc.		4,500,832
	Total Communications Equipment		35,796,971
Computers & Peripherals — 2.1%
252,800	Dell Inc.*		8,059,264
Internet Software & Services — 3.5%
298,100	Akamai Technologies Inc.*		5,169,054
216,400	Yahoo! Inc.*		8,000,308
	Total Internet Software & Services		13,169,362
Semiconductors & Semiconductor Equipment — 7.6%
389,400	Intel Corp.		9,150,900
530,580	Texas Instruments Inc.		15,148,059
193,980	Xilinx Inc.		4,645,821
	Total Semiconductors & Semiconductor Equipment		28,944,780
Software — 7.1%
157,600	Electronic Arts Inc.*		8,964,288
397,000	Microsoft Corp.		10,202,900
324,600	Red Hat Inc.*		7,537,212
	Total Software		26,704,400
	TOTAL INFORMATION TECHNOLOGY		112,674,777
	TOTAL INVESTMENTS — 100.2% (Cost — $292,637,083#)		378,575,385
	Liabilities in Excess of Other Assets — (0.2)%		(654,247	)
	TOTAL NET ASSETS — 100.0%	$	377,921,138

* Non-income producing security.

# Aggregate cost for federal income tax purposes is $309,137,441.

See Notes to Financial Statements.

42         Travelers Series Fund Inc. 2005 Annual Report

Schedules of Investments (October 31, 2005) (continued)

SMITH BARNEY MID CAP CORE PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 96.0%
CONSUMER DISCRETIONARY — 16.3%
Diversified Consumer Services — 3.5%
43,315	Laureate Education Inc.*	$	2,139,761
166,200	ServiceMaster Co.		2,090,796
	Total Diversified Consumer Services		4,230,557
Hotels, Restaurants & Leisure — 2.2%
24,550	Aztar Corp.*		738,219
19,300	CBRL Group Inc.		669,710
39,600	GTECH Holdings Corp.		1,260,864
	Total Hotels, Restaurants & Leisure		2,668,793
Household Durables — 2.7%
57,600	Ethan Allen Interiors Inc.		1,948,032
16,390	Mohawk Industries Inc.*		1,279,239
	Total Household Durables		3,227,271
Media — 2.0%
73,205	Harte-Hanks Inc.		1,874,048
663	Washington Post Co., Class B Shares		493,935
	Total Media		2,367,983
Multiline Retail — 1.7%
91,500	Family Dollar Stores Inc.		2,025,810
Specialty Retail — 4.2%
59,250	Bed Bath & Beyond Inc.*		2,400,810
43,065	PETsMART Inc.		1,012,027
40,100	Sherwin-Williams Co.		1,706,255
	Total Specialty Retail		5,119,092
	TOTAL CONSUMER DISCRETIONARY		19,639,506
CONSUMER STAPLES — 4.0%
Beverages — 1.0%
19,000	Molson Coors Brewing Co., Class B Shares		1,172,300
Food & Staples Retailing — 1.2%
59,600	Albertson’s Inc.		1,496,556
Food Products — 1.8%
67,570	Hormel Foods Corp.		2,148,726
	TOTAL CONSUMER STAPLES		4,817,582
ENERGY — 9.5%
Energy Equipment & Services — 4.5%
22,745	Nabors Industries Ltd.*		1,560,990
48,540	Smith International Inc.		1,572,696
36,575	Weatherford International Ltd.*		2,289,595
	Total Energy Equipment & Services		5,423,281

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         43

Schedules of Investments (October 31, 2005) (continued)

Shares	Security	Value
Oil, Gas & Consumable Fuels — 5.0%
21,000	Arch Coal Inc.	$	1,618,470
28,990	Murphy Oil Corp.		1,358,182
39,210	Newfield Exploration Co.*		1,777,389
31,860	Nexen Inc.		1,317,092
	Total Oil, Gas & Consumable Fuels		6,071,133
	TOTAL ENERGY		11,494,414
EXCHANGE TRADED — 1.7%
16,400	Midcap SPDR Trust Series 1		2,082,800
FINANCIALS — 15.5%
Capital Markets — 3.0%
8,985	Bear Stearns Cos. Inc.		950,613
10,612	Legg Mason Inc.		1,138,774
34,590	National Financial Partners Corp.		1,564,505
	Total Capital Markets		3,653,892
Commercial Banks — 4.7%
42,700	Associated Banc-Corp.		1,332,667
10,420	Comerica Inc.		602,068
64,840	North Fork Bancorporation Inc.		1,643,045
28,575	Zions Bancorporation		2,099,405
	Total Commercial Banks		5,677,185
Consumer Finance — 0.6%
19,300	Nelnet Inc., Class A Shares*		716,030
Insurance — 4.5%
8,820	Ambac Financial Group Inc.		625,250
22,700	Fidelity National Financial Inc.		850,342
3,972	Fidelity National Title Group Inc., Class A*		86,391
73,300	Old Republic International Corp.		1,899,203
30,390	PartnerRe Ltd.		1,936,451
	Total Insurance		5,397,637
Thrifts & Mortgage Finance — 2.7%
36,475	Brookline Bancorp Inc.		512,474
142,700	New York Community Bancorp Inc.		2,307,459
9,700	PMI Group Inc.		386,836
	Total Thrifts & Mortgage Finance		3,206,769
	TOTAL FINANCIALS		18,651,513
HEALTH CARE — 13.8%
Biotechnology — 2.1%
72,900	ImClone Systems Inc.*		2,529,630

See Notes to Financial Statements.

44         Travelers Series Fund Inc. 2005 Annual Report

Schedules of Investments (October 31, 2005) (continued)

Shares	Security	Value
Health Care Equipment & Supplies — 5.2%
53,850	Cytyc Corp.*	$	1,365,098
20,000	DENTSPLY International Inc.		1,102,800
29,355	Fisher Scientific International Inc.*		1,658,557
71,135	Thermo Electron Corp.*		2,147,566
	Total Health Care Equipment & Supplies		6,274,021
Health Care Providers & Services — 3.2%
31,350	Coventry Health Care Inc.*		1,692,586
43,315	DaVita Inc.*		2,130,232
	Total Health Care Providers & Services		3,822,818
Pharmaceuticals — 3.3%
63,035	Medicis Pharmaceutical Corp., Class A Shares		1,859,532
85,900	MGI Pharma Inc.*		1,611,484
32,500	Valeant Pharmaceuticals International		557,700
	Total Pharmaceuticals		4,028,716
	TOTAL HEALTH CARE		16,655,185
INDUSTRIALS — 9.2%
Aerospace & Defense — 3.0%
24,085	Alliant Techsystems Inc.*		1,691,249
29,000	Armor Holdings Inc.*		1,296,590
9,000	L-3 Communications Holdings Inc.		700,380
	Total Aerospace & Defense		3,688,219
Air Freight & Logistics — 1.1%
36,310	C.H. Robinson Worldwide Inc.		1,280,290
Electrical Equipment — 2.3%
16,585	Rockwell Automation Inc.		881,493
50,910	Roper Industries Inc.		1,919,307
	Total Electrical Equipment		2,800,800
Machinery — 1.5%
44,200	AGCO Corp.*		706,758
19,100	Eaton Corp.		1,123,653
	Total Machinery		1,830,411
Road & Rail — 1.3%
33,887	Heartland Express Inc.		669,268
19,610	Yellow Roadway Corp.*		891,275
	Total Road & Rail		1,560,543
	TOTAL INDUSTRIALS		11,160,263
INFORMATION TECHNOLOGY — 17.5%
Communications Equipment — 1.1%
17,200	Harris Corp.		706,920
24,745	Juniper Networks Inc.*		577,301
	Total Communications Equipment		1,284,221

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         45

Schedules of Investments (October 31, 2005) (continued)

Shares	Security	Value
Computers & Peripherals — 3.2%
14,700	Avid Technology Inc.*	$	723,681
53,100	SanDisk Corp.*		3,127,059
	Total Computers & Peripherals		3,850,740
Electronic Equipment & Instruments — 2.3%
21,730	CDW Corp.		1,224,485
44,300	Tech Data Corp.*		1,534,552
	Total Electronic Equipment & Instruments		2,759,037
IT Services — 4.4%
101,800	Acxiom Corp.		2,172,412
23,300	Affiliated Computer Services Inc., Class A Shares*		1,260,763
97,100	Sabre Holdings Corp., Class A Shares		1,896,363
	Total IT Services		5,329,538
Semiconductors & Semiconductor Equipment — 2.9%
51,200	Lam Research Corp.*		1,727,488
61,200	Microchip Technology Inc.		1,846,404
	Total Semiconductors & Semiconductor Equipment		3,573,892
Software — 3.6%
45,250	Amdocs Ltd.*		1,197,768
95,475	Quest Software Inc.*		1,328,057
95,200	Synopsys Inc.*		1,804,040
	Total Software		4,329,865
	TOTAL INFORMATION TECHNOLOGY		21,127,293
MATERIALS — 2.9%
Chemicals — 2.4%
32,050	Air Products & Chemicals Inc.		1,834,542
24,650	Cytec Industries Inc.		1,018,045
	Total Chemicals		2,852,587
Metals & Mining — 0.5%
26,800	Compass Minerals International Inc.		600,052
	TOTAL MATERIALS		3,452,639
UTILITIES — 5.6%
Electric Utilities — 1.2%
67,200	Pepco Holdings Inc.		1,444,128
Multi-Utilities — 3.4%
53,200	Energy East Corp.		1,268,820
38,700	KeySpan Corp.		1,337,859
36,700	SCANA Corp.		1,455,889
	Total Multi-Utilities		4,062,568

See Notes to Financial Statements.

46         Travelers Series Fund Inc. 2005 Annual Report

Schedules of Investments (October 31, 2005) (continued)

Shares		Security	Value
	Water Utilities — 1.0%
	36,736	Aqua America Inc.	$	1,244,616
		TOTAL UTILITIES		6,751,312
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $102,517,600)		115,832,507
Face Amount
	SHORT-TERM INVESTMENT — 4.0%
	Repurchase Agreement — 4.0%
$	4,858,000	Interest in $447,167,000 joint tri-party repurchase agreement dated 10/31/05 with Goldman, Sachs & Co., 4.010% due 11/1/05, Proceeds at maturity — $4,858,541; (Fully collateralized by various US Treasury Obligations, 1.875% to 3.875% due 1/15/07 to 4/15/32; Market value - $4,956,410) (Cost — $4,858,000)		4,858,000
		TOTAL INVESTMENTS — 100.0% (Cost — $107,375,600#)		120,690,507
		Liabilities in Excess of Other Assets — 0.0%		(43,715	)
		TOTAL NET ASSETS — 100.0%	$	120,646,792

* Non-income producing security.

# Aggregate cost for federal income tax purposes is $107,533,690.

Abbreviation used in this schedule:
SPDR	— Standard & Poor’s Depositary Receipts

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         47

Schedules of Investments (October 31, 2005) (continued)

SMITH BARNEY AGGRESIVE GROWTH PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 97.5%
CONSUMER DISCRETIONARY — 14.6%
Media — 14.4%
1,273,275	Cablevision Systems Corp., New York Group, Class A Shares*	$	31,577,220
	Comcast Corp.:
132,842	Class A Shares*		3,696,993
1,348,160	Special Class A Shares*		36,953,065
201,340	Discovery Holding Co., Class A Shares*		2,836,881
	Liberty Global Inc.:
90,170	Class A Shares*		2,233,511
90,170	Series C Shares*		2,138,832
2,013,400	Liberty Media Corp., Class A Shares*		16,046,798
1,829,367	Time Warner Inc.		32,617,614
332,699	Viacom Inc., Class B Shares		10,303,688
675,000	Walt Disney Co.		16,449,750
34,600	World Wrestling Entertainment Inc.		441,150
	Total Media		155,295,502
Specialty Retail — 0.2%
215,000	Charming Shoppes Inc.*		2,408,000
	TOTAL CONSUMER DISCRETIONARY		157,703,502
ENERGY — 13.6%
Energy Equipment & Services — 6.9%
165,800	Core Laboratories NV*		5,340,418
580,650	Grant Prideco Inc.*		22,581,478
745,450	Weatherford International Ltd.*		46,665,170
	Total Energy Equipment & Services		74,587,066
Oil, Gas & Consumable Fuels — 6.7%
795,800	Anadarko Petroleum Corp.		72,187,018
6,325	Bill Barrett Corp.*		201,325
	Total Oil, Gas & Consumable Fuels		72,388,343
	TOTAL ENERGY		146,975,409
EXCHANGE TRADED — 1.9%
532,000	Nasdaq-100 Index Tracking Stock		20,678,840
FINANCIALS — 11.0%
Capital Markets — 10.0%
117,500	Cohen & Steers Inc.		2,171,400
612,842	Lehman Brothers Holdings Inc.		73,338,802
500,400	Merrill Lynch & Co. Inc.		32,395,896
2,415	National Financial Partners Corp.		109,231
	Total Capital Markets		108,015,329
Diversified Financial Services — 0.3%
83,725	CIT Group Inc.		3,828,744

See Notes to Financial Statements.

48         Travelers Series Fund Inc. 2005 Annual Report

Schedules of Investments (October 31, 2005) (continued)

Shares	Security	Value
Thrifts & Mortgage Finance — 0.7%
49,500	Astoria Financial Corp.	$	1,383,525
361,566	New York Community Bancorp Inc.		5,846,522
	Total Thrifts & Mortgage Finance		7,230,047
	TOTAL FINANCIALS		119,074,120
HEALTH CARE — 37.4%
Biotechnology — 21.1%
162,500	Alkermes Inc.*		2,647,125
740,105	Amgen Inc.*		56,070,355
783,806	Biogen Idec Inc.*		31,846,038
110,150	CancerVax Corp.*		149,804
844,850	Chiron Corp.*		37,291,679
101,900	Genentech Inc.*		9,232,140
795,168	Genzyme Corp.*		57,490,646
541,275	ImClone Systems Inc.*		18,782,242
224,750	Isis Pharmaceuticals Inc.*		975,415
766,905	Millennium Pharmaceuticals Inc.*		6,994,174
173,000	Nanogen Inc.*		486,130
265,400	Vertex Pharmaceuticals Inc.*		6,037,850
29,445	ViaCell Inc.*		148,697
	Total Biotechnology		228,152,295
Health Care Equipment & Supplies — 0.5%
92,100	Biosite Inc.*		5,086,683
Health Care Providers & Services — 9.0%
1,672,000	UnitedHealth Group Inc.		96,792,080
Pharmaceuticals — 6.8%
998,800	Forest Laboratories Inc.*		37,864,508
243,448	Johnson & Johnson		15,244,714
635,666	King Pharmaceuticals Inc.*		9,808,326
75,289	Pfizer Inc.		1,636,783
78,576	Teva Pharmaceutical Industries Ltd., Sponsored ADR		2,995,317
323,000	Valeant Pharmaceuticals International		5,542,680
	Total Pharmaceuticals		73,092,328
	TOTAL HEALTH CARE		403,123,386
INDUSTRIALS — 6.0%
Aerospace & Defense — 2.7%
378,800	L-3 Communications Holdings Inc.		29,478,216
Industrial Conglomerates — 2.5%
1,033,412	Tyco International Ltd.		27,271,743
Machinery — 0.8%
308,000	Pall Corp.		8,057,280
	TOTAL INDUSTRIALS		64,807,239

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         49

Schedules of Investments (October 31, 2005) (continued)

Shares	Security	Value
INFORMATION TECHNOLOGY — 12.8%
Communications Equipment — 2.6%
186,100	C-COR Inc.*	$	991,913
890,500	Motorola Inc.		19,733,480
448,325	Nokia Oyj, Sponsored ADR		7,540,827
	Total Communications Equipment		28,266,220
Computers & Peripherals — 2.5%
876,076	Maxtor Corp.*		3,066,266
242,000	Quantum Corp.*		730,840
385,000	SanDisk Corp.*		22,672,650
	Total Computers & Peripherals		26,469,756
Electronic Equipment & Instruments — 0.0%
12,400	Excel Technology Inc.*		324,260
Semiconductors & Semiconductor Equipment — 6.1%
330,000	Broadcom Corp., Class A Shares*		14,011,800
125,000	Cabot Microelectronics Corp.*		3,675,000
229,000	Cirrus Logic Inc.*		1,502,240
133,000	Cree Inc.*		3,197,320
133,000	DSP Group Inc.*		3,269,140
98,324	Freescale Semiconductor Inc., Class B Shares*		2,347,977
358,334	Intel Corp.		8,420,849
1,617,300	Micron Technology Inc.*		21,008,727
543,000	RF Micro Devices Inc.*		2,845,320
10,300	Standard Microsystems Corp.*		291,181
343,091	Teradyne Inc.*		4,645,452
	Total Semiconductors & Semiconductor Equipment		65,215,006
Software — 1.6%
106,000	Advent Software Inc.*		3,256,320
230,000	Autodesk Inc.		10,379,900
72,264	Microsoft Corp.		1,857,185
105,000	RSA Security Inc.*		1,197,000
75,000	Verity Inc.*		746,250
	Total Software		17,436,655
	TOTAL INFORMATION TECHNOLOGY		137,711,897
TELECOMMUNICATION SERVICES — 0.2%
Diversified Telecommunication Services — 0.2%
82,000	AT&T Corp.		1,621,960
	TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $921,767,007)		1,051,696,353

See Notes to Financial Statements.

50         Travelers Series Fund Inc. 2005 Annual Report

Schedules of Investments (October 31, 2005) (continued)

Face Amount		Security	Value
	SHORT-TERM INVESTMENT — 2.6%
	Repurchase Agreement — 2.6%
$	28,700,000	Interest in $542,622,000 joint tri-party repurchase agreement dated 10/31/05 with Greenwich Capital Markets Inc., 4.020% due 11/1/05; Proceeds at maturity - $28,703,205; (Fully collateralized by various U.S. Treasury Obligations, 1.500% to 6.250% due 3/31/06 to 5/15/30; Market value - $29,274,227) (Cost — $28,700,000)	$	28,700,000
		TOTAL INVESTMENTS — 100.1% (Cost — $950,467,007#)		1,080,396,353
		Liabilities in Excess of Other Assets — (0.1)%		(1,397,267	)
		TOTAL NET ASSETS — 100.0%	$	1,078,999,086

* Non-income producing security.

# Aggregate cost for federal income tax purposes is $951,791,610.

Abbreviation used in this schedule:

ADR — American Depositary Receipt

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         51

Schedules of Investments (October 31, 2005) (continued)

SMITH BARNEY INTERNATIONAL ALL CAP GROWTH PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 98.4%
Australia (a) — 3.0%
146,000	Babcock & Brown Ltd.	$	1,831,475
63,000	Macquarie Bank Ltd. (b)		3,061,847
	Total Australia		4,893,322
Denmark (a) — 1.2%
35,930	Novo Nordisk A/S, Class B Shares		1,846,505
Finland (a) — 2.4%
225,000	Nokia Oyj		3,778,830
France — 6.5%
150,000	Altran Technologies SA (a)*		1,754,859
32,625	Essilor International SA (a)(b)		2,687,542
25,000	Groupe Danone (a)(b)		2,541,008
13,000	Total SA (a)(b)		3,276,403
800	Total SA, Sponsored ADR		100,816
	Total France		10,360,628
Germany — 4.1%
25,300	BASF AG (a)(b)		1,825,462
450	BASF AG, Sponsored ADR		32,395
12,500	SAP AG (a)(b)		2,138,940
1,300	SAP AG, Sponsored ADR		55,822
76,400	Stada Arzneimittel AG (a)(b)		2,498,609
	Total Germany		6,551,228
Greece (a) — 1.0%
25,000	EFG Eurobank Ergasias		751,940
45,000	Piraeus Bank SA		911,512
	Total Greece		1,663,452
Hong Kong (a) — 3.5%
120,000	Hutchison Whampoa Ltd.		1,138,957
826,000	Li & Fung Ltd.		1,767,916
295,000	Swire Pacific Ltd., Class A Shares		2,647,527
	Total Hong Kong		5,554,400
Ireland (a) — 7.2%
106,900	Bank of Ireland		1,619,561
77,512	CRH PLC		1,942,042
584,000	Grafton Group PLC*		5,758,254
173,740	Irish Continental Group PLC		2,167,555
35,000	United Drug PLC		136,444
	Total Ireland		11,623,856
Italy (a) — 1.0%
114,000	Saipem SpA (b)		1,635,971

See Notes to Financial Statements.

52         Travelers Series Fund Inc. 2005 Annual Report

Schedules of Investments (October 31, 2005) (continued)

Shares	Security	Value
Japan — 23.3%
43,000	Canon Inc. (a)	$	2,276,280
48,000	Daikin Industries Ltd. (a)		1,249,916
300	Dentsu Inc. (a)(b)		814,259
296,000	Dowa Mining Co., Ltd. (a)		2,381,687
33,000	Fanuc Limited (a)		2,609,144
44,500	Honda Motor Co., Ltd. (a)		2,472,375
2,000	Honda Motor Co., Ltd., Sponsored ADR		55,620
65,200	Hoya Corp. (a)(b)		2,266,576
380	Mitsubishi Tokyo Financial Group Inc. (a)		4,793,241
33	Mizuho Financial Group Inc. (a)		221,728
27,300	Nichii Gakkan Co. (a)(b)		652,480
17,400	Nidec Corp. (a)(b)		991,598
460	NTT Data Corp. (a)(b)		1,614,143
15,800	Orix Corp. (a)(b)		2,962,891
1,080	Rakuten Inc. (a)(b)		701,822
50,000	Ricoh Co., Ltd. (a)		792,423
37,200	Seven & I Holdings Co., Ltd.*		1,214,746
184,000	Sharp Corp. (a)		2,529,848
62,400	Shin-Etsu Chemical Co., Ltd. (a)(b)		3,004,332
79,000	Terumo Corp. (a)(b)		2,397,151
46,000	Trend Micro Inc. (a)(b)		1,441,540
	Total Japan		37,443,800
Mexico — 2.1%
700,100	Wal-Mart de Mexico SA de CV		3,406,418
Netherlands — 1.7%
39,351	ING Groep NV, CVA (a)		1,135,851
51,950	Royal Dutch Shell PLC, Class A Shares (b)*		1,603,340
	Total Netherlands		2,739,191
Norway (a) — 1.0%
159,900	Stolt Offshore SA (b)*		1,658,119
Singapore — 0.6%
106,000	DBS Group Holdings Ltd.		958,124
Spain (a) — 4.6%
205,000	Indra Sistemas SA (b)		4,204,933
198,743	Telefonica SA		3,173,317
	Total Spain		7,378,250
Sweden (a) — 2.4%
111,000	Atlas Copco AB, Class A Shares		2,030,178
534,000	Telefonaktiebolaget LM Ericsson, Class B Shares (b)		1,754,595
	Total Sweden		3,784,773
Switzerland — 12.1%
96,000	Mettler-Toledo International Inc.*		4,953,600
6,740	Nestle SA (a)		2,005,407

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         53

Schedules of Investments (October 31, 2005) (continued)

Shares		Security	Value
	Switzerland — 12.1% (continued)
	41,000	Novartis AG (a)	$	2,204,602
	45,900	Roche Holding AG (a)		6,854,713
	40,000	UBS AG (a)		3,394,110
		Total Switzerland		19,412,432
	United Kingdom (a) — 19.7%
	52,000	BOC Group PLC		1,024,013
	337,300	BP PLC		3,731,040
	514,800	Capita Group PLC		3,550,074
	896,000	O2 PLC*		3,260,108
	70,000	Rio Tinto PLC		2,672,247
	1,069,000	Serco Group PLC		5,014,265
	151,700	Smith & Nephew PLC		1,282,885
	576,352	Tesco PLC		3,066,642
	357,000	Tomkins PLC		1,661,545
	1,854,000	Vodafone Group PLC		4,862,989
	142,700	WPP Group PLC		1,402,507
		Total United Kingdom		31,528,315
	United States — 1.0%
	101,814	News Corp., Class B Shares		1,533,319
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $108,422,430)		157,750,933
Face Amount
	SHORT-TERM INVESTMENTS — 14.9%
	Repurchase Agreement — 1.7%
$	2,712,000	Interest in $542,622,000 joint tri-party repurchase agreement dated 10/31/05 with Greenwich Capital Markets Inc., 4.020% due 11/1/05; Proceeds at maturity — $2,712,303; (Fully collateralized by various U.S. Treasury obligations, 1.500% to 6.250% due 3/31/06 to 5/15/30; Market value — $2,766,261) (Cost — $2,712,000)		2,712,000
Shares
	Securities Purchased from Securities Lending Collateral — 13.2%
	21,220,818	State Street Navigator Securities Lending Trust Prime Portfolio (Cost — $21,220,818)		21,220,818
		TOTAL SHORT-TERM INVESTMENTS (Cost — $23,932,818)		23,932,818
		TOTAL INVESTMENTS — 113.3% (Cost — $132,355,248#)		181,683,751
		Liabilities in Excess of Other Assets — (13.3)%		(21,306,809	)
		TOTAL NET ASSETS — 100.0%	$	160,376,942

See Notes to Financial Statements.

54         Travelers Series Fund Inc. 2005 Annual Report

Schedules of Investments (October 31, 2005) (continued)

* Non-income producing security.

(a) Securities are fair valued in good faith by or under the direction of the Board of Directors (See Note 1).

(b) All or a portion of this security is on loan (See Notes 1 and 3).

# Aggregate cost for federal income tax purposes is $132,956,378.

Abbreviations used in this schedule:
ADR	— American Depositary Receipt
CVA	— Certificaaten van aandelen (Share Certificates)

Summary of Investments by Sector*
Consumer Discretionary	33.4	%
Telecommunication Services	15.2
Financials	13.5
Industrials	12.6
Energy	7.5
Materials	6.8
Information Technology	5.9
Repurchase Agreement	1.7
Other	3.4
	100.0	%

* As a percentage of total investments (excludes securities purchased from securities lending collateral). Please note that Fund holdings are subject to change.

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         55

Statements of Assets and Liabilities (October 31, 2005)

	Smith Barney Large Cap Value Portfolio			Smith Barney Large Cap Growth Portfolio
ASSETS:
Investments, at cost	$	260,537,349		$	292,637,083
Foreign currency, at cost		—			—
Investments, at value		301,156,620			378,575,385
Foreign currency, at value		—			—
Cash		595			—
Receivable for securities sold		1,970,519			3,099,467
Dividends and interest receivable		125,498			131,094
Receivable for Fund shares sold		—			51,327
Prepaid expenses		6,073			4,606
Total Assets		303,259,305			381,861,879
LIABILITIES:
Management fee payable		153,314			240,480
Payable for Fund shares repurchased		71,574			474,870
Transfer agent fees payable		1,253			1,273
Directors’ fees payable		783			98
Payable for securities purchased		—			1,863,063
Due to custodian		—			1,310,467
Payable for loaned securities collateral		—			—
Payable for open currency contracts		—			—
Accrued expenses		65,139			50,490
Total Liabilities		292,063			3,940,741
Total Net Assets	$	302,967,242		$	377,921,138
NET ASSETS:
Par value (Note 4)	$	164		$	261
Paid-in capital in excess of par value		290,742,035			373,223,827
Undistributed net investment income		3,092,777			183,919
Accumulated net realized gain (loss) on investments, futures contracts and foreign currency transactions		(31,486,865	)		(81,425,171	)
Net unrealized appreciation on investments and foreign currency transactions		40,619,131			85,938,302
Total Net Assets	$	302,967,242		$	377,921,138
Shares Outstanding		16,378,520			26,052,469
Net Asset Value		$18.50			$14.51

See Notes to Financial Statements.

56         Travelers Series Fund Inc. 2005 Annual Report

Statements of Assets and Liabilities (October 31, 2005) (continued)

Smith Barney Mid Cap Core Portfolio		Smith Barney Aggressive Growth Portfolio			Smith Barney International All Cap Growth Portfolio
$	107,375,600	$	950,467,007		$	132,355,248
	—		—			197,128
	120,690,507		1,080,396,353			181,683,751
	—		—			194,650
	322		576			489
	672,831		—			—
	121,137		216,788			256,162
	—		112,386			—
	—		11,685			2,985
	121,484,797		1,080,737,788			182,138,037
	75,688		721,325			116,096
	331,621		967,564			138,477
	1,259		1,261			1,256
	—		—			766
	400,850		—			197,592
	—		—			—
	—		—			21,220,818
	—		—			1,488
	28,587		48,552			84,602
	838,005		1,738,702			21,761,095
$	120,646,792	$	1,078,999,086		$	160,376,942
$	82	$	757		$	118
	97,941,919		950,361,126			171,190,096
	519,558		—			1,268,503
	8,870,326		(1,292,143	)		(61,412,948	)
	13,314,907		129,929,346			49,331,173
$	120,646,792	$	1,078,999,086		$	160,376,942
	8,172,439		75,671,297			11,825,631
	$14.76		$14.26			$13.56

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         57

Statements of Operations (For the year ended October 31, 2005)

	Smith Barney Large Cap Value Portfolio			Smith Barney Large Cap Growth Portfolio
INVESTMENT INCOME:
Dividends	$	7,106,975		$	4,745,097
Interest		267,559			15,092
Less: Foreign taxes withheld		(100,359	)		—
Income from securities lending		—			—
Total Investment Income		7,274,175			4,760,189
EXPENSES:
Management fee (Note 2)		1,957,470			2,936,582
Shareholder reports		42,656			25,701
Custody fees		40,339			42,754
Audit and tax		29,300			24,166
Legal fees		22,181			12,525
Directors’ fees		13,320			14,017
Insurance		10,881			11,600
Transfer agent fees (Note 2)		5,012			5,028
Registration fees		33			732
Miscellaneous expenses		1,982			2,196
Total Expenses		2,123,174			3,075,301
Net Investment Income (Loss)		5,151,001			1,684,888
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS (NOTES 1 AND 3):
Net Realized Gain (Loss) From:
Investments transactions		12,470,355			(9,620,366	)
Foreign currency transactions		(468	)		—
Futures contracts		—			—
Net Realized Gain (Loss)		12,469,887			(9,620,366	)
Change in Net Unrealized Appreciation/Depreciation From:
Investments		14,712,542			48,194,981
Foreign currency transactions		(140	)		—
Change in Net Unrealized Appreciation/Depreciation		14,712,402			48,194,981
Net Gain on Investments, Futures Contracts and Foreign Currency Transactions		27,182,289			38,574,615
Increase in Net Assets From Operations	$	32,333,290		$	40,259,503

See Notes to Financial Statements.

58         Travelers Series Fund Inc. 2005 Annual Report

Statements of Operations (For the year ended October 31, 2005) (continued)

Smith Barney Mid Cap Core Portfolio			Smith Barney Aggressive Growth Portfolio			Smith Barney International All Cap Growth Portfolio
$	1,405,212		$	4,322,537		$	3,463,642
	90,567			1,287,167			37,399
	(1,032	)		(32,825	)		(316,376	)
	—			—			89,726
	1,494,747			5,576,879			3,274,391
	890,458			8,084,509			1,403,306
	12,222			43,514			51,530
	26,160			50,540			115,748
	16,325			25,091			28,600
	14,183			21,683			17,325
	6,612			28,693			8,265
	2,116			21,924			6,905
	5,012			5,026			5,028
	—			—			—
	2,105			3,693			11,861
	975,193			8,284,673			1,648,568
	519,554			(2,707,794	)		1,625,823
	12,992,285			211,120			5,532,827
	4			—			(76,349	)
	(37,023	)		—			—
	12,955,266			211,120			5,456,478
	193,983			159,283,167			17,734,096
	—			—			(18,297	)
	193,983			159,283,167			17,715,799
	13,149,249			159,494,287			23,172,277
$	13,668,803		$	156,786,493		$	24,798,100

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         59

Statements of Changes in Net Assets (For the years ended October 31,)

Smith Barney Large Cap Value Portfolio	2005			2004
OPERATIONS:
Net investment income	$	5,151,001		$	5,015,148
Net realized gain		12,469,887			22,083,608
Change in net unrealized appreciation/depreciation		14,712,402			10,192,674
Increase in Net Assets From Operations		32,333,290			37,291,430
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(6,400,006	)		(5,914,007	)
Decrease in Net Assets From Distributions to Shareholders		(6,400,006	)		(5,914,007	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		3,130,472			4,321,708
Reinvestment of distributions		6,400,006			5,914,007
Cost of shares repurchased		(65,848,220	)		(74,452,875	)
Decrease in Net Assets From Fund Share Transactions		(56,317,742	)		(64,217,160	)
Decrease in Net Assets		(30,384,458	)		(32,839,737	)
NET ASSETS:
Beginning of year		333,351,700			366,191,437
End of year*	$	302,967,242		$	333,351,700
* Includes undistributed net investment income of:		$3,092,777			$4,429,540

See Notes to Financial Statements.

60         Travelers Series Fund Inc. 2005 Annual Report

Statements of Changes in Net Assets (For the years ended October 31,) (continued)

Smith Barney Large Capitalization Growth Portfolio	2005			2004
OPERATIONS:
Net investment income (loss)	$	1,684,888		$	(95,094	)
Net realized loss		(9,620,366	)		(6,346,198	)
Change in net unrealized appreciation/depreciation		48,194,981			(14,076,919	)
Increase (Decrease) in Net Assets From Operations		40,259,503			(20,518,211	)
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(1,500,969	)		(23,939	)
Return of capital		—			(46,869	)
Decrease in Net Assets From Distributions to Shareholders		(1,500,969	)		(70,808	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		11,593,119			83,145,183
Reinvestment of distributions		1,500,969			70,808
Cost of shares repurchased		(63,602,132	)		(26,791,922	)
Increase (Decrease) in Net Assets From Fund Share Transactions		(50,508,044	)		56,424,069
Increase (Decrease) in Net Assets		(11,749,510	)		35,835,050
NET ASSETS:
Beginning of year		389,670,648			353,835,598
End of year*	$	377,921,138		$	389,670,648
* Includes undistributed net investment income of:		$183,919			—

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         61

Statements of Changes in Net Assets (For the years ended October 31,) (continued)

Smith Barney Mid Cap Core Portfolio	2005			2004
OPERATIONS:
Net investment income (loss)	$	519,554		$	(60,762	)
Net realized gain		12,955,266			4,898,860
Change in net unrealized appreciation/depreciation		193,983			1,012,508
Increase in Net Assets From Operations		13,668,803			5,850,606
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		8,699,598			22,456,449
Cost of shares repurchased		(11,954,070	)		(4,932,940	)
Increase (Decrease) in Net Assets From Fund Share Transactions		(3,254,472	)		17,523,509
Increase in Net Assets		10,414,331			23,374,115
NET ASSETS:
Beginning of year		110,232,461			86,858,346
End of year*	$	120,646,792		$	110,232,461
* Includes undistributed net investment income of:		$519,558			—

See Notes to Financial Statements.

62         Travelers Series Fund Inc. 2005 Annual Report

Statements of Changes in Net Assets (For the years ended October 31,) (continued)

Smith Barney Aggressive Growth Portfolio	2005			2004
OPERATIONS:
Net investment loss	$	(2,707,794	)	$	(3,509,889	)
Net realized gain		211,120			8,592,603
Change in net unrealized appreciation/depreciation		159,283,167			39,469,472
Increase in Net Assets From Operations		156,786,493			44,552,186
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net realized gains		(3,756,228	)		—
Decrease in Net Assets From Distributions to Shareholders		(3,756,228	)		—
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		63,139,525			270,425,936
Reinvestment of distributions		3,756,228			—
Cost of shares repurchased		(61,265,197	)		(18,523,736	)
Increase in Net Assets From Fund Share Transactions		5,630,556			251,902,200
Increase in Net Assets		158,660,821			296,454,386
NET ASSETS:
Beginning of year		920,338,265			623,883,879
End of year	$	1,078,999,086		$	920,338,265

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         63

Statements of Changes in Net Assets (For the years ended October 31,) (continued)

Smith Barney International All Cap Growth Portfolio	2005			2004
OPERATIONS:
Net investment income	$	1,625,823		$	1,161,805
Net realized gain		5,456,478			7,226,272
Change in net unrealized appreciation/depreciation		17,715,799			14,905,863
Increase in Net Assets From Operations		24,798,100			23,293,940
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(1,500,826	)		(1,763,610	)
Decrease in Net Assets From Distributions to Shareholders		(1,500,826	)		(1,763,610	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		5,415,806			17,143,590
Reinvestment of distributions		1,500,826			1,763,610
Cost of shares repurchased		(32,422,744	)		(60,386,891	)
Net assets of shares issued in connection with Merger (Note 5)		2,864,133			—
Decrease in Net Assets From Fund Share Transactions		(22,641,979	)		(41,479,691	)
Increase (Decrease) in Net Assets		655,295			(19,949,361	)
NET ASSETS:
Beginning of year		159,721,647			179,671,008
End of year*	$	160,376,942		$	159,721,647
* Includes undistributed net investment income of:		$1,268,503			$1,221,698

See Notes to Financial Statements.

64         Travelers Series Fund Inc. 2005 Annual Report

Financial Highlights

For a share of capital stock outstanding throughout each year ended October 31:

Smith Barney Large Cap Value Portfolio	2005			2004			2003			2002		2001
Net Asset Value, Beginning of Year	$	17.09		$	15.68		$	13.24		$17.47		$20.74
Income (Loss) From Operations:
Net investment income		0.30			0.26			0.28		0.32		0.26
Net realized and unrealized gain (loss)		1.45			1.41			2.49		(4.24	)	(2.56	)
Total Income (Loss) From Operations		1.75			1.67			2.77		(3.92	)	(2.30	)
Less Distributions From:
Net investment income		(0.34	)		(0.26	)		(0.33	)	(0.31	)	(0.27	)
Net realized gain		—			—			—		—		(0.70	)
Total Distributions		(0.34	)		(0.26	)		(0.33	)	(0.31	)	(0.97	)
Net Asset Value, End of Year	$	18.50		$	17.09		$	15.68		$13.24		$17.47
Total Return(1)		10.26	%		10.69	%		21.38	%	(22.45	)%	(11.58	)%
Net Assets, End of Year (millions)		$303			$333			$366		$346		$504
Ratios to Average Net Assets:
Gross expenses		0.65	%		0.68	%		0.69	%	0.68	%	0.67	%
Net expenses(2)		0.65			0.68	(3)		0.69		0.68		0.67
Net investment income		1.62			1.38			1.85		1.59		1.42
Portfolio Turnover Rate		44	%		37	%		96	%	68	%	29	%

⁽¹⁾  Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽²⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 1.25%.

⁽³⁾ The investment manager voluntarily waived a portion of its fees.

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         65

Financial Highlights (continued)

For a share of capital stock outstanding throughout each year ended October 31:

Smith Barney Large Capitalization Growth Portfolio	2005			2004			2003			2002			2001
Net Asset Value, Beginning of Year	$	13.15		$	13.76		$	9.91		$	11.86		$	16.04
Income (Loss) From Operations:
Net investment income (loss)		0.06			(0.00	)(1)		0.01			0.02			0.02
Net realized and unrealized gain (loss)		1.35			(0.61	)		3.86			(1.95	)		(4.20	)
Total Income (Loss) From Operations		1.41			(0.61	)		3.87			(1.93	)		(4.18	)
Less Distributions From:
Net investment income		(0.05	)		(0.00	)(1)		(0.02	)		(0.02	)		—
Return of capital		—			(0.00	)(1)		—			—			—
Total Distributions		(0.05	)		(0.00	)(1)		(0.02	)		(0.02	)		—
Net Asset Value, End of Year	$	14.51		$	13.15		$	13.76		$	9.91		$	11.86
Total Return(2)		10.74	%		(4.42	)%		39.16	%		(16.29	)%		(26.06	)%
Net Assets, End of Year (millions)		$378			$390			$354			$225			$280
Ratios to Average Net Assets:
Gross expenses		0.79	%		0.78	%		0.79	%		0.80	%		0.78	%
Net expenses		0.79			0.78	(3)		0.79			0.80			0.78
Net investment income (loss)		0.43			(0.02	)		0.06			0.13			0.14
Portfolio Turnover Rate		20	%		7	%		16	%		19	%		10	%

⁽¹⁾ Amount represents less than $0.01 per share.

⁽²⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽³⁾ The investment manager voluntarily waived a portion of its fees.

See Notes to Financial Statements.

66         Travelers Series Fund Inc. 2005 Annual Report

Financial Highlights (continued)

For a share of capital stock outstanding throughout each year ended October 31:

Smith Barney Mid Cap Core Portfolio	2005			2004			2003			2002			2001
Net Asset Value, Beginning of Year		$13.14			$12.35			$10.10			$10.83			$14.22
Income (Loss) From Operations:
Net investment income (loss)		0.06			(0.01	)		(0.00	)(1)		(0.02	)		0.02
Net realized and unrealized gain (loss)		1.56			0.80			2.25			(0.70	)		(3.36	)
Total Income (Loss) From Operations		1.62			0.79			2.25			(0.72	)		(3.34	)
Less Distributions From:
Net investment income		—			—			—			(0.01	)		(0.05	)
Total Distributions		—			—			—			(0.01	)		(0.05	)
Net Asset Value, End of Year		$14.76			$13.14			$12.35			$10.10			$10.83
Total Return(2)		12.33	%		6.40	%		22.28	%		(6.64	)%		(23.56	)%
Net Assets, End of Year (millions)	$	121		$	110		$	87		$	57		$	34
Ratios to Average Net Assets:
Gross expenses		0.82	%		0.83	%		0.85	%		0.90	%		0.96	%
Net expenses(3)		0.82			0.83	(4)		0.85			0.90			0.95	(4)
Net investment income (loss)		0.44			(0.06	)		(0.03	)		(0.10	)		0.25
Portfolio Turnover Rate		107	%		92	%		98	%		79	%		45	%

⁽¹⁾ Amount represents less than $0.01 per share.

⁽²⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽³⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 0.95%.

⁽⁴⁾ The investment manager voluntarily waived a portion of its fees.

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         67

Financial Highlights (continued)

For a share of capital stock outstanding throughout each year ended October 31:

Smith Barney Aggressive Growth Portfolio	2005(1)			2004			2003			2002			2001
Net Asset Value, Beginning of Year	$	12.24		$	11.43		$	9.09		$	12.32		$	15.03
Income (Loss) From Operations:
Net investment loss		(0.04	)		(0.05	)		(0.04	)		(0.05	)		(0.05	)
Net realized and unrealized gain (loss)		2.11			0.86			2.38			(3.18	)		(2.66	)
Total Income (Loss) From Operations		2.07			0.81			2.34			(3.23	)		(2.71	)
Less Distributions From:
Net realized gain		(0.05	)		—			—			—			—
Total Distributions		(0.05	)		—			—			—			—
Net Asset Value, End of Year	$	14.26		$	12.24		$	11.43		$	9.09		$	12.32
Total Return(2)		16.94	%		7.09	%		25.74	%		(26.22	)%		(18.03	)%
Net Assets, End of Year (000s)		$1,079			$920			$624			$415			$366
Ratios to Average Net Assets:
Gross expenses		0.82	%		0.82	%		0.82	%		0.83	%		0.84	%
Net expenses(3)		0.82			0.82	(4)		0.82			0.83			0.84
Net investment loss		(0.27	)		(0.44	)		(0.49	)		(0.50	)		(0.40	)
Portfolio Turnover Rate		0	%		4	%		0	%		9	%		3	%

⁽¹⁾ Per share amounts have been calculated using the average shares method.

⁽²⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽³⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 1.00%.

⁽⁴⁾ The investment manager voluntarily waived a portion of its fees.

See Notes to Financial Statements.

68         Travelers Series Fund Inc. 2005 Annual Report

Financial Highlights (continued)

For a share of capital stock outstanding throughout each year ended October 31:

Smith Barney International All Cap Growth Portfolio	2005			2004(1)			2003(1)			2002(1)			2001(1)
Net Asset Value, Beginning of Year	$	11.77		$	10.43		$	8.78		$	11.18		$	18.52
Income (Loss) From Operations:
Net investment income		0.13			0.07			0.10			0.04			0.05
Net realized and unrealized gain (loss)		1.77			1.37			1.60			(2.39	)		(7.39	)
Total Income (Loss) From Operations		1.90			1.44			1.70			(2.35	)		(7.34	)
Less Distributions From:
Net investment income		(0.11	)		(0.10	)		(0.05	)		(0.05	)		—
Total Distributions		(0.11	)		(0.10	)		(0.05	)		(0.05	)		—
Net Asset Value, End of Year	$	13.56		$	11.77		$	10.43		$	8.78		$	11.18
Total Return(2)		16.21	%		13.90	%		19.45	%		(20.97	)%		(39.63	)%
Net Assets, End of Year (000s)		$160,377			$159,722			$179,671			$170,067			$243,575
Ratios to Average Net Assets:
Gross expenses		1.00	%		1.01	%		0.99	%		1.00	%		1.00	%
Net expenses(3)		1.00			1.01	(4)		0.99			1.00			1.00
Net investment income		0.98			0.67			1.07			0.42			0.31
Portfolio Turnover Rate		16	%		21	%		45	%		27	%		22	%

⁽¹⁾ Per share amounts have been calculated using the average shares method.

⁽²⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽³⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 1.50%.

⁽⁴⁾ The investment manager voluntarily waived a portion of its fees.

See Notes to Financial Statements.

Travelers Series Fund Inc. 2005 Annual Report         69

Notes to Financial Statements

1. Organization and Significant Accounting Policies

The Smith Barney Large Cap Value Portfolio (“SBLCV”), Smith Barney Large Capitalization Growth Portfolio (“SBLCG”), Smith Barney Mid Cap Core Portfolio (“SBMCC”), Smith Barney Aggressive Growth Portfolio (“SBAG”) and Smith Barney International All Cap Growth Portfolio (“SBIACG”) (“Funds”) are separate diversified investment funds of Travelers Series Fund Inc. (“Company”). The Company, a Maryland corporation, is registered under the Investment Company Act of 1940 (the “1940 Act”), as amended, as an open-end management investment company.

The following are significant accounting policies consistently followed by the Funds and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.

(a) Investment Valuation. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various relationships between securities. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Funds calculate their net asset value, the Funds may value these investments at fair value as determined in accordance with the procedures approved by the Funds’ Board of Directors. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.

(b) Repurchase Agreements. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian takes possession of the underlying collateral securities, the market value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.

(c) Financial Futures Contracts. The Funds may enter into financial futures contracts to hedge a portion of their portfolio. Upon entering into a financial futures contract, the Funds are required to deposit cash or securities as initial margin. Additional securities are also segregated up to the current market value of the financial futures contracts. Subsequent payments, known as variation margin, are made or received by the Funds each day, depending on the daily fluctuation in the value of the underlying financial instruments. The Funds recognize an unrealized gain or loss equal to the daily variation margin. When the financial futures contracts

70         Travelers Series Fund Inc. 2005 Annual Report

Notes to Financial Statements (continued)

are closed, a realized gain or loss is recognized equal to the difference between the proceeds from (or cost of) the closing transactions and the Funds’ basis in the contracts.

The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. In addition, investing in financial futures contracts involves the risk that the Funds could lose more than the original margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

(d) Forward Foreign Currency Contracts. The Funds may enter into forward foreign currency contracts to hedge against foreign currency exchange rate risk on their non-US dollar denominated securities or to facilitate settlement of foreign currency denominated portfolio transactions. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The contract is marked-to-market daily and the change in value is recorded by the Funds as an unrealized gain or loss. When a forward foreign currency contract is extinguished, through either delivery or offset by entering into another forward foreign currency contract, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was extinguished.

Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statements of Assets and Liabilities. The Funds bear the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

(e) Lending of Portfolio Securities. The Funds have an agreement with their custodians whereby the custodian may lend securities owned by the Funds to brokers, dealers and other financial organizations. In exchange for lending securities under the terms of the agreement with their custodian, the Funds receive a lender’s fee. Fees earned by the Funds on securities lending are recorded as securities lending income. Loans of securities by the Funds are collateralized by cash, U.S. government securities or high quality money market instruments that are maintained at all times in an amount at least equal to the current market value of the loaned securities, plus a margin which varies depending on the type of securities loaned. The custodian establishes and maintains the collateral in a segregated account. The Funds have the right under the lending agreement to recover the securities from the borrower on demand.

The Funds maintain the risk of any loss on the securities on loan as well as the potential loss on investments purchased with cash collateral received from securities lending.

(f) Foreign Risk. The investments by the Funds in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies and may require settlement in foreign currencies and pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of SBIACG and SBLCV. Foreign investments may also subject SBIACG and SBLCV to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

Travelers Series Fund Inc. 2005 Annual Report         71

Notes to Financial Statements (continued)

(g) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities, at the date of valuation, resulting from changes in exchange rates.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

(h) Security Transactions and Investment Income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Funds determine the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults on an expected interest payment, the Funds’ policy is to generally halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default.

(i) Distributions to Shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Funds are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

(j) Federal and Other Taxes. It is the Funds’ policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Funds intend to distribute substantially all of their income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Funds’ financial statements. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

72         Travelers Series Fund Inc. 2005 Annual Report

Notes to Financial Statements (continued)

(k) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. There were no reclassifications during the current year for SBLCG. Additionally, during the current year, the following reclassifications have been made:

Fund			Over/Undistributed Net Investment Income			Undistributed Net Realized Gains/Accumulated Net Realized Losses			Paid-in Capital
SBLCV	(a	)	$	(87,758	)	$	87,758			—
SBMCC	(b	)		4			(4	)		—
SBAG	(c	)		2,529,134			(3,141	)	$	(2,525,993	)
	(d	)		178,660			(178,660	)		—
SBIACG	(e	)		(1,843	)		—			1,843
	(b	)		(76,349	)		76,349			—

^(a) Reclassifications are primarily due to foreign currency transactions treated as ordinary income for tax purposes and book/tax differences in the treatment of distributions from real estate investment trusts.

^(b) Reclassifications are primarily due to foreign currency transactions treated as ordinary income for tax purposes.

^(c) Reclassifications are primarily due to a tax net operating loss and distributions paid in connection with the redemption of fund shares.

^(d) Reclassifications are primarily due to a tax net operating loss offsetting short-term capital gains.

^(e) Reclassifications are primarily due to book/tax differences related to the merger.

2. Management Agreement and Other Transactions with Affiliates

Smith Barney Fund Management LLC (“SBFM”), an indirect wholly-owned subsidiary of Citigroup Inc. (“Citigroup”), acts as investment manager of the Funds. SBMCC and SBIACG pay SBFM a management fee calculated at the annual rate of 0.75% and 0.85%, respectively, of the Funds’ average daily net assets. SBLCV, SBLCG and SBAG pay SBFM a management fee, which is calculated daily and payable monthly, based on the Funds’ average daily net assets in accordance with the following breakpoint schedule:

Average Daily Net Assets	Fee Rate
SBLCV
First $500 million	0.600	%
Next $500 million	0.550
Over $1 billion	0.500
SBLCG
First $5 billion	0.750	%
Next $2.5 billion	0.725
Next $2.5 billion	0.700
Over $10 billion	0.650
SBAG
First $5 billion	0.800	%
Next $2.5 billion	0.775
Next $2.5 billion	0.750
Over $10 billion	0.700

Travelers Series Fund Inc. 2005 Annual Report         73

Notes to Financial Statements (continued)

Effective November 1, 2005, SBLCG, SBAG and SBIACG’s management fee will be calculated in accordance with the following breakpoint schedule:

Average Daily Net Assets	Fee Rate
SBLCG
First $1 Billion	0.750	%
Next $1 Billion	0.725
Next $3 Billion	0.700
Next $5 Billion	0.675
Over $10 Billion	0.650
SBAG
First $1 billion	0.750	%
Next $1 billion	0.725
Next $3 billion	0.700
Next $5 billion	0.675
Over $10 billion	0.650
SBIACG
First $1 Billion	0.850	%
Next $1 Billion	0.825
Next $3 Billion	0.800
Next $5 Billion	0.775
Over $10 Billion	0.750

During the year ended October 31, 2005, SBLCV, SBMCC, SBAG and SBIACG, had voluntary expense limitations in place of 1.25%, 0.95%, 1.00% and 1.50% respectively. These expense limitations can be terminated at any time by SBFM.

Citicorp Trust Bank, fsb. (“CTB”), another subsidiary of Citigroup, acts as the Funds’ transfer agent and PFPC Inc. (“PFPC”) acts as the Funds’ sub-transfer agent. CTB receives account fees and asset-based fees that vary according to the size and type of account. PFPC is responsible for shareholder recordkeeping and financial processing for all shareholder accounts and is paid by CTB. For the year ended October 31, 2005, each Fund paid transfer agent fees of $4,167 to CTB.

For the year ended October 31, 2005, Citigroup Global Markets Inc. (“CGM”), another indirect wholly-owned subsidiary of Citigroup, received brokerage commissions in the amounts of $28,788 and $32,352 for SBLCV and SBMCC, respectively. During the year ended October 31, 2005, CGM did not receive any brokerage commissions from SBLCG, SBAG and SBIACG.

Certain officers and one Director of the Company are employees of Citigroup or its affiliates and do not receive compensation from the Funds.

74         Travelers Series Fund Inc. 2005 Annual Report

Notes to Financial Statements (continued)

3. Investments

During the year ended October 31, 2005, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:

	Purchases		Sales
SBLCV	$	137,103,079	$	196,910,973
SBLCG		78,203,215		124,867,263
SBMCC		122,781,790		128,621,621
SBAG		29,366,747		1,466,093
SBIACG		26,624,391		49,241,455

At October 31, 2005, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

	Gross unrealized appreciation		Gross unrealized depreciation		Net unrealized appreciation
SBLCV	$	48,939,598	$	(10,465,391)	$	38,474,207
SBLCG		78,523,561		(9,085,617)		69,437,944
SBMCC		16,631,758		(3,474,941)		13,156,817
SBAG		278,472,543		(149,867,800)		128,604,743
SBIACG		51,224,566		(2,497,193)		48,727,373

At October 31, 2005, SBIACG had the following open foreign currency contract:

	Local Currency	Market Value		Settlement Date	Unrealized Loss
Contracts to Buy:
Japanese Yen	22,993,740	$	197,592	11/2/05	$	(1,488	)

At October 31, 2005, SBLCV, SBLCG, SBMCC and SBAG did not have any open foreign currency contracts.

At October 31, 2005, SBIACG loaned securities having a market value of $20,198,407. SBIACG received cash collateral amounting to $21,220,818 which was invested into the State Street Navigator Securities Lending Trust Prime Portfolio, a Rule 2a-7 money market fund, registered under the 1940 Act.

At October 31, 2005, SBLCV, SBLCG, SBMCC and SBAG did not have any securities on loan.

4. Capital Shares

At October 31, 2005, the Company had six billion shares of capital stock authorized with a par value of $0.00001 per share. Each share of a Fund represents an equal proportionate interest in that Fund with each other share of the same Fund and has an equal entitlement to any dividends and distributions made by the Fund.

Travelers Series Fund Inc. 2005 Annual Report         75

Notes to Financial Statements (continued)

Transactions in shares of each Fund were as follows:

	Year Ended October 31, 2005		Year Ended October 31, 2004
SBLCV
Shares sold	174,564		256,486
Shares issued on reinvestment	354,179		357,126
Shares repurchased	(3,655,136	)	(4,456,154	)
Net Decrease	(3,126,393	)	(3,842,542	)
SBLCG
Shares sold	837,308		5,848,481
Shares issued on reinvestment	104,161		4,938
Shares repurchased	(4,531,870	)	(1,924,673	)
Net Increase (Decrease)	(3,590,401	)	3,928,746
SBMCC
Shares sold	618,090		1,744,843
Shares repurchased	(836,951	)	(384,264	)
Net Increase (Decrease)	(218,861	)	1,360,579
SBAG
Shares sold	4,820,016		22,127,976
Shares issued on reinvestment	281,999		—
Shares repurchased	(4,607,553	)	(1,514,855	)
Net Increase	494,462		20,613,121
SBIACG
Shares sold	423,243		1,538,608
Shares issued on reinvestment	115,894		159,603
Shares repurchased	(2,502,814	)	(5,360,813	)
Shares issued in connection with merger (Note 5)	224,109		—
Net Decrease	(1,739,568	)	(3,662,602	)

5. Transfer of Net Assets

On July 8, 2005, SBIACG acquired the assets and certain liabilities of the GSS Salomon Brothers Variable International Equity Fund pursuant to a plan of reorganization approved by GSS Salomon Brothers Variable International Equity Fund shareholders on July 1, 2005. Total shares issued by SBIACG, the total net assets of the GSS Salomon Brothers Variable International Equity Fund and total net assets of SBIACG on the date of transfer were as follows:

Acquired Fund	Shares issued by SBIACG	Total Net Assets of the GSS Salomon Brothers Variable International Equity Fund		Total Net Assets of SBIACG
GSS Salomon Brothers Variable International Equity Fund	224,109	$	2,864,133	$	158,199,570

76         Travelers Series Fund Inc. 2005 Annual Report

Notes to Financial Statements (continued)

The total assets of GSS Salomon Brothers Variable International Equity Fund before acquisition included net unrealized depreciation of $961,933 and accumulated net realized gains of $494. Total net assets of SBIACG immediately after the transfer were $161,063,703. The transaction was structured to qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as amended.

6. Income Tax Information and Distributions to Shareholders

The tax character of distributions paid during the fiscal year ended October 31, 2005 were as follows:

	SBLCV		SBLCG		SBAG		SBIACG
Distributions paid from:
Ordinary Income	$	6,400,006	$	1,500,969		—	$	1,500,826
Net Long-term Capital Gains		—		—	$	3,756,228		—
Total Distributions Paid	$	6,400,006	$	1,500,969	$	3,756,228	$	1,500,826

The tax character of distributions paid during the fiscal year ended October 31, 2004 were as follows:

	SBLCV		SBLCG		SBAG	SBIACG
Distributions paid from:
Ordinary Income	$	5,914,007	$	23,939	—	$	1,763,610
Net Long-term Capital Gains		—		—	—		—
Total Taxable Distributions	$	5,914,007	$	23,939	—	$	1,763,610
Tax Return of Capital		—		46,869	—		—
Total Distributions Paid	$	5,914,007	$	70,808	—	$	1,763,610

During the years ended October 31, 2005 and 2004, SBMCC did not pay any distributions.

As of October 31, 2005, the components of accumulated earnings on a tax basis were as follows:

	SBLCV			SBLCG			SBMCC
Undistributed ordinary income — net	$	3,092,777		$	183,919		$	519,558
Undistributed long-term capital gains — net		—			—			9,028,416
Total undistributed earnings	$	3,092,777		$	183,919		$	9,547,974
Capital loss carryforward*	$	(29,341,801	)	$	(64,924,813	)		—
Unrealized appreciation		38,474,067	(a)		69,437,944	(b)	$	13,156,817	(b)
Total accumulated earnings — Net	$	12,225,043		$	4,697,050		$	22,704,791

Travelers Series Fund Inc. 2005 Annual Report         77

Notes to Financial Statements (continued)

	SBAG			SBIACG
Undistributed ordinary income — net		—		$	1,840,218
Undistributed long-term capital gains — net	$	32,460			—
Total undistributed earnings	$	32,460		$	1,840,218
Capital loss carryforward*		—		$	(61,381,331	)
Other book/tax temporary differences		—			(2,202	)(c)
Unrealized appreciation	$	128,604,743	(b)		48,730,043	(d)
Total accumulated earnings/(losses) — Net	$	128,637,203		$	(10,813,272	)

* During the taxable year ended October 31, 2005, SBLCV, SBMCC and SBIACG utilized $12,803,025, $3,842,058 and $5,532,827, respectively, of their respective capital loss carryovers available from prior years. As of October 31, 2005, the Funds had the following net capital loss carryforwards remaining:

Year of Expiration	SBLCV			SBLCG			SBIACG
10/31/2008		—		$	(2,019,427	)		—
10/31/2009		—			(5,453,825	)	$	(38,021,872	)
10/31/2010	$	(6,191,123	)		(30,603,559	)		(13,574,174	)
10/31/2011		(23,150,678	)		(8,588,495	)		(9,785,285	)
10/31/2012		—			(5,325,802	)		—
10/31/2013		—			(12,933,705	)		—
	$	(29,341,801	)	$	(64,924,813	)	$	(61,381,331	)

These amounts will be available to offset any future taxable capital gains.

^(a) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and the difference between the book and tax cost basis of investments in real estate investment trusts.

^(b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales.

^(c) Other book/tax temporary differences are attributable primarily for differences in the book/tax treatment of various items.

^(d) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains an investments in passive foreign investment companies.

7. Regulatory Matters

On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and CGM relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).

The SEC order finds that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at that time, included the Funds’ investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also finds that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer

78         Travelers Series Fund Inc. 2005 Annual Report

Notes to Financial Statements (continued)

agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan prepared and submitted for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.

The order requires SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent SBFM and CGM would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Funds’ Board selected a new transfer agent for the Funds. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, the Funds’ investment manager does not believe that this matter will have a material adverse effect on the Funds.

On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason Inc.

8. Legal Matters

Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGM and SBFM, (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC described in Note 7. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the investment manager for the Smith Barney family of funds, rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses.

On October 5, 2005, a motion was filed to consolidate the five actions and any subsequently related actions. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future.

As of the date of this report, the Funds’ investment manager believes that resolution of the pending lawsuit will not have a material effect on the financial position or results of

Travelers Series Fund Inc. 2005 Annual Report         79

Notes to Financial Statements (continued)

operations of the Funds or the ability of the Funds’ investment manager and its affiliates to continue to render services to the Funds under their respective contracts.

* * *

Beginning in June, 2004, class action lawsuits alleging violations of the federal securities laws were filed against CGM and a number of its affiliates, including SBFM and Salomon Brothers Asset Management Inc (the “Advisers”), substantially all of the mutual funds managed by the Advisers, including the Funds and directors or trustees of the Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGM 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 CGM 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 aspects 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, the Funds’ investment manager 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, the Funds’ investment manager 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.

The Defendants have moved to dismiss the complaint. Those motions are pending before the court.

9. Other Matters

The Funds have received information concerning SBFM, as follows:

On September 16, 2005, the staff of the Securities and Exchange Commission (the “Commission”) informed SBFM that the staff is considering recommending that the Commission institute administrative proceedings against SBFM for alleged violations of Sections 19(a) and 34(b) of the 1940 Act (and related Rule 19a-1). The notification is a result of an industry wide inspection undertaken by the Commission and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM.

80         Travelers Series Fund Inc. 2005 Annual Report

Notes to Financial Statements (continued)

Although there can be no assurance, SBFM believes that this matter is not likely to have a material adverse effect on the Funds or SBFM’s ability to perform investment advisory services relating to the Funds.

10. Subsequent Events

On December 1, 2005, Citigroup completed the sale of substantially all of its asset management business, CAM, to Legg Mason, Inc. (“Legg Mason”). As a result, the Funds’ investment manager (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused each Fund’s existing investment management contract to terminate. Each Fund’s shareholders previously approved a new investment management contract between the Fund and the Manager, which became effective on December 1, 2005.

Legg Mason, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202, is a financial services holding company. As of December 2, 2005, Legg Mason’s asset management operation had aggregate assets under management of approximately $830 billion.

Each Fund’s Board has appointed the Fund’s current distributor, CGM, and Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, as co-distributors of each Fund. CGM and other broker-dealers, financial intermediaries and financial institutions (each called a “Service Agent”) that currently offer fund shares will continue to make the Fund’s shares available to their clients. Additional Service Agents may offer fund shares in the future.

Effective December 1, 2005, CGM will no longer be an affiliated person of the Funds under the Investment Company Act of 1940, as amended. As a result, the Funds will be permitted to execute transactions with CGM or an affiliate of CGM as agent (but not as principal) without the restrictions applicable to transactions with affiliated persons. Similarly, the Funds generally will be permitted to purchase securities in underwritings in which CGM or an affiliate of CGM is a member without the restrictions imposed by certain rules of the Securities and Exchange Commission. The Manager’s use of CGM or affiliates of CGM as agent in portfolio transactions with the Funds will be governed by the Funds’ policy of seeking the best overall terms available.

Certain officers and one Director of the Funds are employees of Legg Mason or its affiliates and do not receive compensation from the Funds.

The Funds’ Board has approved PFPC Inc. (“PFPC”) to serve as transfer agent for the Funds. The principal business office of PFPC is located at P.O. Box 9699, Providence, RI 02940-9699.

Travelers Series Fund Inc. 2005 Annual Report         81

Report of Independent Registered Public Accounting Firm

The Shareholders and Board of Directors

Travelers Series Fund Inc.:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Smith Barney Large Cap Value Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith Barney Mid Cap Core Portfolio, Smith Barney Aggressive Growth Portfolio and Smith Barney International All Cap Growth Portfolio, each a series of Travelers Series Fund Inc., as of October 31, 2005, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2005, by correspondence with the custodian and broker. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Smith Barney Large Cap Value Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith Barney Mid Cap Core Portfolio, Smith Barney Aggressive Growth Portfolio and Smith Barney International All Cap Growth Portfolio as of October 31, 2005, and the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

New York, New York

December 16, 2005

82         Travelers Series Fund Inc. 2005 Annual Report

Board Approval of Management Agreements (unaudited)

At meetings of the Board of Travelers Series Fund Inc., on behalf of its series, Smith Barney Large Cap Value Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith Barney Mid Cap Core Portfolio, Smith Barney Aggressive Growth Portfolio and Smith Barney International All Cap Growth Portfolio (each series, a “Fund” and collectively, the “Funds”), including the Funds’ independent, or non-interested, Board members (the “Independent Board Members”), the Board received information from the Funds’ manager, Smith Barney Fund Management LLC (the “Manager”), to assist them in their consideration of the Funds’ management agreement (the “Management Agreement”). The Board received and considered a variety of information about the Manager, and the Funds’ distributor, as well as the advisory and distribution arrangements for the Funds. In voting to approve each Management Agreement, the Board, including the Independent Board Members, considered whether the approval would be in the best interest of the Funds and their shareholders based upon several factors including those discussed below.

Nature, Extent and Quality of the Services under the Management

The Board received and considered information regarding the nature, extent and quality of services provided to the Funds by the Manager under the Management Agreement during the past year. The Board also received a description of the administrative and other services rendered to the Funds and their shareholders by the Manager. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager about the management of the Funds’ affairs and the Manager’s role in coordinating the activities of the Funds’ other service providers. The Board’s evaluation of the services provided by the Manager took into account the Board’s knowledge and familiarity gained as Board members of funds in the Citigroup Asset Management (“CAM”) fund complex, including the scope and quality of the Manager’s investment management and other capabilities and the quality of its administrative and other services. The Board observed that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Funds’ expanded compliance programs. The Board also considered the Manager’s response to recent regulatory compliance issues affecting it and the CAM fund complex. The Board reviewed information received from the Manager regarding the implementation to date of the Funds’ compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of 1940.

The Board reviewed the qualifications, backgrounds and responsibilities of the Funds’ senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Funds. The Board also considered the degree to which the Manager implemented organizational changes to improve investment results and the services provided to the CAM fund complex. The Board noted that the Manager’s Office of the Chief Investment Officer, composed of the senior officers of the investment teams managing the funds in the CAM complex, participates in reporting to the Board on investment matters. The Board also considered, based on its knowledge of the Manager and its affiliates, the financial resources available to CAM and its parent organization, Citigroup Inc.

Travelers Series Fund Inc. 2005 Annual Report         83

Board Approval of Management Agreements (unaudited) (continued)

The Board also considered the Manager’s brokerage policies and practices, the standards applied in seeking best execution, the Manager’s policies and practices regarding soft dollars, the use of a broker affiliated with the Manager and the existence of quality controls applicable to brokerage allocation procedures. In addition, management also reported to the Board on, among other things, its business plans, recent organizational changes and portfolio manager compensation plan.

The Board concluded that, overall, it was satisfied with the nature, extent and quality of services provided (and expected to be provided) under the Management Agreement by the Manager were acceptable.

Fund Performance

The Board received and reviewed performance information for the Funds as well as for a group of comparable funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the Funds with the funds included in the Performance Universe. The Board also was provided with information comparing the Funds’ performance to the Lipper category averages over various time periods. The Board members noted that they had also received and discussed with management information throughout the year at periodic intervals comparing each Fund’s performance against its benchmark index(es).

Smith Barney Large Cap Value Portfolio

The information comparing the Fund’s performance to that of its Performance Universe, consisting of all variable insurance products classified as “large-cap value funds” by Lipper, showed that the Fund’s performance, as of March 31, 2005 for the 1-, 3-, 5 and 10-year periods was lower than the median. The Board noted that as of August 19, 2004, there had been a change in the portfolio managers managing the portfolio. Management noted that the last year’s performance was hampered by underweighting energy stocks and overweighting technology, healthcare and consumer staples and believes that this contributed to the below median performance results. Management also noted that the Fund has reallocated its portfolio. Based on their review, the Board continues to retain confidence in the Manager to seek to achieve the Fund’s investment objective and carry out its investment strategies.

Smith Barney Large Capitalization Growth Portfolio

The information comparing the Fund’s performance to that of its Performance Universe, consisting of all variable insurance products classified as “large cap growth funds” by Lipper, showed that the Fund’s performance, as of March 31, 2005, for the 1-year period was lower than the median while the 3- and 5-year periods were better than the median. Based on their review, the Board continues to retain confidence in the Manager to seek to achieve the Fund’s investment objective and carry out its investment strategies.

84         Travelers Series Fund Inc. 2005 Annual Report

Board Approval of Management Agreements (unaudited) (continued)

Smith Barney Mid Cap Core Portfolio

The information comparing the Fund’s performance to that of its Performance Universe, consisting of all variable insurance products classified as “mid-cap core funds” by Lipper, showed that the Fund’s performance, as of March 31, 2005, for the 1-, 3- and 5-year periods were lower than the median. The Board noted that effective May 11, 2005, there had been a change in the portfolio management team managing the Fund. Based on their review, the Board continues to retain confidence in the Manager to seek to achieve the Fund’s investment objective and carry out its investment strategies.

Smith Barney Aggressive Growth Portfolio

The information comparing the Fund’s performance to that of its Performance Universe, consisting of all variable insurance products classified as “multi-cap growth funds” by Lipper, showed that the Fund’s performance, as of March 31, 2005, for the 1-year period was lower than the median, the performance for the 3-year period was within the median range and the performance for the 5-year period was better than the median. Based on their review, the Board continues to retain confidence in the Manager to seek to achieve the Fund’s investment objective and carry out its investment strategies.

Smith Barney International All Cap Growth Portfolio

The information comparing the Fund’s performance to that of its Performance Universe, consisting of all variable insurance products classified as “international growth funds” by Lipper, showed that the Fund’s performance, as of March 31, 2005, for the 1-year period was within the median range, while the 3-, 5- and 10-year periods was lower than the median. The Board noted the enhanced controls and quantitative tools utilized by the portfolio manager appeared to be helping to improve results. Based on their review, the Board continues to retain confidence in the Manager to seek to achieve the Fund’s investment objective and carry out its investment strategies.

Management Fees and Expense Ratios

The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management services provided by the Manager. The Board also reviewed and considered whether fee waiver and/or expense reimbursement arrangements are currently in place and considered the actual fee rate (after taking any waivers and reimbursements into account) (the “Actual Management Fee”) and whether any fee waivers and reimbursements could be discontinued.

Additionally, the Board received and considered information comparing each Fund’s Contractual Management Fees and Actual Management Fee and each Fund’s overall expenses with those of funds in both the relevant expense group (“Expense Group”) and a broader group of funds, each selected and provided by Lipper. The Board also reviewed information regarding fees the Manager charged its other U.S. clients investing primarily in an asset class similar to that of the Funds including, where applicable, separate accounts.

Travelers Series Fund Inc. 2005 Annual Report         85

Board Approval of Management Agreements (unaudited) (continued)

The Manager reviewed with the Board the significant differences in scope of services provided to the Funds and to these other clients, noting that the Funds are provided with administrative services, office facilities, Fund officers (including the Funds’ chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Funds by other service providers. The Board considered the fee comparisons in light of the differences required to manage these different types of accounts. The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a proposed framework of fees based on asset classes.

Management also discussed with the Board the current distribution arrangements. The Board was provided with information concerning revenues received by and certain expenses incurred by the Funds’ affiliated distributor and how the amount received by the distributor was expended.

Smith Barney Large Cap Value Portfolio

The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of 9 variable insurance portfolio funds (including the Fund) classified as “large-cap value funds” by Lipper, showed that the Fund’s Contractual and Actual Management Fees were within the range of management fees paid by the other funds in the Expense Group and, indeed, were better than the median. The Board noted that the Fund’s actual total expense ratio was also better than the median. The Board concluded that this was acceptable.

Smith Barney Large Capitalization Growth Portfolio

The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of 14 variable insurance portfolio funds (including the Fund) classified as “large-cap growth funds” by Lipper, showed that the Fund’s Contractual and Actual Management Fees were within the range of management fees paid by the other funds in the Expense Group and were within the median range. The Board noted that the Fund’s actual total expense ratio was better than the median. After discussion with the Board, the Manager offered to institute fee breakpoints effective November 1, 2005, acknowledging that the Fund is not yet large enough to realize the benefits of the new fee schedule. Breakpoints will help reduce the management fees of the Fund; as the Fund’s assets grow the impact of the breakpoints will increase.

Smith Barney Mid Cap Core Portfolio

The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of 13 variable insurance portfolio funds (including the Fund) classified as “mid-cap core funds” by Lipper, showed that the Fund’s Contractual and Actual Management Fees were within the range of management fees paid by the other funds in the Expense Group and, indeed, were better than

86         Travelers Series Fund Inc. 2005 Annual Report

Board Approval of Management Agreements (unaudited) (continued)

the median. The Board noted that the Fund’s actual total expense ratio was also better than the median. And concluded that it was acceptable.

Smith Barney Aggressive Growth Portfolio

The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of 12 variable insurance portfolio funds (including the Fund) classified as “multi-cap growth funds” by Lipper, showed that the Fund’s Contractual and Actual Management Fees were within the range of management fees paid by the other funds in the Expense Group but were higher than the median. The Board noted that the Fund’s actual total expense ratio was also within the range of total expenses paid by the other funds in the Expense Group and was within the median range. After discussion with the Board, the Manager offered to reduce the Contractual Management Fee and institute fee breakpoints effective November 1, 2005; as the Fund’s assets grow the impact of the breakpoints will become effective.

Smith Barney International All Cap Growth Portfolio

The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of 11 variable insurance portfolio funds (including the Fund) classified as “international growth funds” by Lipper, showed that the Fund’s Contractual and Actual Management Fees were within the range of management fees paid by the other funds in the Expense Group and that the Contractual Management Fees were better than the median while the Actual Management Fees were within the median range. The Board noted that the Fund’s actual total expense ratio was better than the median. After discussion with the Board, the Manager offered to institute fee breakpoints effective November 1, 2005, acknowledging that the Fund is not yet large enough to realize the benefits of the new fee schedule. Breakpoints will help reduce the management fees of the Fund; as the Fund’s assets grow the impact of the breakpoints will increase.

Taking all of the above into consideration, the Board determined that for each of the Funds the Management Fee was reasonable in light of the nature, extent and quality of the services provided to the Board under the Management Agreement.

Manager Profitability

The Board received and considered a profitability analysis of the Manager and its affiliates in providing services to the Funds. The Board also received profitability information with respect to the CAM fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing the profitability data as well as a report from an outside consultant that had reviewed the Manager’s methodology. The Board determined that the Manager’s profitability was considered not excessive in light of the nature, extent and quality of the services provided to the Funds.

Travelers Series Fund Inc. 2005 Annual Report         87

Board Approval of Management Agreements (unaudited) (continued)

Economies of Scale

The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Funds, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered whether economies of scale in the provision of services to the Funds were being passed along to the shareholders. The Board also considered whether alternative fee structures (such as with additional breakpoints at lower asset levels) would be more appropriate or reasonable taking into consideration economies of scale or other efficiencies. However, because of the nature of the Manager’s business, the Board could not reach definitive conclusions as to whether the Funds realize or might realize economies of scale or how great they may be.

The Board noted that, with the exception of Smith Barney Aggressive Growth Portfolio, none of the series of the Funds had yet reached the specified asset level at which a breakpoint to its Contractual Management Fee would be triggered. The Board noted that the Funds’ Contractual Management Fee contains breakpoints or was now proposed to contain breakpoints and, accordingly, reflects the potential for sharing economies of scale with shareholders as the funds grow. The Board considered whether the breakpoint fee structure was a reasonable means of sharing economies of scale or other efficiencies that might accrue from increases in asset levels. The Board also noted that as the Funds’ assets have increased over time, it has realized other economies of scale, as certain expenses, such as fees for Board members, auditors and legal fees, become a smaller percentage of overall assets.

The Board noted that for Smith Barney Aggressive Growth Portfolio, the fund’s asset level had exceeded the first breakpoint (or would exceed any proposed breakpoints) and, as a result, the fund and its shareholders realized or would realize economies of scale because the total expense ratio of the fund would be lower than if no breakpoints had been in place.

Other Benefits to the Manager

The Board considered other benefits received by the Manager and its affiliates as a result of their relationship with the Funds, including soft dollar arrangements, receipt of brokerage commissions and the opportunity to offer additional products and services to the Funds shareholders.

In light of the costs of providing investment management and other services to the Funds and the Manager’s ongoing commitment to the Funds, the profits and other ancillary benefits that the Manager and its affiliates received were considered reasonable.

Based on their discussions and considerations, including those described above, the Board members approved the Management Agreements to continue for another year. No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreements.

88         Travelers Series Fund Inc. 2005 Annual Report

Board Approval of Management Agreements (unaudited) (continued)

Additional Information

On June 23, 2005, Citigroup Inc. entered into a definitive agreement (the “Transaction Agreement”) with Legg Mason, Inc. under which Citigroup agreed to sell substantially all of its asset management business, Citigroup Asset Management (“CAM”), which includes the Adviser, to Legg Mason in exchange for the broker-dealer and investment banking businesses of Legg Mason and certain other considerations (the “Transaction”). The Transaction closed on December 1, 2005.

The consummation of the Transaction resulted in the automatic termination of each Fund’s current management agreement in accordance with the Investment Company Act of 1940, as amended (the “1940 Act”). Prior to the closing of the Transaction, each Fund’s Board approved a new management agreement between the Fund and the Adviser (the “New Management Agreement”) and authorized the Fund’s officers to submit the New Management Agreement to shareholders for their approval.

On July 11, 2005, members of the Board discussed with CAM management and certain Legg Mason representatives the Transaction and Legg Mason’s general plans and intentions regarding CAM’s business and its combination with Legg Mason’s business. The Board Members also inquired about the plans for and anticipated roles and responsibilities of certain CAM employees and officers after the Transaction.

At a meeting held on August 1, 2005, each Fund’s Board, including a majority of the Board Members who are not “interested persons” of the Fund or the Adviser as defined in the 1940 Act (the “Independent Board Members”), approved the New Management Agreement. To assist the Board in its consideration of the New Management Agreement, Legg Mason provided materials and information about Legg Mason, including its financial condition, asset management capabilities and organization, and CAM provided materials and information about the Transaction between Legg Mason and Citigroup. Representatives of CAM and Legg Mason also made presentations to and responded to questions from the Board. The Independent Board Members, through their independent legal counsel, also requested and received additional information from CAM and Legg Mason in connection with their consideration of the New Management Agreement. The additional information was provided in advance of and at the August meeting. After the presentations and after reviewing the written materials provided, the Independent Board Members met in executive session with their counsel to consider the New Management Agreement. The Independent Board Members of the Board also conferred separately and with their counsel about the Transaction on a number of occasions, including in connection with the July and August meetings.

In their deliberations concerning the New Management Agreement, among other things, the Board Members considered:

(i) the reputation, financial strength and resources of Legg Mason and its investment advisory subsidiaries;

(ii) that, following the Transaction, CAM will be part of an organization focused on the asset management business;

(iii) that Legg Mason is an experienced and respected asset management firm, and that Legg Mason has advised the Board Members that (a) it may wish to combine certain CAM operations with those of certain Legg Mason subsidiaries; (b) it is expected that these combination processes will result in changes to portfolio managers or portfolio management teams

Travelers Series Fund Inc. 2005 Annual Report         89

Board Approval of Management Agreements (unaudited) (continued)

for a number of the CAM funds, subject to Board oversight and appropriate notice to shareholders, and that, in other cases, the current portfolio managers or portfolio management teams will remain in place; and (c) in the future, it may recommend that Legg Mason subsidiaries be appointed as the adviser or subadviser to some or all of the CAM funds, subject to applicable regulatory requirements;

(iv) that CAM management had advised the Board that a number of portfolio managers and other key CAM personnel would be retained after the closing of the Transaction;

(v) that CAM management and Legg Mason have advised the Board that following the Transaction, there is not expected to be any diminution in the nature, quality and extent of services provided to the Fund and their shareholders by the Adviser, including compliance services;

(vi) that Legg Mason has advised the Board that it has no present intention to alter the expense waivers and reimbursements currently in effect and, while it reserves the right to do so in the future, it would consult with the Board before making any changes;

(vii) that under the Transaction Agreement, Citigroup and Legg Mason have agreed not to take any action that is not contemplated by the Transaction or fail to take any action that to their respective knowledge would cause any “undue burden” on Fund shareholders under applicable provisions of the 1940 Act;

(viii) the assurances from Citigroup and Legg Mason that, for a three year period following the closing of the Transaction, Citigroup-affiliated broker-dealers will continue to offer each Fund as an investment product, and the potential benefits to Fund shareholders from this and other third-party distribution access;

(ix) the potential benefits to Fund shareholders from being part of a combined fund family with Legg Mason sponsored funds;

(x) that Citigroup and Legg Mason would derive benefits from the Transaction and that, as a result, they have a financial interest in the matters that were being considered;

(xi) the potential effects of regulatory restrictions on the Fund if Citigroup-affiliated broker-dealers remain principal underwriters of the Funds after the closing of the Transaction;

(xii) the fact that each Fund’s total advisory and administrative fees will not increase by virtue of the New Management Agreement, but will remain the same;

(xiii) the terms and conditions of the New Management Agreement, including the differences from the current management agreement, and the benefits of a single, uniform form of agreement covering these services;

(xiv) that the Funds would not bear the costs of obtaining shareholder approval of the New Management Agreement;

(xv) that each Fund would avail itself of permissions granted under certain licensing arrangements between Citigroup and Legg Mason that would permit the Fund (including any share classes thereof) to maintain its current name, as well as all logos, trademarks and service marks, related to Citigroup or any of its affiliates for some agreed upon time period after the closing of the Transaction ; and

(xvi) that, as discussed in detail above, within the past year the Board had performed a full annual review of the current management agreement as required by the 1940 Act. In

90         Travelers Series Fund Inc. 2005 Annual Report

Board Approval of Management Agreements (unaudited) (continued)

that regard, the Board, in its deliberations concerning the New Management Agreement, considered the same factors regarding the nature, quality and extent of services provided, costs of services provided, profitability, fall out benefits, fees and economies of scale and investment performance as it did when it renewed the current management agreement, and reached substantially the same conclusions.

Travelers Series Fund Inc. 2005 Annual Report         91

Additional Information (unaudited)

Information about Directors and Officers

The business and affairs of the Travelers Series Fund Inc. (“Company”) are managed under the direction of the Company’s Board of Directors. Information pertaining to the Directors and Officers of the Company is set forth below. The Statement of Additional Information includes additional information about each Fund’s Directors and is available, without charge, by calling 1-800-451-2010.

Name, Address, and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Director	Other Board Memberships Held by Director
Non-Interested Directors:
Robert A. Frankel 1961 Deergrass Way Carlsbad, CA 92009 Birth Year: 1927	Director	Since 1999	Managing Partner of Robert A. Frankel Managing Consultants; Former Vice President of The Readers Digest Association, Inc.	18	None
Michael E. Gellert 122 East 42nd Street 47th Floor New York, NY 10168 Birth Year: 1931	Director	Since 1999	General Partner of Windcrest Partners, a venture capital firm	11	Director of Dalet S.A., (a publicly held French company-media management programs), SEACOR Holdings, Inc. (offshore marine services provider) and Six Flags, Inc.
Rainer Greeven 630 5th Avenue Suite 1960 New York, NY 10111 Birth Year: 1936	Director	Since 1994	Attorney, Rainer Greeven PC	11	None
Susan M. Heilbron P.O. Box 557 Chilmark, MA 02535 Birth Year: 1945	Director	Since 1994	Owner/Consultant of Lacey & Heilbron, a public relations firm	11	None

92         Travelers Series Fund Inc. 2005 Annual Report

Additional Information (unaudited) (continued)

Name, Address, and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Director	Other Board Memberships Held by Director
Interested Director:
R. Jay Gerken, CFA**  Citigroup Asset Management (“CAM”) 399 Park Avenue, Mezzanine New York, NY 10022 Birth Year: 1951	Chairman, President and Chief Executive Officer	Since 2002	Managing Director of CAM; Chairman, President, Chief Executive Officer and Director of SBFM; President and Chief Executive Officer of certain mutual funds associated with CAM; Formerly Portfolio Manager of Smith Barney Allocation Series Inc. (from 1996 to 2001) and Smith Barney Growth and Income Fund (from 1996 to 2000); formerly President, and Chief Executive Officer of Travelers Investment Adviser Inc. (“TIA”) (from 2002 to 2005)	171	None

Travelers Series Fund Inc. 2005 Annual Report         93

Additional Information (unaudited) (continued)

Name, Address, and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Director	Other Board Memberships Held by Director
Officers:
Andrew B. Shoup CAM 125 Broad Street 10th Floor New York, NY 10004 Birth Year: 1956	Senior Vice President and Chief Administrative Officer	Since 2003	Director of CAM; Senior Vice President and Chief Administrative Officer of certain mutual funds associated with CAM; Head of International Funds Administration of CAM (from 2001 to 2003); Director of Global Funds Administration of CAM (from 2000 to 2001); Head of U.S. Citibank Funds Administration of CAM (from 1998 to 2000)	N/A	N/A
James M. Giallanza CAM 125 Broad Street, 11th Floor New York, NY 10004 Birth Year: 1966	Chief Financial Officer and Treasurer	Since 2004	Director of CAM; Chief Financial Officer and Treasurer of certain mutual funds associated with CAM; Director and Controller of the U.S. wholesale business at UBS Global Asset Management US, Inc. (from September 2001 to July 2004); Director of Global Funds Administration at CAM (from June 2000 to September 2001); Treasurer of the Lazard Funds (from June 1998 to June 2000)	N/A	N/A
Alan J. Blake CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1949	Vice President and Investment Officer	Since 1998	Managing Director of CAM	N/A	N/A
Richard A. Freeman CAM 399 Park Avenue New York, NY 10022 Birth Year: 1953	Vice President and Investment Officer	Since 1999	Managing Director of CAM and Investment Officer of SBFM	N/A	N/A

94         Travelers Series Fund Inc. 2005 Annual Report

Additional Information (unaudited) (continued)

Name, Address, and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Director	Other Board Memberships Held by Director
Robert Feitler CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1960	Vice President and Investment Officer	Since 2004	Director of CAM	N/A	N/A
Mark J. McAllister, CFA CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1962	Vice President and Investment Officer	Since 2004	Managing Director of CAM	N/A	N/A
Jeffrey J. Russell CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1957	Vice President and Investment Officer	Since 1994	Managing Director of CAM	N/A	N/A
Brian Angerame CAM 399 Park Avenue New York, NY 10022 Birth Year: 1972	Vice President and Investment Officer	Since 2005	Director of CAM; Formerly Portfolio manager of Prudential Investment Management (from 1997 to 2000)	N/A	N/A
Derek Deutsch CAM 399 Park Avenue New York, NY 10022 Birth Year: 1969	Vice President and Investment Officer	Since 2005	Director of CAM	N/A	N/A
Peter Stournaras CAM 399 Park Avenue New York, NY 10022 Birth Year: 1973	Vice President and Investment Officer	Since 2005	Director of CAM; Formerly senior consultant with Deloitte and Touche LLP.	N/A	N/A

Travelers Series Fund Inc. 2005 Annual Report         95

Additional Information (unaudited) (continued)

Name, Address, and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Director	Other Board Memberships Held by Director
Andrew Beagley CAM 399 Park Avenue, 4th Floor New York, NY 10022 Birth Year: 1962	Chief Anti-Money Laundering Compliance Officer Chief Compliance Officer	Since 2002 Since 2002	Chief Anti-Money Laundering Compliance Officer and Chief Compliance Officer of certain mutual funds associated with CAM, Managing Director of CAM (since 2005); Director of CAM (2000-2005); Director of Compliance, North America, CAM (2000-2005); Director of Compliance, Europe, the Middle East and Africa, CAM (from 1999 to 2000); Salomon Brothers Asset Management Limited, Smith Barney Global Capital Management Inc.; formerly Chief Compliance Officer of TIA (from 2002 to 2005)	N/A	N/A
Robert I. Frenkel CAM 300 First Stamford Place 4th Floor Stamford, CT 06902 Birth Year: 1954	Secretary and Chief Legal Officer	Since 2003	Managing Director and General Counsel, Global Mutual Funds for CAM and its predecessor (since 1994); Secretary of CFM (from 2001 to 2004); Secretary and Chief Legal Officer of mutual funds associated with CAM	N/A	N/A

* Each Director and officer serves until his or her successor has been duly elected and qualified.

** Mr. Gerken is an “interested person” of the Funds as defined in the Investment Company Act of 1940, as amended, because Mr. Gerken is an officer of SBFM and certain of its affiliates.

96         Travelers Series Fund Inc. 2005 Annual Report

Important Tax Information (unaudited)

The following information is provided with respect to the distributions paid during the taxable year ended October 31, 2005:

	SBLCV		SBLCG
Record Date: Payable Date:	12/27/2004 12/28/2004		12/27/2004 12/28/2004
Dividends Qualifying for the Dividends Received Deduction for Corporations	100.00	%	100.00	%

	SBAG		SBIACG
Record Date: Payable Date:		12/27/2004 12/28/2004		12/27/2004 12/28/2004
Foreign Source Income		—		96.12	%*
Foreign Taxes Paid Per Share		—	$	0.017600
Long-Term Capital Gain Dividend	$	0.049500		—

* Expressed as a percentage of the cash distribution grossed-up for foreign taxes.

The foreign taxes paid represent taxes incurred by the Fund on income received by the Fund from foreign sources. Foreign taxes paid may be included in taxable income with an offsetting deduction from gross income or may be taken as a credit for taxes paid to foreign governments. You should consult your tax adviser regarding the appropriate treatment of foreign taxes paid.

Please retain this information for your records.

Travelers Series Fund Inc. 2005 Annual Report         97

Travelers Series Fund Inc.

DIRECTORS Robert A. Frankel Michael E. Gellert R. Jay Gerken, CFA Chairman Rainer Greeven Susan M. Heilbron OFFICERS R. Jay Gerken, CFA President and Chief Executive Officer Andrew B. Shoup Senior Vice President and Chief Administrative Officer James M. Giallanza Chief Financial Officer and Treasurer Brian Angerame Vice President and Investment Officer Derek Deutsch Vice President and Investment Officer Peter Stournaras Vice President and Investment Officer Alan J. Blake Vice President and Investment Officer Robert Feitler Vice President and Investment Officer OFFICERS (continued) Richard A. Freeman Vice President and Investment Officer Mark J. McAllister, CFA Vice President and Investment Officer Jeffrey J. Russell Vice President and Investment Officer Andrew Beagley Chief Anti-Money Laundering Compliance Officer and Chief Compliance Officer Robert I. Frenkel Secretary and Chief Legal Officer INVESTMENT MANAGER Smith Barney Fund
    Management LLC CUSTODIAN State Street Bank and Trust     Company DISTRIBUTORS Citigroup Global Markets Inc. Legg Mason Investor Services, LLC TRANSFER AGENT PFPC Inc. P.O. Box 9699 Providence, Rhode Island 02940-9699

This report is submitted for the general information of the shareholders of the Travelers Series Fund Inc. — Smith Barney Large Cap Value Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith Barney Mid Cap Core Portfolio, Smith Barney Aggressive Growth Portfolio and Smith Barney International All Cap Growth Portfolio.

This report must be preceded or accompanied by a free prospectus. Investors should consider the Fund’s investment objectives, risks, charges and expenses before investing. The prospectus contains this and other important information about the Fund. Please read the prospectus carefully before investing.

TRAVELERS SERIES FUND INC.

125 Broad Street

10th Floor, MF-2

New York, New York 10004

FDO3331 12/05 05-9444

Travelers Series Fund Inc.

Smith Barney Large Cap Value Portfolio

Smith Barney Large Capitalization Growth Portfolio

Smith Barney Mid Cap Core Portfolio

Smith Barney Aggressive Growth Portfolio

Smith Barney International All Cap Growth Portfolio

The Funds are separate investment funds of the Travelers Series Fund Inc., a Maryland corporation.

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Funds, shareholders can call 1-800-451-2010.

Information on how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the Funds’ website at www.citigroupam.com and (3) on the SEC’s website at www.sec.gov.

EX-99.17.D

SEMI-ANNUAL

REPORT

APRIL 30, 2006

Legg Mason Partners Variable Portfolios III, Inc.

Legg Mason Partners Variable Large Cap Value Portfolio

Legg Mason Partners Variable Large Cap Growth Portfolio

Legg Mason Partners Variable Mid Cap Core Portfolio

Legg Mason Partners Variable Aggressive Growth Portfolio

Legg Mason Partners Variable International All Cap Growth Portfolio

INVESTMENT PRODUCTS: NOT FDIC INSURED Ÿ NO BANK GUARANTEE Ÿ MAY LOSE VALUE

Legg Mason Partners Variable Portfolios III, Inc.

Semi-Annual Report  •  April 30, 2006

What’s

Inside

Letter from the Chairman	I
Fund at a Glance:
Legg Mason Partners Variable Large Cap Value Portfolio	1
Legg Mason Partners Variable Large Cap Growth Portfolio	2
Legg Mason Partners Variable Mid Cap Core Portfolio	3
Legg Mason Partners Variable Aggressive Growth Portfolio	4
Legg Mason Partners Variable International All Cap Growth Portfolio	5
Fund Expenses	6
Schedules of Investments	8
Statements of Assets and Liabilities	26
Statements of Operations	28
Statements of Changes in Net Assets	30
Financial Highlights	35
Notes to Financial Statements	40
Additional Shareholder Information	50

“Smith Barney”, “Salomon Brothers” and “Citi” are service marks of Citigroup, licensed for use by Legg Mason as the names of funds and investment managers. Legg Mason and its affiliates, as well as the Funds’ investment manager, are not affiliated with Citigroup.

Letter from the Chairman

R. JAY GERKEN, CFA

Chairman, President and Chief Executive Officer

Dear Shareholder,

The U.S. economy was mixed during the six-month reporting period. After a 4.1% advance in the third quarter of 2005, fourth quarter gross domestic product (“GDP”)ⁱ growth slipped to 1.7%. This marked the first quarter in which GDP growth did not surpass 3.0% since the first three months of 2003. However, as expected, the economy rebounded sharply in the first quarter of 2006, with GDP rising an estimated 5.3%. The economic turnaround was prompted by both strong consumer and business spending. In addition, the U.S. Labor Department reported that unemployment hit a five-year low in March.

Overseas, economic growth has been improving in many areas. After a lengthy period of weakness and deflation, Japan’s economy has gained momentum due, in part, to strong exports and improving consumer spending. Growth in the Eurozone has also been strengthening on the back of improved domestic spending in countries such as Germany. In addition, interest rates have remained low in the region.

For the six-month period ended April 30, 2006, the U.S. stock market generated strong results, with the S&P 500 Indexⁱⁱ returning 9.63%. While high oil and commodity prices, steadily rising interest rates, and geopolitical issues triggered periods of market volatility, investors generally remained focused on the strong corporate profit environment.

Investment returns were even stronger in the international equity markets. While these markets experienced many of the same issues as the U.S., they rallied on expectations for improving economic growth and solid corporate profits. During the six-month period ended April 30, 2006, the MSCI EAFE Indexⁱⁱⁱ rose 22.89%. This was surpassed by the emerging equity markets, as the MSCI Emerging Markets Index^iv surged 37.60% over the same period.

Legg Mason Partners Variable Portfolios III, Inc.         I

Within this environment, the funds performed as follows:

Performance Snapshot as of April 30, 2006 (unaudited)
	6 months
Variable Large Cap Value Portfolio1	11.37%
S&P 500/Citigroup Value Index	13.20%
Lipper Variable Large-Cap Value Funds Category Average	10.79%
Variable Large Cap Growth Portfolio1	2.27%
Russell 1000 Growth Index	7.06%
Lipper Variable Large-Cap Growth Funds Category Average	7.63%
Variable Mid Cap Core Portfolio1	14.63%
S&P MidCap 400 Index	15.26%
Lipper Variable Mid-Cap Core Funds Category Average	14.35%
Variable Aggressive Growth Portfolio1	10.73%
Russell 3000 Growth Index	8.19%
Lipper Variable Multi-Cap Growth Funds Category Average	11.97%
Variable International All Cap Growth Portfolio1	23.07%
MSCI EAFE Growth Index	22.26%
Lipper Variable International Growth Funds Category Average	24.80%
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost.
Performance figures reflect fee waivers and/or expense reimbursements, without which the performance would have been lower.
Fund returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the deduction of all fund expenses.
Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended April 30, 2006 and include the reinvestment of distributions, including returns of capital, if any. Returns were calculated among the 97 funds in the variable large-cap value funds category. Returns were calculated among the 195 funds in the variable large-cap growth funds category. Returns were calculated among the 83 funds in the variable mid-cap core funds category. Returns were calculated among the 124 funds in the variable multi-cap growth funds category. Returns were calculated among the 57 funds in the variable international growth funds category.

¹ The fund is an underlying investment option of various variable annuity and variable life insurance products. The fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the fund. Past performance is no guarantee of future results.

II         Legg Mason Partners Variable Portfolios III, Inc.

Legg Mason Partners Variable Large Cap Value Portfolio²

For the six months ended April 30, 2006, the Legg Mason Partners Variable Large Cap Value Portfolio returned 11.37%. The fund outperformed the Lipper Variable Large-Cap Value Funds Category Average,³ which increased 10.79%. The fund’s unmanaged benchmark, the S&P 500/Citigroup Value Index,^v returned 13.20% for the same period.

Legg Mason Partners Variable Large Cap Growth Portfolio²

For the six months ended April 30, 2006, the Legg Mason Partners Variable Large Cap Growth Portfolio returned 2.27%. The fund underperformed the Lipper Variable Large-Cap Growth Funds Category Average,⁴ which increased 7.63%. The fund’s unmanaged benchmark, the Russell 1000 Growth Index,^vi returned 7.06% for the same period.

Legg Mason Partners Variable Mid Cap Core Portfolio²

For the six months ended April 30, 2006, the Legg Mason Partners Variable Mid Cap Core Portfolio returned 14.63%. The fund outperformed the Lipper Variable Mid-Cap Core Funds Category Average,⁵ which increased 14.35%. The fund’s unmanaged benchmark, the S&P 500 MidCap 400 Index,^vii returned 15.26% for the same period.

Legg Mason Partners Variable Aggressive Growth Portfolio²

For the six months ended April 30, 2006, the Legg Mason Partners Variable Aggressive Growth Portfolio returned

² The fund is an underlying investment option of various variable annuity and variable life insurance products. The fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the fund. Past performance is no guarantee of future results.

³ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended April 30, 2006, including the reinvestment of distributions, including returns of capital, if any, calculated among the 97 funds in the fund’s Lipper category.

⁴ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended April 30, 2006, including the reinvestment of distributions, including returns of capital, if any, calculated among the 195 funds in the fund’s Lipper category.

⁵ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended April 30, 2006, including the reinvestment of distributions, including returns of capital, if any, calculated among the 83 funds in the fund’s Lipper category.

Legg Mason Partners Variable Portfolios III, Inc.         III

10.73%. The fund outperformed its unmanaged benchmark, the Russell 3000 Growth Index,^viii which returned 8.19% for the same period. The Lipper Variable Multi-Cap Growth Funds Category Average⁶ increased 11.97% over the same time frame.

Legg Mason Partners Variable International All Cap Growth Portfolio⁷

For the six months ended April 30, 2006, the Legg Mason Partners Variable International All Cap Growth Portfolio, returned 23.07%. These shares outperformed the fund’s unmanaged benchmark, the MSCI EAFE Growth Index^ix, which returned 22.26% for the same period. The Lipper Variable International Growth Funds Category Average⁸ increased 24.80% over the same time frame.

Special Shareholder Notices

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business to Legg Mason, Inc. (“Legg Mason”). As a result, the funds’ investment adviser (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused the funds’ then existing investment management contract to terminate. The funds’ shareholders previously approved a new investment management contract between the funds and the Manager, which became effective on December 1, 2005.

Prior to May 1, 2006, the funds were knows as Travelers Series Fund Inc. Smith Barney Large Cap Value Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith Barney Mid Cap Core Portfolio, Smith Barney Aggressive Growth Portfolio and Smith Barney International All Cap Growth Portfolio. The funds’ investment strategy and objective have not changed.

⁶ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended April 30, 2006, including the reinvestment of distributions, including returns of capital, if any, calculated among the 124 funds in the fund’s Lipper category.

⁷ The fund is an underlying investment option of various variable annuity and variable life insurance products. The fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the fund. Past performance is no guarantee of future results.

⁸ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended April 30, 2006, including the reinvestment of distributions, including returns of capital, if any, calculated among the 57 funds in the fund’s Lipper category.

IV         Legg Mason Partners Variable Portfolios III, Inc.

Information About Your Funds

As you may be aware, several issues in the mutual fund industry have come under the scrutiny of federal and state regulators. The funds’ Manager and some of its affiliates have received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the funds’ response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The funds have been informed that the Manager and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.

Important information concerning the funds and their Manager with regard to recent regulatory developments is contained in the Notes to Financial Statements included in this report.

As always, thank you for your continued confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.

Sincerely,

R. Jay Gerken, CFA

Chairman, President and Chief Executive Officer

May 25, 2006

Legg Mason Partners Variable Portfolios III, Inc.         V

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Legg Mason Partners Variable Large Cap Value Portfolio

RISKS: Keep in mind, common stocks are subject to market fluctuations. Foreign stocks are subject to certain risks of overseas investing, including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. The fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on fund performance. Please see the fund’s prospectus for more information on these and other risks.

Legg Mason Partners Variable Large Cap Growth Portfolio

RISKS: Keep in mind, common stocks are subject to market fluctuations. Please see the fund’s prospectus for more information on these and other risks.

Legg Mason Partners Variable Mid Cap Core Portfolio

RISKS: Mid-cap stocks may be more volatile than large-cap stocks. Additionally, the fund’s performance may be influenced by political, social and economic factors affecting investments in companies in foreign countries. The fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on fund performance. Please see the fund’s prospectus for more information on these and other risks.

Legg Mason Partners Variable Aggressive Growth Portfolio

RISKS: The fund may invest a significant portion of its assets in small- and mid-cap companies which may be more volatile than an investment that focuses only on large-cap companies. Please see the fund’s prospectus for more information on these and other risks.

Legg Mason Partners Variable International All Cap Growth Portfolio

RISKS: Keep in mind, the fund is subject to certain risks of overseas investing, not associated with domestic investing, including currency fluctuations, change in political and economic conditions, differing securities regulations and periods of illiquidity, which could result in significant market fluctuations. These risks are magnified in emerging markets. The fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on fund performance. Please see the fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ Gross domestic product is a market value of goods and services produced by labor and property in a given country.

ⁱⁱ The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

ⁱⁱⁱ The MSCI EAFE Index is an unmanaged index of common stocks of companies located in Europe, Australasia and the Far East.

^iv The MSCI Emerging Markets Index consists of emerging market companies with an average size of $800 million. The index measures the performance of emerging markets in South America, South Africa, Asia and Eastern Europe.

^v The S&P 500/Citigroup Value Index is an index of stocks representing approximately half of the market capitalization of the stocks in the S&P 500 Index that, on a growth-value spectrum, have been identified as falling either wholly or partially within the value half of the spectrum based on a number of factors. Until December 16, 2005, when Standard & Poor’s changed both the name of the index and its calculation methodology, the index was called the S&P 500/BARRA Value Index.

^vi The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

^vii The S&P MidCap 400 Index is a market-value weighted index which consists of 400 domestic stocks chosen for market size, liquidity, and industry group representation.

^viii The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

^ix The MSCI EAFE Growth Index is an unmanaged index of growth stocks of companies located in Europe, Australasia and the Far East.

VI         Legg Mason Partners Variable Portfolios III, Inc.

Fund at a Glance (unaudited)

Legg Mason Partners Variable Large Cap Value Portfolio

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         1

Fund at a Glance (unaudited)

Legg Mason Partners Variable Large Cap Growth Portfolio

2         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Fund at a Glance (unaudited)

Legg Mason Partners Variable Mid Cap Core Portfolio

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         3

Fund at a Glance (unaudited)

Legg Mason Partners Variable Aggressive Growth Portfolio

4         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Fund at a Glance (unaudited)

Legg Mason Partners Variable International All Cap Growth Portfolio

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         5

Fund Expenses (unaudited)

As a shareholder of the Funds, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested on November 1, 2005 and held for the six months ended April 30, 2006.

Actual Expenses

The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

Based on Actual Total Return(1)
	Actual Total Return(2)		Beginning Account Value		Ending Account Value		Annualized Expense Ratio		Expenses Paid During the Period(3)
Legg Mason Partners Variable Large Cap Value Portfolio	11.37	%	$	1,000.00	$	1,113.70	0.63	%	$	3.30
Legg Mason Partners Variable Large Cap Growth Portfolio	2.27			1,000.00		1,022.70	0.78			3.91
Legg Mason Partners Variable Mid Cap Core Portfolio	14.63			1,000.00		1,146.30	0.81			4.31
Legg Mason Partners Variable Aggressive Growth Portfolio	10.73			1,000.00		1,107.30	0.76			3.97
Legg Mason Partners Variable International All Cap Growth Portfolio	23.07			1,000.00		1,230.70	0.96			5.31

⁽¹⁾ For the six months ended April 30, 2006.

⁽²⁾ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

⁽³⁾ Expenses (net of voluntary fee waivers and/or expense reimbursements) are equal to each Fund’s respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

6         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Fund Expenses (unaudited) (continued)

Hypothetical Example for Comparison Purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

Based on Hypothetical Total Return(1)
	Hypothetical Annualized Total Return		Beginning Account Value		Ending Account Value		Annualized Expense Ratio		Expenses Paid During the Period(2)
Legg Mason Partners Variable Large Cap Value Portfolio	5.00	%	$	1,000.00	$	1,021.67	0.63	%	$	3.16
Legg Mason Partners Variable Large Cap Growth Portfolio	5.00			1,000.00		1,020.93	0.78			3.91
Legg Mason Partners Variable Mid Cap Core Portfolio	5.00			1,000.00		1,020.78	0.81			4.06
Legg Mason Partners Variable Aggressive Growth Portfolio	5.00			1,000.00		1,021.03	0.76			3.81
Legg Mason Partners Variable International All Cap Growth Portfolio	5.00			1,000.00		1,020.03	0.96			4.81

⁽¹⁾ For the six months ended April 30, 2006.

⁽²⁾ Expenses (net of voluntary fee waivers and/or expense reimbursements) are equal to each Fund’s respective annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         7

Schedules of Investments (April 30, 2006) (unaudited)

LEGG MASON PARTNERS VARIABLE LARGE CAP VALUE PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 96.4%
CONSUMER DISCRETIONARY — 11.5%
Hotels, Restaurants & Leisure — 1.8%
158,500	McDonald’s Corp.	$	5,479,345
Household Durables — 1.2%
132,800	Newell Rubbermaid Inc.		3,641,376
Media — 7.6%
102,400	EchoStar Communications Corp., Class A Shares*		3,164,160
3,607	Interpublic Group of Cos. Inc.*		34,555
43,100	Liberty Global Inc., Series A Shares*		892,601
22,300	Liberty Global Inc., Series C Shares*		445,331
402,100	Liberty Media Corp., Class A Shares*		3,357,535
458,100	News Corp., Class B Shares		8,351,163
111,500	SES Global SA, FDR		1,828,370
288,600	Time Warner Inc.		5,021,640
	Total Media		23,095,355
Multiline Retail — 0.9%
51,700	Target Corp.		2,745,270
	TOTAL CONSUMER DISCRETIONARY		34,961,346
CONSUMER STAPLES — 10.0%
Food & Staples Retailing — 4.3%
401,900	Kroger Co.*		8,142,494
113,700	Wal-Mart Stores Inc.		5,119,911
	Total Food & Staples Retailing		13,262,405
Food Products — 1.0%
163,000	Sara Lee Corp.		2,912,810
Household Products — 1.5%
80,500	Kimberly-Clark Corp.		4,711,665
Tobacco — 3.2%
132,500	Altria Group Inc.		9,693,700
	TOTAL CONSUMER STAPLES		30,580,580
ENERGY — 8.3%
Energy Equipment & Services — 2.5%
82,300	GlobalSantaFe Corp.		5,037,583
32,600	Halliburton Co.		2,547,690
	Total Energy Equipment & Services		7,585,273
Oil, Gas & Consumable Fuels — 5.8%
36,700	Marathon Oil Corp.		2,912,512
50,200	Royal Dutch Shell PLC, ADR, Class A Shares		3,420,126
46,300	Suncor Energy Inc.		3,969,762
53,100	Total SA, Sponsored ADR		7,328,862
	Total Oil, Gas & Consumable Fuels		17,631,262
	TOTAL ENERGY		25,216,535

See Notes to Financial Statements.

8         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
FINANCIALS — 31.0%
Capital Markets — 5.2%
85,600	Bank of New York Co. Inc.	$	3,008,840
31,100	Goldman Sachs Group Inc.		4,985,019
105,300	Merrill Lynch & Co. Inc.		8,030,178
	Total Capital Markets		16,024,037
Commercial Banks — 7.1%
181,600	Bank of America Corp.		9,065,472
90,400	Wachovia Corp.		5,410,440
102,900	Wells Fargo & Co.		7,068,201
	Total Commercial Banks		21,544,113
Consumer Finance — 4.4%
114,900	American Express Co.		6,182,769
82,800	Capital One Financial Corp.		7,173,792
	Total Consumer Finance		13,356,561
Diversified Financial Services — 2.3%
154,500	JPMorgan Chase & Co.		7,011,210
Insurance — 8.8%
77,400	AFLAC Inc.		3,679,596
105,700	American International Group Inc.		6,896,925
94,600	Chubb Corp.		4,875,684
54,800	Loews Corp.		5,817,020
52,300	Marsh & McLennan Cos. Inc.		1,604,041
92,800	St. Paul Travelers Cos. Inc.		4,085,984
	Total Insurance		26,959,250
Thrifts & Mortgage Finance — 3.2%
70,900	Freddie Mac		4,329,154
75,140	Golden West Financial Corp.		5,400,312
	Total Thrifts & Mortgage Finance		9,729,466
	TOTAL FINANCIALS		94,624,637
HEALTH CARE — 10.1%
Health Care Providers & Services — 3.1%
95,100	UnitedHealth Group Inc.		4,730,274
68,900	WellPoint Inc.*		4,891,900
	Total Health Care Providers & Services		9,622,174
Pharmaceuticals — 7.0%
91,500	Abbott Laboratories		3,910,710
55,700	Johnson & Johnson		3,264,577
83,000	Novartis AG, Sponsored ADR		4,773,330
184,200	Pfizer Inc.		4,665,786
100,300	Sanofi-Aventis, ADR		4,718,112
	Total Pharmaceuticals		21,332,515
	TOTAL HEALTH CARE		30,954,689

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         9

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
INDUSTRIALS — 9.6%
Aerospace & Defense — 4.6%
71,900	Boeing Co.	$	6,000,055
68,200	Raytheon Co.		3,019,214
77,900	United Technologies Corp.		4,892,899
	Total Aerospace & Defense		13,912,168
Building Products — 1.1%
102,400	Masco Corp.		3,266,560
Commercial Services & Supplies — 1.2%
59,400	Avery Dennison Corp.		3,712,500
Industrial Conglomerates — 1.7%
57,600	Textron Inc.		5,181,120
Machinery — 1.0%
38,100	Parker Hannifin Corp.		3,088,005
	TOTAL INDUSTRIALS		29,160,353
INFORMATION TECHNOLOGY — 3.6%
Communications Equipment — 1.7%
225,400	Nokia Oyj, Sponsored ADR		5,107,564
Computers & Peripherals — 1.0%
36,500	International Business Machines Corp.		3,005,410
Software — 0.9%
115,100	Microsoft Corp.		2,779,665
	TOTAL INFORMATION TECHNOLOGY		10,892,639
MATERIALS — 2.7%
Chemicals — 2.7%
46,600	Air Products & Chemicals Inc.		3,193,032
113,700	E.I. du Pont de Nemours & Co.		5,014,170
	TOTAL MATERIALS		8,207,202
TELECOMMUNICATION SERVICES — 7.2%
Diversified Telecommunication Services — 2.1%
244,037	AT&T Inc.		6,396,210
Wireless Telecommunication Services — 5.1%
92,200	ALLTEL Corp.		5,934,914
387,002	Sprint Nextel Corp.		9,597,649
	Total Wireless Telecommunication Services		15,532,563
	TOTAL TELECOMMUNICATION SERVICES		21,928,773
UTILITIES — 2.4%
Multi-Utilities — 2.4%
157,300	Sempra Energy		7,238,946
	TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $235,068,659)		293,765,700

See Notes to Financial Statements.

10         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Face Amount		Security	Value
	SHORT-TERM INVESTMENT — 3.7%
	Repurchase Agreement — 3.7%
$	11,259,000	Interest in $513,793,000 joint tri-party repurchase agreement dated 4/28/06 with Merrill Lynch, Pierce, Fenner & Smith, Inc., 4.790% due 5/1/06; Proceeds at maturity — $11,263,494; (Fully collateralized by U.S. Treasury obligations, 0.000% to 2.375% due 4/30/06 to 4/15/11; Market value — $11,484,251) (Cost — $11,259,000)	$	11,259,000
		TOTAL INVESTMENTS — 100.1% (Cost — $246,327,659#)		305,024,700
		Liabilities in Excess of Other Assets — (0.1)%		(260,076	)
		TOTAL NET ASSETS — 100.0%	$	304,764,624

* Non-income producing security.

# Aggregate cost for federal income tax purposes is substantially the same.

Abbreviations used in this schedule:
ADR	— American Depositary Receipt
FDR	— Foreign Depositary Receipt

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         11

Schedules of Investments (April 30, 2006) (unaudited) (continued)

LEGG MASON PARTNERS VARIABLE LARGE CAP GROWTH PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 100.1%
CONSUMER DISCRETIONARY — 20.0%
Internet & Catalog Retail — 10.1%
474,000	Amazon.com Inc.*	$	16,689,540
296,100	eBay Inc.*		10,188,801
295,000	IAC/InterActiveCorp.*		8,516,650
	Total Internet & Catalog Retail		35,394,991
Media — 5.2%
589,320	Time Warner Inc.		10,254,168
291,915	Walt Disney Co.		8,161,943
	Total Media		18,416,111
Specialty Retail — 4.7%
134,600	Bed Bath & Beyond Inc.*		5,161,910
288,450	Home Depot Inc.		11,517,809
	Total Specialty Retail		16,679,719
	TOTAL CONSUMER DISCRETIONARY		70,490,821
CONSUMER STAPLES — 10.6%
Beverages — 4.6%
194,490	Coca-Cola Co.		8,160,800
135,700	PepsiCo Inc.		7,903,168
	Total Beverages		16,063,968
Food Products — 2.4%
144,540	Wm. Wrigley Jr. Co.		6,803,498
36,335	Wm. Wrigley Jr. Co., Class B		1,711,378
	Total Food Products		8,514,876
Household Products — 3.6%
218,355	Procter & Gamble Co.		12,710,445
	TOTAL CONSUMER STAPLES		37,289,289
FINANCIALS — 12.9%
Capital Markets — 7.2%
194,430	Merrill Lynch & Co. Inc.		14,827,232
164,970	Morgan Stanley		10,607,571
	Total Capital Markets		25,434,803
Insurance — 5.7%
141,556	American International Group Inc.		9,236,529
119	Berkshire Hathaway Inc., Class A Shares*		10,591,000
	Total Insurance		19,827,529
	TOTAL FINANCIALS		45,262,332

See Notes to Financial Statements.

12         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
HEALTH CARE — 20.2%
Biotechnology — 13.4%
260,580	Amgen Inc.*	$	17,641,266
237,150	Biogen Idec Inc.*		10,636,178
236,800	Genentech Inc.*		18,875,328
	Total Biotechnology		47,152,772
Pharmaceuticals — 6.8%
94,050	Eli Lilly & Co.		4,977,126
131,870	Johnson & Johnson		7,728,901
444,470	Pfizer Inc.		11,258,425
	Total Pharmaceuticals		23,964,452
	TOTAL HEALTH CARE		71,117,224
INDUSTRIALS — 2.3%
Industrial Conglomerates — 2.3%
235,220	General Electric Co.		8,136,260
INFORMATION TECHNOLOGY — 34.1%
Communications Equipment — 11.3%
412,908	Cisco Systems Inc.*		8,650,422
423,100	Juniper Networks Inc.*		7,818,888
592,680	Motorola Inc.		12,653,718
207,400	QUALCOMM Inc.		10,647,916
	Total Communications Equipment		39,770,944
Computers & Peripherals — 2.3%
131,900	Dell Inc.*		3,455,780
346,900	EMC Corp.*		4,686,619
	Total Computers & Peripherals		8,142,399
Internet Software & Services — 5.6%
259,700	Akamai Technologies Inc.*		8,749,293
336,300	Yahoo! Inc.*		11,023,914
	Total Internet Software & Services		19,773,207
Semiconductors & Semiconductor Equipment — 7.0%
406,400	Intel Corp.		8,119,872
474,080	Texas Instruments Inc.		16,455,317
	Total Semiconductors & Semiconductor Equipment		24,575,189
Software — 7.9%
205,200	Electronic Arts Inc.*		11,655,360
299,600	Microsoft Corp.		7,235,340
294,600	Red Hat Inc.*		8,658,294
	Total Software		27,548,994
	TOTAL INFORMATION TECHNOLOGY		119,810,733
	TOTAL INVESTMENTS — 100.1% (Cost — $263,372,939#)		352,106,659
	Liabilities in Excess of Other Assets — (0.1)%		(369,965	)
	TOTAL NET ASSETS — 100.0%	$	351,736,694

* Non-income producing security.

# Aggregate cost for federal income tax purposes is substantially the same.

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         13

Schedules of Investments (April 30, 2006) (unaudited) (continued)

LEGG MASON PARTNERS VARIABLE MID CAP CORE PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 96.7%
CONSUMER DISCRETIONARY — 14.9%
Diversified Consumer Services — 2.1%
227,300	ServiceMaster Co.	$	2,736,692
Hotels, Restaurants & Leisure — 2.9%
59,400	CBRL Group Inc.		2,418,174
39,600	GTECH Holdings Corp.		1,352,736
	Total Hotels, Restaurants & Leisure		3,770,910
Household Durables — 3.9%
24,570	Black & Decker Corp.		2,299,998
26,390	Mohawk Industries Inc.*		2,113,839
20,000	Toll Brothers Inc.*		643,000
	Total Household Durables		5,056,837
Multiline Retail — 2.0%
146,400	Dollar General Corp.		2,556,144
Specialty Retail — 4.0%
63,050	Bed Bath & Beyond Inc.*		2,417,967
56,200	Sherwin-Williams Co.		2,862,828
	Total Specialty Retail		5,280,795
	TOTAL CONSUMER DISCRETIONARY		19,401,378
CONSUMER STAPLES — 3.5%
Beverages — 1.8%
31,500	Molson Coors Brewing Co., Class B Shares		2,326,590
Food Products — 1.7%
67,570	Hormel Foods Corp.		2,267,649
	TOTAL CONSUMER STAPLES		4,594,239
ENERGY — 9.7%
Energy Equipment & Services — 5.0%
36,690	Nabors Industries Ltd.*		1,369,638
40,640	Smith International Inc.		1,716,227
63,650	Weatherford International Ltd.*		3,368,994
	Total Energy Equipment & Services		6,454,859
Oil, Gas & Consumable Fuels — 4.7%
28,990	Murphy Oil Corp.		1,454,718
39,210	Newfield Exploration Co.*		1,748,766
26,460	Nexen Inc.		1,547,910
31,500	Pioneer Natural Resources Co.		1,348,830
	Total Oil, Gas & Consumable Fuels		6,100,224
	TOTAL ENERGY		12,555,083

See Notes to Financial Statements.

14         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
FINANCIALS — 16.2%
Capital Markets — 1.0%
8,985	Bear Stearns Cos. Inc.	$	1,280,452
Commercial Banks — 1.7%
42,700	Associated Banc-Corp.		1,444,114
12,620	Comerica Inc.		717,700
	Total Commercial Banks		2,161,814
Consumer Finance — 0.6%
19,300	Nelnet Inc., Class A Shares*		750,770
Insurance — 5.7%
8,820	Ambac Financial Group Inc.		726,415
16,500	Fidelity National Financial Inc.		692,670
34,590	National Financial Partners Corp.		1,798,680
99,250	Old Republic International Corp.		2,208,312
32,790	PartnerRe Ltd.		2,051,015
	Total Insurance		7,477,092
Real Estate Investment Trusts (REITs) — 1.2%
138,005	Spirit Finance Corp.		1,600,858
Thrifts & Mortgage Finance — 6.0%
145,885	Hudson City Bancorp Inc.		1,956,318
19,100	MGIC Investment Corp.		1,350,370
142,700	New York Community Bancorp Inc.		2,455,867
44,900	PMI Group Inc.		2,072,135
	Total Thrifts & Mortgage Finance		7,834,690
	TOTAL FINANCIALS		21,105,676
HEALTH CARE — 13.4%
Biotechnology — 2.2%
77,900	ImClone Systems Inc.*		2,812,190
Health Care Equipment & Supplies — 4.2%
53,850	Cytyc Corp.*		1,392,023
31,855	Fisher Scientific International Inc.*		2,247,370
47,335	Thermo Electron Corp.*		1,824,291
	Total Health Care Equipment & Supplies		5,463,684
Health Care Providers & Services — 5.6%
39,250	Coventry Health Care Inc.*		1,949,548
49,030	Manor Care Inc.		2,149,965
18,600	Omnicare Inc.		1,054,806
43,200	Pediatrix Medical Group Inc.*		2,186,784
	Total Health Care Providers & Services		7,341,103
Pharmaceuticals — 1.4%
93,800	MGI Pharma Inc.*		1,752,184
	TOTAL HEALTH CARE		17,369,161

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         15

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
INDUSTRIALS — 14.2%
Aerospace & Defense — 4.3%
24,085	Alliant Techsystems Inc.*	$	1,926,559
29,000	Armor Holdings Inc.*		1,771,030
23,300	L-3 Communications Holdings Inc.		1,903,610
	Total Aerospace & Defense		5,601,199
Air Freight & Logistics — 0.8%
22,210	C.H. Robinson Worldwide Inc.		985,013
Commercial Services & Supplies — 2.4%
68,240	R.R. Donnelley & Sons Co.		2,299,006
19,610	YRC Worldwide Inc.*		823,620
	Total Commercial Services & Supplies		3,122,626
Electrical Equipment — 2.1%
7,985	Rockwell Automation Inc.		578,593
44,250	Roper Industries Inc.		2,100,105
	Total Electrical Equipment		2,678,698
Machinery — 4.0%
115,800	AGCO Corp.*		2,740,986
33,100	Eaton Corp.		2,537,115
	Total Machinery		5,278,101
Road & Rail — 0.6%
33,887	Heartland Express Inc.		823,793
	TOTAL INDUSTRIALS		18,489,430
INFORMATION TECHNOLOGY — 19.3%
Communications Equipment — 0.6%
17,200	Harris Corp.		801,004
Computers & Peripherals — 4.2%
48,700	Avid Technology Inc.*		1,877,385
48,900	Intergraph Corp.*		2,152,578
66,500	Western Digital Corp.*		1,399,160
	Total Computers & Peripherals		5,429,123
Electronic Equipment & Instruments — 4.9%
84,300	Benchmark Electronics Inc.*		2,301,390
21,730	CDW Corp.		1,293,370
97,300	Ingram Micro Inc., Class A Shares*		1,789,347
28,800	Tech Data Corp.*		1,057,536
	Total Electronic Equipment & Instruments		6,441,643
Internet Software & Services — 2.7%
23,570	j2 Global Communications Inc.*		1,157,051
64,900	WebEx Communications Inc.*		2,294,215
	Total Internet Software & Services		3,451,266

See Notes to Financial Statements.

16         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares		Security	Value
	IT Services — 2.6%
	38,950	Acxiom Corp.	$	1,009,584
	104,600	Sabre Holdings Corp., Class A Shares		2,415,214
		Total IT Services		3,424,798
	Semiconductors & Semiconductor Equipment — 4.0%
	55,500	Lam Research Corp.*		2,712,840
	66,400	Microchip Technology Inc.		2,474,064
		Total Semiconductors & Semiconductor Equipment		5,186,904
	Software — 0.3%
	16,520	Internet Security Systems Inc.*		370,709
		TOTAL INFORMATION TECHNOLOGY		25,105,447
	MATERIALS — 1.7%
	Chemicals — 1.2%
	22,550	Air Products & Chemicals Inc.		1,545,126
	Metals & Mining — 0.5%
	26,800	Compass Minerals International Inc.		705,644
		TOTAL MATERIALS		2,250,770
	UTILITIES — 3.8%
	Electric Utilities — 2.3%
	67,200	Pepco Holdings Inc.		1,550,976
	27,700	WPS Resources Corp.		1,384,723
		Total Electric Utilities		2,935,699
	Multi-Utilities — 1.1%
	36,700	SCANA Corp.		1,436,438
	Water Utilities — 0.4%
	21,981	Aqua America Inc.		525,346
		TOTAL UTILITIES		4,897,483
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $105,701,576)		125,768,667
Face Amount
	SHORT-TERM INVESTMENT — 2.5%
	Repurchase Agreement — 2.5%
$	3,296,000	Interest in $604,665,000 joint tri-party repurchase agreement dated 4/28/06 with Deutsche Bank Securities Inc., 4.790% due 5/1/06; Proceeds at maturity — $3,297,316; (Fully collateralized by various U.S. government agency obligations, 0.000% to 22.306% due 2/15/17 to 4/15/36; Market value — $3,361,920) (Cost — $3,296,000)		3,296,000
		TOTAL INVESTMENTS — 99.2% (Cost — $108,997,576#)		129,064,667
		Other Assets in Excess of Liabilities — 0.8%		1,045,077
		TOTAL NET ASSETS — 100.0%	$	130,109,744

* Non-income producing security.

# Aggregate cost for federal income tax purposes is substantially the same.

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         17

Schedules of Investments (April 30, 2006) (unaudited) (continued)

LEGG MASON PARTNERS VARIABLE AGGRESSIVE GROWTH PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 95.0%
CONSUMER DISCRETIONARY — 13.4%
Media — 13.2%
1,273,275	Cablevision Systems Corp., New York Group, Class A Shares*	$	25,809,284
166,349	CBS Corp., Class B Shares		4,236,909
132,842	Comcast Corp., Class A Shares*		4,111,460
1,348,160	Comcast Corp., Special Class A Shares*		41,563,773
201,340	Discovery Holding Co., Class A Shares*		2,999,966
90,170	Liberty Global Inc., Series A Shares*		1,867,421
90,170	Liberty Global Inc., Series C Shares*		1,800,695
2,013,400	Liberty Media Corp., Class A Shares*		16,811,890
1,829,367	Time Warner Inc.		31,830,986
166,349	Viacom Inc., Class B Shares*		6,625,680
675,000	Walt Disney Co.		18,873,000
34,600	World Wrestling Entertainment Inc.		599,964
	Total Media		157,131,028
Specialty Retail — 0.2%
215,000	Charming Shoppes Inc.*		2,956,250
	TOTAL CONSUMER DISCRETIONARY		160,087,278
ENERGY — 17.0%
Energy Equipment & Services — 10.0%
165,800	Core Laboratories NV*		10,155,250
580,650	Grant Prideco Inc.*		29,729,280
1,490,900	Weatherford International Ltd.*		78,913,337
	Total Energy Equipment & Services		118,797,867
Oil, Gas & Consumable Fuels — 7.0%
795,800	Anadarko Petroleum Corp.		83,415,756
6,325	Bill Barrett Corp.*		190,003
	Total Oil, Gas & Consumable Fuels		83,605,759
	TOTAL ENERGY		202,403,626
EXCHANGE TRADED FUND — 1.9%
532,000	Nasdaq-100 Index Tracking Stock		22,258,880
FINANCIALS — 12.4%
Capital Markets — 11.3%
154,400	Cohen & Steers Inc.		3,957,272
612,842	Lehman Brothers Holdings Inc.		92,631,068
500,400	Merrill Lynch & Co. Inc.		38,160,504
	Total Capital Markets		134,748,844
Diversified Financial Services — 0.4%
83,725	CIT Group Inc.		4,521,987
Insurance — 0.0%
2,415	National Financial Partners Corp.		125,580

See Notes to Financial Statements.

18         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
Thrifts & Mortgage Finance — 0.7%
49,500	Astoria Financial Corp.	$	1,550,340
361,566	New York Community Bancorp Inc.		6,222,551
	Total Thrifts & Mortgage Finance		7,772,891
	TOTAL FINANCIALS		147,169,302
HEALTH CARE — 29.4%
Biotechnology — 15.5%
162,500	Alkermes Inc.*		3,488,875
740,105	Amgen Inc.*		50,105,108
783,806	Biogen Idec Inc.*		35,153,699
110,150	CancerVax Corp.*		283,086
101,900	Genentech Inc.*		8,122,449
795,168	Genzyme Corp.*		48,632,475
541,275	ImClone Systems Inc.*		19,540,028
224,750	Isis Pharmaceuticals Inc.*		1,928,355
766,905	Millennium Pharmaceuticals Inc.*		6,963,497
173,000	Nanogen Inc.*		444,610
265,400	Vertex Pharmaceuticals Inc.*		9,652,598
29,445	ViaCell Inc.*		170,487
	Total Biotechnology		184,485,267
Health Care Equipment & Supplies — 0.5%
92,100	Biosite Inc.*		5,194,440
Health Care Providers & Services — 7.0%
1,672,000	UnitedHealth Group Inc.		83,165,280
Pharmaceuticals — 6.4%
998,800	Forest Laboratories Inc.*		40,331,544
243,448	Johnson & Johnson		14,268,487
635,666	King Pharmaceuticals Inc.*		11,054,232
75,289	Pfizer Inc.		1,907,070
78,576	Teva Pharmaceutical Industries Ltd., Sponsored ADR		3,182,328
323,000	Valeant Pharmaceuticals International		5,781,700
	Total Pharmaceuticals		76,525,361
	TOTAL HEALTH CARE		349,370,348
INDUSTRIALS — 6.9%
Aerospace & Defense — 2.6%
378,800	L-3 Communications Holdings Inc.		30,947,960
Industrial Conglomerates — 3.5%
1,583,412	Tyco International Ltd.		41,722,906
Machinery — 0.8%
308,000	Pall Corp.		9,295,440
	TOTAL INDUSTRIALS		81,966,306
INFORMATION TECHNOLOGY — 13.9%
Communications Equipment — 2.6%
186,100	C-COR Inc.*		1,522,298

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         19

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
Communications Equipment — 2.6% (continued)
890,500	Motorola Inc.	$	19,012,175
448,325	Nokia Oyj, Sponsored ADR		10,159,044
	Total Communications Equipment		30,693,517
Computers & Peripherals — 2.8%
876,076	Maxtor Corp.*		8,480,416
242,000	Quantum Corp.*		827,640
385,000	SanDisk Corp.*		24,574,550
	Total Computers & Peripherals		33,882,606
Electronic Equipment & Instruments — 0.0%
12,400	Excel Technology Inc.*		366,668
Semiconductors & Semiconductor Equipment — 7.0%
495,000	Broadcom Corp., Class A Shares*		20,349,450
125,000	Cabot Microelectronics Corp.*		4,088,750
229,000	Cirrus Logic Inc.*		2,164,050
133,000	Cree Inc.*		3,966,060
133,000	DSP Group Inc.*		3,596,320
98,324	Freescale Semiconductor Inc., Class B Shares*		3,113,921
358,334	Intel Corp.		7,159,514
1,617,300	Micron Technology Inc.*		27,445,581
543,000	RF Micro Devices Inc.*		5,049,900
10,300	Standard Microsystems Corp.*		239,990
343,091	Teradyne Inc.*		5,784,514
	Total Semiconductors & Semiconductor Equipment		82,958,050
Software — 1.5%
106,000	Advent Software Inc.*		3,731,200
230,000	Autodesk Inc.*		9,669,200
72,264	Microsoft Corp.		1,745,176
105,000	RSA Security Inc.*		2,198,700
	Total Software		17,344,276
	TOTAL INFORMATION TECHNOLOGY		165,245,117
TELECOMMUNICATION SERVICES — 0.1%
Diversified Telecommunication Services — 0.1%
63,912	AT&T Inc.		1,675,134
	TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $885,461,449)		1,130,175,991

See Notes to Financial Statements.

20         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Face Amount		Security	Value
	SHORT-TERM INVESTMENT — 5.1%
	Repurchase Agreement — 5.1%
$	60,571,000	Interest in $513,793,000 joint tri-party repurchase agreement dated 4/28/06 with Merrill Lynch, Pierce, Fenner & Smith Inc., 4.790% due 5/1/06; Proceeds at maturity — $60,595,178; (Fully collateralized by U.S. Treasury obligations, 0.000% to 2.375% due 4/30/06 to 4/15/11; Market value — $61,782,800) (Cost — $60,571,000)	$	60,571,000
		TOTAL INVESTMENTS — 100.1% (Cost — $946,032,449#)		1,190,746,991
		Liabilities in Excess of Other Assets — (0.1)%		(843,093	)
		TOTAL NET ASSETS — 100.0%	$	1,189,903,898

* Non-income producing security.

# Aggregate cost for federal income tax purposes is substantially the same.

Abbreviation used in this schedule:
ADR	— American Depositary Receipt

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         21

Schedules of Investments (April 30, 2006) (unaudited) (continued)

LEGG MASON PARTNERS VARIABLE INTERNATIONAL ALL CAP GROWTH PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 99.4%
Australia — 2.7%
146,000	Babcock & Brown Ltd.	$	2,028,296
53,000	Macquarie Bank Ltd.		2,872,775
	Total Australia		4,901,071
Denmark — 1.3%
35,930	Novo Nordisk A/S, Class B Shares		2,334,696
Finland — 2.8%
225,000	Nokia Oyj		5,126,721
France — 7.3%
225,000	Altran Technologies SA*		3,263,492
32,625	Essilor International SA		3,274,143
25,000	Groupe Danone		3,121,161
13,000	Total SA		3,597,194
800	Total SA, Sponsored ADR		110,416
	Total France		13,366,406
Germany — 5.9%
25,300	BASF AG		2,170,471
450	BASF AG, Sponsored ADR		38,502
50,000	IKB Deutsche Industriebank AG		2,075,304
12,500	SAP AG		2,732,989
1,300	SAP AG, Sponsored ADR		71,019
76,400	Stada Arzneimittel AG		3,700,540
	Total Germany		10,788,825
Greece — 1.3%
25,000	EFG Eurobank Ergasias		996,626
45,000	Piraeus Bank SA		1,419,008
	Total Greece		2,415,634
Hong Kong — 0.6%
120,000	Hutchison Whampoa Ltd.		1,180,939
Ireland — 8.1%
106,900	Bank of Ireland		2,005,287
77,512	CRH PLC		2,852,249
584,000	Grafton Group PLC*		8,101,968
118,740	Irish Continental Group PLC		1,723,752
35,391	United Drug PLC		167,088
	Total Ireland		14,850,344
Italy — 1.6%
114,000	Saipem SpA		2,852,256
Japan — 26.4%
51,000	Aisin Seiki Co., Ltd.		1,918,523
43,000	Canon Inc.		3,291,848

See Notes to Financial Statements.

22         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
Japan — 26.4% (continued)
48,000	Daikin Industries Ltd.	$	1,674,885
150,000	Dowa Mining Co., Ltd.		1,713,909
43,000	Fanuc Limited		4,070,402
44,500	Honda Motor Co., Ltd.		3,164,184
2,000	Honda Motor Co., Ltd., Sponsored ADR		70,860
65,200	Hoya Corp.		2,641,811
380	Mitsubishi UFJ Financial Group Inc.		5,978,466
17,400	Nidec Corp.		1,342,755
460	NTT Data Corp.		2,130,696
15,800	Orix Corp.		4,749,374
2,380	Rakuten Inc.		1,924,500
37,200	Seven & I Holdings Co., Ltd.		1,441,898
184,000	Sharp Corp.		3,232,837
62,400	Shin-Etsu Chemical Co., Ltd.		3,608,807
79,000	Terumo Corp.		2,832,960
63,000	Trend Micro Inc.		2,441,925
	Total Japan		48,230,640
Mexico — 2.2%
1,400,200	Wal-Mart de Mexico SA de CV		3,983,365
Netherlands — 1.9%
39,351	ING Groep NV, CVA		1,602,508
51,950	Royal Dutch Shell PLC, Class A Shares		1,782,440
	Total Netherlands		3,384,948
Norway — 1.4%
159,900	Acergy SA*		2,606,346
Singapore — 0.7%
106,000	DBS Group Holdings Ltd.		1,193,422
Spain — 2.3%
205,000	Indra Sistemas SA		4,223,320
Sweden — 2.8%
90,000	Assa Abloy AB		1,742,314
111,000	Atlas Copco AB, Class A Shares		3,279,830
	Total Sweden		5,022,144
Switzerland — 12.0%
96,000	Mettler-Toledo International Inc.*		6,220,800
6,740	Nestle SA		2,053,902
41,000	Novartis AG		2,350,171
42,000	Roche Holding AG		6,452,689
40,000	UBS AG		4,737,160
	Total Switzerland		21,814,722
United Kingdom — 17.1%
52,000	BOC Group PLC		1,475,989
337,300	BP PLC		4,157,157
514,800	Capita Group PLC		4,368,212

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         23

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares		Security	Value
	United Kingdom — 17.1% (continued)
	65,000	Rio Tinto PLC	$	3,571,552
	1,069,000	Serco Group PLC		6,543,789
	151,700	Smith & Nephew PLC		1,253,358
	576,352	Tesco PLC		3,354,834
	357,000	Tomkins PLC		2,203,230
	1,854,000	Vodafone Group PLC		4,374,131
		Total United Kingdom		31,302,252
	United States — 1.0%
	101,814	News Corp., Class B Shares		1,856,069
		TOTAL COMMON STOCKS (Cost — $103,835,579)		181,434,120
Right
	RIGHT — 0.0%
	Hong Kong — 0.0%
	6	Hutchison Whampoa (a)* (Cost — $0)		0
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $103,835,579)		181,434,120
Face Amount
	SHORT-TERM INVESTMENT — 0.3%
	Repurchase Agreement — 0.3%
$	474,000	Interest in $513,793,000 joint tri-party repurchase agreement dated 4/28/06 with Merrill Lynch, Pierce, Fenner & Smith, Inc., 4.790% due 5/1/06; Proceeds at maturity — $474,189; (Fully collateralized by U.S. Treasury obligations, 0.000% to 2.375% due 4/30/06 to 4/15/11; Market value — $483,483) (Cost — $474,000)		474,000
		TOTAL INVESTMENTS — 99.7% (Cost — $104,309,579#)		181,908,120
		Other Assets in Excess of Liabilities — 0.3%		638,637
		TOTAL NET ASSETS — 100.0%	$	182,546,757

* Non-income producing security.

^(a) Security is valued in good faith at fair value by or under the direction of the Board of Directors (See Note 1).

# Aggregate cost for federal income tax purposes is substantially the same.

Abbreviations used in this schedule:
ADR	— American Depositary Receipt
CVA	— Certificaaten van aandelen (Share Certificates)

See Notes to Financial Statements.

24         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Summary of Investments by Sector*
Industrials	19.2	%
Information Technology	18.4
Financials	16.3
Health Care	12.3
Materials	8.5
Energy	8.3
Consumer Staples	7.7
Consumer Discretionary	6.7
Telecommunication Services	2.4
Short-Term Investment	0.2
	100.0	%

* As a percentage of total investments.

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         25

Statement of Assets and Liabilities (April 30, 2006) (unaudited)

	Legg Mason Partners Variable Large Cap Value Portfolio			Legg Mason Partners Variable Large Cap Growth Portfolio
ASSETS:
Investments, at cost	$	246,327,659		$	263,372,939
Foreign currency, at cost		45,760			—
Investments, at value		305,024,700			352,106,659
Foreign currency, at value		47,718			—
Cash		152			210,067
Receivable for securities sold		—			—
Dividends and interest receivable		279,853			128,793
Receivable for Fund shares sold		10			53,833
Prepaid expenses		2,318			—
Total Assets		305,354,751			352,499,352
LIABILITIES:
Payable for Fund shares repurchased		395,144			503,001
Investment management fee payable		149,502			221,499
Payable for securities purchased		—			—
Accrued expenses		45,481			38,158
Total Liabilities		590,127			762,658
Total Net Assets	$	304,764,624		$	351,736,694
NET ASSETS:
Par value (Note 4)	$	150		$	237
Paid-in capital in excess of par value		264,406,584			338,237,908
Undistributed (Overdistributed) net investment income		470,068			(60,761	)
Accumulated net investment loss		—			—
Accumulated net realized gain (loss) on investments and foreign currency transactions		(18,811,293	)		(75,174,410	)
Net unrealized appreciation on investments and foreign currencies		58,699,115			88,733,720
Total Net Assets	$	304,764,624		$	351,736,694
Shares Outstanding		15,028,092			23,736,041
Net Asset Value		$20.28			$14.82

See Notes to Financial Statements.

26         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Statement of Assets and Liabilities (April 30, 2006) (unaudited) (continued)

Legg Mason Partners Variable Mid Cap Core Portfolio		Legg Mason Partners Variable Aggressive Growth Portfolio			Legg Mason Partners Variable International All Cap Growth Portfolio
$	108,997,576	$	946,032,449		$	104,309,579
	—		—			518,314
	129,064,667		1,190,746,991			181,908,120
	—		—			524,319
	13		397			651
	3,220,914		—			—
	47,390		238,025			585,518
	—		303,971			12
	—		895			6,780
	132,332,984		1,191,290,279			183,025,400
	101,979		619,299			284,758
	79,660		725,065			124,555
	2,025,154		—			—
	16,447		42,017			69,330
	2,223,240		1,386,381			478,643
$	130,109,744	$	1,189,903,898		$	182,546,757
$	83	$	754		$	111
	99,965,343		945,859,486			160,061,815
	130,030		—			(213,121	)
	—		(1,242,437	)		—
	9,947,197		571,553			(54,931,218	)
	20,067,091		244,714,542			77,629,170
$	130,109,744	$	1,189,903,898		$	182,546,757
	8,341,565		75,377,718			11,080,993
	$15.60		$15.79			$16.47

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         27

Statements of Operations (For the six months ended April 30, 2006) (unaudited)

	Legg Mason Partners Variable Large Cap Value Portfolio			Legg Mason Partners Variable Large Cap Growth Portfolio
INVESTMENT INCOME:
Dividends	$	2,958,155		$	1,706,186
Interest		235,547			13,064
Income from securities lending		—			—
Less: Foreign taxes withheld		(57,533	)		—
Total Investment Income		3,136,169			1,719,250
EXPENSES:
Investment management fee (Note 2)		910,278			1,400,774
Audit and tax		14,609			13,007
Directors’ fees		13,100			12,518
Legal fees		11,238			10,363
Shareholder reports		9,567			17,339
Insurance		3,755			6,755
Custody fees		3,127			11,212
Transfer agent fees (Note 2)		864			1,276
Miscellaneous expenses		580			632
Total Expenses		967,118			1,473,876
Less: Fee waivers and/or expense reimbursements (Notes 2 and 7)		(8,241	)		(9,948	)
Net Expenses		958,877			1,463,928
Net Investment Income (Loss)		2,177,292			255,322
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (NOTES 1 AND 3):
Net Realized Gain (Loss) From:
Investment transactions		12,675,702			6,250,761
Foreign currency transactions		(130	)		—
Net Realized Gain		12,675,572			6,250,761
Change in Net Unrealized Appreciation/Depreciation From:
Investments		18,077,770			2,795,418
Foreign currencies		2,214			—
Change in Net Unrealized Appreciation/Depreciation		18,079,984			2,795,418
Net Gain on Investments and Foreign Currency Transactions		30,755,556			9,046,179
Increase in Net Assets From Operations	$	32,932,848		$	9,301,501

See Notes to Financial Statements.

28         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Statements of Operations (For the six months ended April 30, 2006) (unaudited) (continued)

Legg Mason Partners Variable Mid Cap Core Portfolio	Legg Mason Partners Variable Aggressive Growth Portfolio			Legg Mason Partners Variable International All Cap Growth Portfolio
$     814,670	$	2,739,233		$	1,601,756
53,988		405,163			40,525
—		—			4,545
(413)		(33,799	)		(119,238	)
868,245		3,110,597			1,527,588
472,567		4,272,145			717,790
9,551		14,111			13,883
6,800		27,523			9,000
12,852		8,602			14,490
6,459		28,462			23,646
644		10,789			1,979
1,075		14,318			26,192
1,249		1,404			885
868		2,148			6,565
512,065		4,379,502			814,430
(4,296)		(26,468	)		(5,221	)
507,769		4,353,034			809,209
360,476		(1,242,437	)		718,379
10,105,318		1,896,164			6,479,252
(28)		—			2,478
10,105,290		1,896,164			6,481,730
6,752,184		114,785,196			28,270,038
—		—			27,959
6,752,184		114,785,196			28,297,997
16,857,474		116,681,360			34,779,727
$17,217,950	$	115,438,923		$	35,498,106

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         29

Statements of Changes in Net Assets

For the six months ended April 30, 2006 (unaudited) and the year ended October 31, 2005
Legg Mason Partners Variable Large Cap Value Portfolio	2006			2005
OPERATIONS:
Net investment income	$	2,177,292		$	5,151,001
Net realized gain		12,675,572			12,469,887
Change in net unrealized appreciation/depreciation		18,079,984			14,712,402
Increase in Net Assets From Operations		32,932,848			32,333,290
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(4,800,001	)		(6,400,006	)
Decrease in Net Assets From Distributions to Shareholders		(4,800,001	)		(6,400,006	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		510,623			3,130,472
Reinvestment of distributions		4,800,001			6,400,006
Cost of shares repurchased		(31,646,089	)		(65,848,220	)
Decrease in Net Assets From Fund Share Transactions		(26,335,465	)		(56,317,742	)
Increase (Decrease) in Net Assets		1,797,382			(30,384,458	)
NET ASSETS:
Beginning of period		302,967,242			333,351,700
End of period*	$	304,764,624		$	302,967,242
* Includes undistributed net investment income of:		$470,068			$3,092,777

See Notes to Financial Statements.

30         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Statements of Changes in Net Assets (continued)

For the six months ended April 30, 2006 (unaudited) and the year ended October 31, 2005
Legg Mason Partners Variable Large Cap Growth Portfolio	2006			2005
OPERATIONS:
Net investment income	$	255,322		$	1,684,888
Net realized gain (loss)		6,250,761			(9,620,366	)
Change in net unrealized appreciation/depreciation		2,795,418			48,194,981
Increase in Net Assets From Operations		9,301,501			40,259,503
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(500,002	)		(1,500,969	)
Decrease in Net Assets From Distributions to Shareholders		(500,002	)		(1,500,969	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		5,209,785			11,593,119
Reinvestment of distributions		500,002			1,500,969
Cost of shares repurchased		(40,695,730	)		(63,602,132	)
Decrease in Net Assets From Fund Share Transactions		(34,985,943	)		(50,508,044	)
Decrease in Net Assets		(26,184,444	)		(11,749,510	)
NET ASSETS:
Beginning of period		377,921,138			389,670,648
End of period*	$	351,736,694		$	377,921,138

* Includes undistributed (overdistributed) net investment income of: $ (60,761) $183,919

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         31

Statements of Changes in Net Assets (continued)

For the six months ended April 30, 2006 (unaudited) and the year ended October 31, 2005
Legg Mason Partners Variable Mid Cap Core Portfolio	2006			2005
OPERATIONS:
Net investment income	$	360,476		$	519,554
Net realized gain		10,105,290			12,955,266
Change in net unrealized appreciation/depreciation		6,752,184			193,983
Increase in Net Assets From Operations		17,217,950			13,668,803
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(750,004	)		—
Net realized gains		(9,028,419	)		—
Decrease in Net Assets From Distributions to Shareholders		(9,778,423	)		—
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		1,033,203			8,699,598
Reinvestment of distributions		9,778,423			—
Cost of shares repurchased		(8,788,201	)		(11,954,070	)
Increase (Decrease) in Net Assets From Fund Share Transactions		2,023,425			(3,254,472	)
Increase in Net Assets		9,462,952			10,414,331
NET ASSETS:
Beginning of period		120,646,792			110,232,461
End of period*	$	130,109,744		$	120,646,792
* Includes undistributed net investment income of:		$130,030			$519,558

See Notes to Financial Statements.

32         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Statements of Changes in Net Assets (continued)

For the six months ended April 30, 2006 (unaudited) and the year ended October 31, 2005
Legg Mason Partners Variable Aggressive Growth Portfolio	2006			2005
OPERATIONS:
Net investment loss	$	(1,242,437	)	$	(2,707,794	)
Net realized gain		1,896,164			211,120
Change in net unrealized appreciation/depreciation		114,785,196			159,283,167
Increase in Net Assets From Operations		115,438,923			156,786,493
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net realized gains		(32,468	)		(3,756,228	)
Decrease in Net Assets From Distributions to Shareholders		(32,468	)		(3,756,228	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		36,049,635			63,139,525
Reinvestment of distributions		32,468			3,756,228
Cost of shares repurchased		(40,583,746	)		(61,265,197	)
Increase (Decrease) in Net Assets From Fund Share Transactions		(4,501,643	)		5,630,556
Increase in Net Assets		110,904,812			158,660,821
NET ASSETS:
Beginning of period		1,078,999,086			920,338,265
End of period*	$	1,189,903,898		$	1,078,999,086

* Includes accumulated net investment loss of: $ (1,242,437) —

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         33

Statements of Changes in Net Assets (continued)

For the six months ended April 30, 2006 (unaudited) and the year ended October 31, 2005
Legg Mason Partners Variable International All Cap Growth Portfolio	2006			2005
OPERATIONS:
Net investment income	$	718,379		$	1,625,823
Net realized gain		6,481,730			5,456,478
Change in net unrealized appreciation/depreciation		28,297,997			17,715,799
Increase in Net Assets From Operations		35,498,106			24,798,100
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(2,200,003	)		(1,500,826	)
Decrease in Net Assets From Distributions to Shareholders		(2,200,003	)		(1,500,826	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		923,656			5,415,806
Reinvestment of distributions		2,200,003			1,500,826
Cost of shares repurchased		(14,251,947	)		(32,422,744	)
Net assets of shares issued in connection with merger (Note 5)		—			2,864,133
Decrease in Net Assets From Fund Share Transactions		(11,128,288	)		(22,641,979	)
Increase in Net Assets		22,169,815			655,295
NET ASSETS:
Beginning of period		160,376,942			159,721,647
End of period*	$	182,546,757		$	160,376,942

* Includes undistributed (overdistributed) net investment income of: $ (213,121) $1,268,503

See Notes to Financial Statements.

34         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Financial Highlights

For a share of capital stock outstanding throughout each year ended October 31, unless otherwise noted:

Legg Mason Partners Variable Large Cap Value Portfolio	2006(1)			2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$	18.50		$	17.09		$	15.68		$	13.24		$	17.47		$	20.74
Income (Loss) From Operations:
Net investment income		0.15			0.30			0.26			0.28			0.32			0.26
Net realized and unrealized gain (loss)		1.93			1.45			1.41			2.49			(4.24	)		(2.56	)
Total Income (Loss) From Operations		2.08			1.75			1.67			2.77			(3.92	)		(2.30	)
Less Distributions From:
Net investment income		(0.30	)		(0.34	)		(0.26	)		(0.33	)		(0.31	)		(0.27	)
Net realized gains		—			—			—			—			—			(0.70	)
Total Distributions		(0.30	)		(0.34	)		(0.26	)		(0.33	)		(0.31	)		(0.97	)
Net Asset Value, End of Period	$	20.28		$	18.50		$	17.09		$	15.68		$	13.24		$	17.47
Total Return(2)		11.37	%		10.26	%		10.69	%		21.38	%		(22.45	)%		(11.58	)%
Net Assets, End of Period (millions)		$305			$303			$333			$366			$346			$504
Ratios to Average Net Assets:
Gross expenses		0.64	%(3)		0.65	%		0.68	%		0.69	%		0.68	%		0.67	%
Net expenses(4)		0.63	(3)(5)		0.65			0.68	(5)		0.69			0.68			0.67
Net investment income		1.44	(3)		1.62			1.38			1.85			1.59			1.42
Portfolio Turnover Rate		15	%		44	%		37	%		96	%		68	%		29	%

⁽¹⁾ For the six months ended April 30, 2006 (unaudited).

⁽²⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽³⁾ Annualized.

⁽⁴⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 1.25%.

⁽⁵⁾ The investment manager voluntarily waived a portion of its fees and/or reimbursed expenses.

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         35

Financial Highlights (continued)

For a share of capital stock outstanding throughout each year ended October 31, unless otherwise noted:

Legg Mason Partners Variable Large Cap Growth Portfolio	2006(1)			2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$	14.51		$	13.15		$	13.76		$	9.91		$	11.86		$	16.04
Income (Loss) From Operations:
Net investment income (loss)		0.01			0.06			(0.00	)(2)		0.01			0.02			0.02
Net realized and unrealized gain (loss)		0.32			1.35			(0.61	)		3.86			(1.95	)		(4.20	)
Total Income (Loss) From Operations		0.33			1.41			(0.61	)		3.87			(1.93	)		(4.18	)
Less Distributions From:
Net investment income		(0.02	)		(0.05	)		(0.00	)(2)		(0.02	)		(0.02	)		—
Return of capital		—			—			(0.00	)(2)		—			—			—
Total Distributions		(0.02	)		(0.05	)		(0.00	)(2)		(0.02	)		(0.02	)		—
Net Asset Value, End of Period	$	14.82		$	14.51		$	13.15		$	13.76		$	9.91		$	11.86
Total Return(3)		2.27	%		10.74	%		(4.42	)%		39.16	%		(16.29	)%		(26.06	)%
Net Assets, End of Period (millions)		$352			$378			$390			$354			$225			$280
Ratios to Average Net Assets:
Gross expenses		0.79	%(4)		0.79	%		0.78	%		0.79	%		0.80	%		0.78	%
Net expenses		0.78	(4)(5)		0.79			0.78	(5)		0.79			0.80			0.78
Net investment income (loss)		0.14	(4)		0.43			(0.02	)		0.06			0.13			0.14
Portfolio Turnover Rate		8	%		20	%		7	%		16	%		19	%		10	%

⁽¹⁾ For the six months ended April 30, 2006 (unaudited).

⁽²⁾ Amount represents less than $0.01 per share.

⁽³⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽⁴⁾ Annualized.

⁽⁵⁾ The investment manager voluntarily waived a portion of its fees and/or reimbursed expenses.

See Notes to Financial Statements.

36         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Financial Highlights (continued)

For a share of capital stock outstanding throughout each year ended October 31, unless otherwise noted:

Legg Mason Partners Variable Mid Cap Core Portfolio	2006(1)			2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$	14.76		$	13.14		$	12.35		$	10.10		$	10.83		$	14.22
Income (Loss) From Operations:
Net investment income (loss)		0.05			0.06			(0.01	)		(0.00	)(2)		(0.02	)		0.02
Net realized and unrealized gain (loss)		2.00			1.56			0.80			2.25			(0.70	)		(3.36	)
Total Income (Loss) From Operations		2.05			1.62			0.79			2.25			(0.72	)		(3.34	)
Less Distributions From:
Net investment income		(0.09	)		—			—			—			(0.01	)		(0.05	)
Net realized gains		(1.12	)		—			—			—			—			—
Total Distributions		(1.21	)		—			—			—			(0.01	)		(0.05	)
Net Asset Value, End of Period	$	15.60		$	14.76		$	13.14		$	12.35		$	10.10		$	10.83
Total Return(3)		14.63	%		12.33	%		6.40	%		22.28	%		(6.64	)%		(23.56	)%
Net Assets, End of Period (millions)		$130			$121			$110			$87			$57			$34
Ratios to Average Net Assets:
Gross expenses		0.81	%(4)		0.82	%		0.83	%		0.85	%		0.90	%		0.96	%
Net expenses(5)		0.81	(4)(6)		0.82			0.83	(6)		0.85			0.90			0.95	(6)
Net investment income (loss)		0.57	(4)		0.44			(0.06	)		(0.03	)		(0.10	)		0.25
Portfolio Turnover Rate		38	%		107	%		92	%		98	%		79	%		45	%

⁽¹⁾ For the six months ended April 30, 2006 (unaudited).

⁽²⁾ Amount represents less than $0.01 per share.

⁽³⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽⁴⁾ Annualized.

⁽⁵⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets of the fund will not exceed 0.95%.

⁽⁶⁾ The investment manager voluntarily waived a portion of its fees and/or reimbursed expenses.

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         37

Financial Highlights (continued)

For a share of capital stock outstanding throughout each year ended October 31, unless otherwise noted:

Legg Mason Partners Variable Aggressive Growth Portfolio	2006(1)			2005(2)			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$	14.26		$	12.24		$	11.43		$	9.09		$	12.32		$	15.03
Income (Loss) From Operations:
Net investment loss		(0.02	)		(0.04	)		(0.05	)		(0.04	)		(0.05	)		(0.05	)
Net realized and unrealized gain (loss)		1.55			2.11			0.86			2.38			(3.18	)		(2.66	)
Total Income (Loss) From Operations		1.53			2.07			0.81			2.34			(3.23	)		(2.71	)
Less Distributions From:
Net realized gains		(0.00	)(3)		(0.05	)		—			—			—			—
Total Distributions		(0.00	)(3)		(0.05	)		—			—			—			—
Net Asset Value, End of Period	$	15.79		$	14.26		$	12.24		$	11.43		$	9.09		$	12.32
Total Return(4)		10.73	%		16.94	%		7.09	%		25.74	%		(26.22	)%		(18.03	)%
Net Assets, End of Period (millions)		$1,190			$1,079			$920			$624			$415			$366
Ratios to Average Net Assets:
Gross expenses		0.77	%(5)		0.82	%		0.82	%		0.82	%		0.83	%		0.84	%
Net expenses(6)		0.76	(5)(7)		0.82			0.82	(7)		0.82			0.83			0.84
Net investment loss		(0.22	)(5)		(0.27	)		(0.44	)		(0.49	)		(0.50	)		(0.40	)
Portfolio Turnover Rate		0	%		0	%		4	%		0	%		9	%		3	%

⁽¹⁾ For the six months ended April 30, 2006 (unaudited).

⁽²⁾ Per share amounts have been calculated using the average shares method.

⁽³⁾ Amount represents less than $0.01 per share.

⁽⁴⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽⁵⁾ Annualized.

⁽⁶⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 1.00%.

⁽⁷⁾ The investment manager voluntarily waived a portion of its fees and/or reimbursed expenses.

See Notes to Financial Statements.

38         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Financial Highlights (continued)

For a share of capital stock outstanding throughout each year ended October 31, unless otherwise noted:

Legg Mason Partners Variable International All Cap Growth Portfolio	2006(1)			2005			2004(2)			2003(2)			2002(2)			2001(2)
Net Asset Value, Beginning of Period	$	13.56		$	11.77		$	10.43		$	8.78		$	11.18		$	18.52
Income (Loss) From Operations:
Net investment income		0.06			0.13			0.07			0.10			0.04			0.05
Net realized and unrealized gain (loss)		3.04			1.77			1.37			1.60			(2.39	)		(7.39	)
Total Income (Loss) From Operations		3.10			1.90			1.44			1.70			(2.35	)		(7.34	)
Less Distributions From:
Net investment income		(0.19	)		(0.11	)		(0.10	)		(0.05	)		(0.05	)		—
Total Distributions		(0.19	)		(0.11	)		(0.10	)		(0.05	)		(0.05	)		—
Net Asset Value, End of Period	$	16.47		$	13.56		$	11.77		$	10.43		$	8.78		$	11.18
Total Return(3)		23.07	%		16.21	%		13.90	%		19.45	%		(20.97	)%		(39.63	)%
Net Assets, End of Period (millions)		$183			$160			$160			$180			$170			$244
Ratios to Average Net Assets:
Gross expenses		0.96	%(4)		1.00	%		1.01	%		0.99	%		1.00	%		1.00	%
Net expenses(5)		0.96	(4)(6)		1.00			1.01	(6)		0.99			1.00			1.00
Net investment income		0.85	(4)		0.98			0.67			1.07			0.42			0.31
Portfolio Turnover Rate		6	%		16	%		21	%		45	%		27	%		22	%

⁽¹⁾ For the six months ended April 30, 2006 (unaudited).

⁽²⁾ Per share amounts have been calculated using the average shares method.

⁽³⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽⁴⁾ Annualized.

⁽⁵⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 1.50%.

⁽⁶⁾ The investment manager voluntarily waived a portion of its fees and/or reimbursed expenses.

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         39

Notes to Financial Statements (unaudited)

1. Organization and Significant Accounting Policies

Legg Mason Partners Variable Large Cap Value Portfolio, Legg Mason Partners Variable Large Cap Growth Portfolio, Legg Mason Partners Variable Mid Cap Core Portfolio, Legg Mason Partners Variable Aggressive Growth Portfolio and Legg Mason Partners Variable International All Cap Growth Portfolio (formerly known as Smith Barney Large Cap Value Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith Barney Mid Cap Core Portfolio, Smith Barney Aggressive Growth Portfolio and Smith Barney International All Cap Growth Portfolio), respectively (the “Funds”) are separate diversified investment funds of Legg Mason Partners Variable Portfolios III, Inc. (formerly known as Travelers Series Fund Inc.) (the “Company”). The Company, a Maryland corporation, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Shares of the Funds may only be purchased or redeemed through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating life insurance companies or through eligible pension or other qualified plans.

The following are significant accounting policies consistently followed by the Funds and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.

(a) Investment Valuation. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various relationships between securities. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Funds calculate their net asset value, the Funds may value these investments at fair value as determined in accordance with the procedures approved by the Funds’ Board of Directors. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. Short-term obligations maturing within 60 days are valued at amortized cost, which approximates market value.

(b) Repurchase Agreements. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian take possession of the underlying collateral securities, the market value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.

40         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

(c) Lending of Portfolio Securities. The Funds have an agreement with their custodian whereby the custodian may lend securities owned by the Funds to brokers, dealers and other financial organizations. In exchange for lending securities under the terms of the agreement with their custodian, the Funds receive a lender’s fee. Fees earned by the Funds on securities lending are recorded as securities lending income. Loans of securities by the Funds are collateralized by cash, U.S. government securities or high quality money market instruments that are maintained at all times in an amount at least equal to the current market value of the loaned securities, plus a margin which varies depending on the type of securities loaned. The custodian establishes and maintains the collateral in a segregated account. The Funds have the right under the lending agreement to recover the securities from the borrower on demand.

The Funds maintain the risk of any loss on the securities on loan as well as the potential loss on investments purchased with cash collateral received from securities lending.

(d) Foreign Risk. The Funds’ investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies and may require settlement in foreign currencies and pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

(e) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities, at the date of valuation, resulting from changes in exchange rates.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         41

Notes to Financial Statements (unaudited) (continued)

(f) Security Transactions and Investment Income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Funds determine the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults on an expected interest payment, the Funds’ policy is to generally halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default.

(g) Distributions to Shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Funds are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

(h) Federal and Other Taxes. It is the Funds’ policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Funds intend to distribute substantially all of its income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Funds’ financial statements. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

(i) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share.

2. Investment Management Agreement and Other Transactions with Affiliates

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management (“CAM”), to Legg Mason, Inc. (“Legg Mason”). As a result, the Funds’ investment manager, Smith Barney Fund Management LLC (“SBFM” or the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused the Funds’ existing investment management contracts to terminate. The Funds’ shareholders approved a new investment management contract between the Funds and the Manager, which became effective on December 1, 2005.

Legg Mason, whose principal executive offices are in Baltimore, Maryland, is a financial services holding company.

42         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

Effective November 1, 2005 and under the new Investment Management agreements effective December 1, 2005, Legg Mason Partners Variable Mid Cap Core Portfolio pays the Manager a management fee calculated daily and payable monthly at an annual rate of 0.75% of the Fund’s average daily net assets. Legg Mason Partners Variable Large Cap Value Portfolio, Legg Mason Partners Variable Large Cap Growth Portfolio, Legg Mason Partners Variable Aggressive Growth Portfolio and Legg Mason Partners Variable International All Cap Growth Portfolio pay the Manager an investment management fee, which is calculated in accordance with the following breakpoint schedule:

Average Daily Net Assets	Annual Rate
Legg Mason Partners Variable Large Cap Value Portfolio
First $500 million	0.600	%
Next $500 million	0.550
Over $1 billion	0.500
Legg Mason Partners Variable Large Cap Growth Portfolio
First $1 billion	0.750	%
Next $1 billion	0.725
Next $3 billion	0.700
Next $5 billion	0.675
Over $10 billion	0.650
Legg Mason Partners Variable Aggressive Growth Portfolio
First $1 billion	0.750	%
Next $1 billion	0.725
Next $3 billion	0.700
Next $5 billion	0.675
Over $10 billion	0.650
Legg Mason Partners Variable International All Cap Growth Portfolio
First $1 billion	0.850	%
Next $1 billion	0.825
Next $3 billion	0.800
Next $5 billion	0.775
Over $10 billion	0.750

During the six months ended April 30, 2006, Legg Mason Partners Variable Large Cap Value Portfolio, Legg Mason Partners Variable Mid Cap Core Portfolio, Legg Mason Partners Variable Aggressive Growth Portfolio and Legg Mason Partners Variable International All Cap Growth Portfolio, had voluntary expense limitations in place of 1.25%, 0.95%, 1.00% and 1.50%, respectively. These expense limitations are voluntary and may be terminated at any time.

During the six months ended April 30, 2006, the Manager waived and/or reimbursed expenses amounting to $8,241 for Legg Mason Partners Variable Large Cap Value Portfolio; $9,948 for Legg Mason Partners Variable Large Cap Growth Portfolio; $4,296 for Legg Mason Partners Variable Mid Cap Core Portfolio; $26,468 for Legg Mason Partners Variable Aggressive Growth Portfolio and $5,221 for Legg Mason Partners Variable International All Cap Growth Portfolio, respectively.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         43

Notes to Financial Statements (unaudited) (continued)

The Funds’ Board has approved PFPC Inc. (“PFPC”) to serve as transfer agent for the Funds, effective January 1, 2006. The principal business office of PFPC is located at 4400 Computer Drive, Westborough, MA 01581. Prior to January 1, 2006, Citicorp Trust Bank, fsb. (“CTB”), a subsidiary of Citigroup, acted as the Funds’ transfer agent. Also, prior to January 1, 2006, PFPC acted as the Funds’ sub-transfer agent. CTB received account fees and asset-based fees that varied according to the size and type of account. PFPC was responsible for shareholder recordkeeping and financial processing for all shareholder accounts and was paid by CTB. For the period ended April 30, 2006, the Funds paid transfer agent fees of $10,480 to CTB.

The totals for each Fund were as follows:

	Transfer Agent Fees
Legg Mason Partners Variable Large Cap Value Portfolio	$	2,097
Legg Mason Partners Variable Large Cap Growth Portfolio		2,093
Legg Mason Partners Variable Mid Cap Core Portfolio		2,092
Legg Mason Partners Variable Aggressive Growth Portfolio		2,093
Legg Mason Partners Variable International All Cap Growth Portfolio		2,105

The Funds’ Board has appointed the Funds’ current distributor, Citigroup Global Markets Inc. (“CGM”), and Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, as co-distributors of the Funds. CGM and other broker-dealers, financial intermediaries and financial institutions (each called a “Service Agent”) that currently offer Fund shares will continue to make the Funds’ shares available to their clients. Additional Service Agents may offer Fund shares in the future.

For the six months ended April 30, 2006, CGM, its affiliates and LMIS did not receive any brokerage commissions from the Funds.

Certain officers and one Director of the Company are employees of Legg Mason or its affiliates and do not receive compensation from the Company.

3. Investments

During the six months ended April 30, 2006, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:

	Purchases		Sales
Legg Mason Partners Variable Large Cap Value Portfolio	$	45,259,085	$	74,510,653
Legg Mason Partners Variable Large Cap Growth Portfolio		29,908,301		65,423,206
Legg Mason Partners Variable Mid Cap Core Portfolio		46,689,287		53,610,630
Legg Mason Partners Variable Aggressive Growth Portfolio		16,349,882		116,708
Legg Mason Partners Variable International All Cap Growth Portfolio		9,320,713		20,328,430

44         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

At April 30, 2006, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

	Gross unrealized appreciation		Gross unrealized depreciation			Net unrealized appreciation
Legg Mason Partners Variable Large Cap Value Portfolio	$	61,311,778	$	(2,614,737	)	$	58,697,041
Legg Mason Partners Variable Large Cap Growth Portfolio		94,818,940		(6,085,220	)		88,733,720
Legg Mason Partners Variable Mid Cap Core Portfolio		22,223,030		(2,155,939	)		20,067,091
Legg Mason Partners Variable Aggressive Growth Portfolio		357,048,453		(112,333,911	)		244,714,542
Legg Mason Partners Variable International All Cap Growth Portfolio		78,500,127		(901,586	)		77,598,541

At April 30, 2006, Legg Mason Partners Variable Large Cap Value Portfolio, Legg Mason Partners Variable Large Cap Growth Portfolio, Legg Mason Partners Variable Mid Cap Core Portfolio, Legg Mason Partners Variable Aggressive Growth Portfolio and Legg Mason Partners Variable International All Cap Growth Portfolio did not have any securities on loan.

4. Capital Shares

At April 30, 2006, the Company had six billion shares of capital stock authorized with a par value of $0.00001 per share. Each share of a Fund represents an equal proportionate interest in that Fund with each other share of the same Fund and has an equal entitlement to any dividends and distributions made by the Fund.

Transactions in shares of each Fund were as follows:

	Six Months Ended April 30, 2006		Year Ended October 31, 2005
Legg Mason Partners Variable Large Cap Value Portfolio
Shares sold	25,965		174,564
Shares issued on reinvestment	252,366		354,179
Shares repurchased	(1,628,759	)	(3,655,136	)
Net Decrease	(1,350,428	)	(3,126,393	)
Legg Mason Partners Variable Large Cap Growth Portfolio
Shares sold	345,654		837,308
Shares issued on reinvestment	32,723		104,161
Shares repurchased	(2,694,805	)	(4,531,870	)
Net Decrease	(2,316,428	)	(3,590,401	)

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         45

Notes to Financial Statements (unaudited) (continued)

	Six Months Ended April 30, 2006		Year Ended October 31, 2005
Legg Mason Partners Variable Mid Cap Core Portfolio
Shares sold	67,766		618,090
Shares issued on reinvestment	681,898		—
Shares repurchased	(580,538	)	(836,951	)
Net Increase (Decrease)	169,126		(218,861	)
Legg Mason Partners Variable Aggressive Growth Portfolio
Shares sold	2,351,882		4,820,016
Shares issued on reinvestment	2,165		281,999
Shares repurchased	(2,647,626	)	(4,607,553	)
Net Increase (Decrease)	(293,579	)	494,462
Legg Mason Partners Variable International All Cap Growth Portfolio
Shares sold	60,905		423,243
Shares issued on reinvestment	153,310		115,894
Shares repurchased	(958,853	)	(2,502,814	)
Shares issued in connection with merger	—		224,109
Net Decrease	(744,638	)	(1,739,568	)

5. Transfer of Net Assets

On July 8, 2005, Legg Mason Partners Variable International All Cap Growth Portfolio acquired the assets and certain liabilities of the GSS Salomon Brothers Variable International Equity Fund pursuant to a plan of reorganization approved by GSS Salomon Brothers Variable International Equity Fund shareholders on July 1, 2005. Total shares issued by Legg Mason Partners Variable International All Cap Growth Portfolio, the total net assets of the GSS Salomon Brothers Variable International Equity Fund and total net assets of Legg Mason Partners Variable International All Cap Growth Portfolio on the date of the transfer were as follows:

Acquired Fund	Shares Issued by Legg Mason Partners Variable International All Cap Growth Portfolio	Total Net Assets of the GSS Salomon Brothers Variable International Equity Fund		Total Net Assets of, Legg Mason Partners Variable International All Cap Growth Portfolio
GSS Salomon Brothers Variable International Equity Fund	224,109	$	2,864,133	$	158,199,570

The total assets of the GSS Salomon Brothers Variable International Equity Fund before acquisition included unrealized depreciation of $961,933 and accumulated net realized gains of $494. Total net assets of Legg Mason Partners Variable International All Cap Growth Portfolio immediately after the transfer were $161,063,703. The transaction was structured to qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as amended.

46         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

6. Capital Loss Carryforward

On October 31, 2005, the Legg Mason Partners Variable Large Cap Value Portfolio Fund had a net capital loss carryforward of $29,341,801 of which $6,191,123 expires in 2010, $23,150,678 expires in 2011. The Legg Mason Partners Variable Large Cap Growth Portfolio Fund had a net capital loss carryforward of $64,924,813 of which $2,019,427 expires in 2008, $5,453,825 expires in 2009, $30,603,559 expires in 2010, $8,588,495 expires in 2011, $5,325,802 expires in 2012 and $12,933,705 expires in 2013. The Legg Mason Partners Variable International All Cap Growth Portfolio Fund had a net capital loss carryforward of $61,381,331 of which $38,021,872 expires in 2009, $13,574,174 expires in 2010 and $9,785,285 expires in 2011. These amounts will be available to offset any future taxable capital gain.

7. Regulatory Matters

On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and CGM relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).

The SEC order finds that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the fund’s investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also finds that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan submitted for the approval of the SEC. At this time, there is no

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         47

Notes to Financial Statements (unaudited) (continued)

certainty as to how the above-described proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made.

The order also required that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provided that a portion of such fees might be subsequently distributed in accordance with the terms of the order. On April 3, 2006, an aggregate amount of approximately $9 million was distributed to the affected Funds.

The order required SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGM would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Fund’s Board selected a new transfer agent for the Fund. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.

On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason.

8. Legal Matters

Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGM and SBFM (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC described in Note 7. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the investment manager for the Smith Barney family of funds, rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses.

On October 5, 2005, a motion to consolidate the five actions and any subsequently filed, related action was filed. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future.

As of the date of this report, the Fund’s investment manager believes that resolution of the pending lawsuit will not have a material effect on the financial position or results of operations of the Fund or the ability of the Fund’s investment manager and its affiliates to continue to render services to the Funds under their respective contracts.

* * *

Beginning in June 2004, class action lawsuits alleging violations of the federal securities laws were filed against CGM and a number of its affiliates, including SBFM and Salomon Brothers Asset Management Inc. (“SBAM”) (collectively, 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,

48         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

among other things, that CGM 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 CGM for steering clients towards proprietary funds. The complaints also alleged that the Defendants breached their fiduciary duty to the Funds by improperly charging Rule l2b-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 aspects 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, the Fund’s investment manager 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 theses 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, the Fund’s investment manager 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.

The Defendants have moved to dismiss the Complaint. Those motions are pending before the court.

9. Other Matters

On September 16, 2005, the staff of the Securities and Exchange Commission (the “Commission”) informed SBFM and SBAM that the staff is considering recommending that the Commission institute administrative proceedings against SBFM and SBAM for alleged violations of Section 19(a) and 34(b) of the Investment Company Act (and related Rule 19a-1). The notification is a result of an industry wide inspection by the SEC and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. Section 19(a) and related Rule 19a-1 of the Investment Company Act generally require funds that are making dividend and distribution payments to provide shareholders with a written statement disclosing the source of the dividends and distributions, and, in particular, the portion of the payments made from each of net investment income, undistributed net profits and/or paid-in capital. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM or SBAM.

Although there can be no assurance, SBFM believes that this matter is not likely to have a material adverse effect on the Funds or SBFM’s ability to perform investment management services relating to the Funds.

Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report         49

Additional Shareholder Information (unaudited)

Results of a Special Meeting of Shareholders

On November 15, 2005, a Special Meeting of Shareholders was held for the following purposes: 1) to approve a new management agreement and 2) to elect Directors of the Company to oversee the Funds. The following tables provide the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter voted on at the Special Meeting of Shareholders.

1. Approval of New Management Agreement

Fund Name	Votes For	Votes Against	Abstentions	Broker Non-Votes
Legg Mason Partners Variable Large Cap Value Portfolio	13,670,372.185	258,701.103	606,723.162	0.000
Legg Mason Partners Variable Large Cap Growth Portfolio	25,401,706.570	340,106.990	904,455.030	0.000
Legg Mason Partners Variable Mid Cap Core Portfolio	7,850,506.152	141,232.635	303,474.232	0.000
Legg Mason Partners Variable Aggressive Growth Portfolio	72,040,450.790	1,572,564.120	2,469,981.890	0.000
Legg Mason Partners Variable International All Cap Growth Portfolio	10,445,981.758	247,818.709	347,653.702	0.000

2. Election of Directors¹

Nominees	Votes For	Authority Withheld	Abstentions	Broker Non-Votes
Robert A. Frankel	644,358,719.408	16,164,564.582	0.000	0.000
Michael E. Gellert	644,364,511.260	16,158,772.730	0.000	0.000
Rainer Greeven	644,620,846.258	15,902,437.742	0.000	0.000
Susan M. Heilborn	644,899,625.635	15,623,658.365	0.000	0.000
R. Jay Gerken	644,284,458.802	16,238,825.188	0.000	0.000

¹ Directors are elected by the shareholders of all of the series of the Company of which the Funds are a series.

50         Legg Mason Partners Variable Portfolios III, Inc. 2006 Semi-Annual Report

Legg Mason Partners Variable Portfolios III, Inc.

DIRECTORS Robert A. Frankel Michael E. Gellert R. Jay Gerken, CFA Chairman Rainer Greeven Susan M. Heilbron OFFICERS R. Jay Gerken, CFA President and Chief Executive Officer Andrew B. Shoup Senior Vice President and Chief Administrative Officer James M. Giallanza Chief Financial Officer and Treasurer Brian Angerame Vice President and Investment Officer Derek Deutsch Vice President and Investment Officer Peter Stournaras Vice President and Investment Officer Alan J. Blake Vice President and Investment Officer Robert Feitler Vice President and Investment Officer Richard A. Freeman Vice President and Investment Officer Mark J. McAllister, CFA Vice President and Investment Officer OFFICERS (continued) Jeffrey J. Russell Vice President and Investment Officer Ted P. Becker Chief Compliance Officer John Chiota Chief Anti-Money Laundering Compliance Officer Robert I. Frenkel Secretary and Chief Legal Officer INVESTMENT MANAGER Smith Barney Fund
    Management LLC DISTRIBUTORS Citigroup Global Markets Inc. Legg Mason Investor Services, LLC CUSTODIAN State Street Bank and Trust
    Company ANNUITY ADMINISTRATION Travelers Annuity Investor Services One Cityplace Hartford, CT 06103-3415 TRANSFER AGENT PFPC Inc. 4400 Computer Drive Westborough, Massachusetts 01581 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 345 Park Avenue New York, New York 10154

This report is submitted for the general information of the shareholders of the Legg Mason Partners Variable Portfolios III, Inc. — Legg Mason Partners Variable Large Cap Value Portfolio, Legg Mason Partners Variable Large Cap Growth Portfolio, Legg Mason Partners Variable Mid Cap Core Portfolio, Legg Mason Partners Variable Aggressive Growth Portfolio and Legg Mason Partners Variable International All Cap Growth Portfolio.

This report must be preceded or accompanied by a free prospectus. Investors should consider the Funds’ investment objectives, risks, charges and expenses before investing. The prospectus contains this and other important information about the Funds. Please read the prospectus carefully before investing.

www.leggmason.com/InvestorServices

©2006 Legg Mason Investor Services, LLC Member NASD, SIPC

FD03404 06/06 SR06-53

Legg Mason Partners Variable Portfolios III, Inc.

Legg Mason Partners Variable Large Cap Value Portfolio

Legg Mason Partners Variable Large Cap Growth Portfolio

Legg Mason Partners Variable Mid Cap Core Portfolio

Legg Mason Partners Variable Aggressive Growth Portfolio

Legg Mason Partners Variable International All Cap Growth Portfolio

The Funds are separate investment funds of the Legg Mason Partners Variable Portfolios III, Inc., a Maryland corporation.

LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, INC.

Legg Mason Partners Funds

125 Broad Street

10th Floor, MF-2

New York, New York 10004

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Funds, shareholders can call 1-800-451-2010.

Information an how the Funds voted proxies relating to portfolio securities during the prior 12 month period ended June 30th of each year and a description of the policies and procedures that the Funds use to determine how to vote proxies related to portfolio transactions is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on each Fund’s website at www.leggmason.com/InvestorServices and (3) on the SEC’s website at www.sec.gov. Proxy voting reports for the period ending June 30, 2005 will be continue to be listed under the Funds’ former Travelers Series Fund Inc. name.

EX-99.17.E

Legg Mason Partners Variable Portfolios II
Variable Aggressive Growth Portfolio
Class I Shares

    PROSPECTUS

MAY 1, 2006

Fund shares are offered only to variable annuity and variable life insurance separate accounts established by insurance companies (“Participating Insurance Companies”) to fund variable annuity contracts (“VA contracts”) and variable life insurance policies (“VLI policies,” and together with VA contracts, the “Policies”). Individuals may not purchase shares of any fund directly from the Legg Mason Partners Variable Portfolios II. The Policies are described in the separate prospectuses issued by the Participating Insurance Companies. This prospectus should be read together with the prospectus for those Policies.

The Statement of Additional Information (“SAI”) provides more detailed information about this fund and is incorporated by reference into (is legally a part of) this prospectus.

The Securities and Exchange Commission (“SEC”) has not approved or disapproved these securities or determined whether this prospectus is accurate or complete. Any statement to the contrary is a crime.

 INVESTMENT PRODUCTS: NOT FDIC INSURED•NO BANK GUARANTEE•MAY LOSE VALUE 

“Smith Barney” and “Salomon Brothers” are service marks of Citigroup, licensed for use by Legg Mason as the names of funds and investment advisers. Legg Mason and its affiliates, as well as the fund’s investment manager, are not affiliated with Citigroup.

Variable Aggressive Growth
Portfolio
Class I Shares

Contents

The fund is a separate investment series of Legg Mason Partners Variable Portfolios II, a Massachusetts business trust (the “Trust”).

	Page
Investments, risks and performance	2
More on the fund’s investments	7
Management	10
Shareholder transactions	13
Pricing of fund shares	15
Purchases and redemptions	16
Tax consequences of dividends and distributions	17
Financial highlights	18

   The Trust is currently divided into multiple funds, each with its own investment objective, policies and restrictions. The fund is diversified under the Investment Company Act of 1940, as amended (the “1940 Act”). There can be no assurance that the fund will achieve its investment objective.

   Prior to May 1, 2006, the fund was named Greenwich Street Series Fund — Salomon Brothers Variable Aggressive Growth Fund. The fund’s investment objective and strategies were not affected as a result of this change.

Investments, risks and performance

Investment objective

Capital appreciation.

Key investments

The fund invests primarily in common stocks of companies that the manager believes are experiencing, or will experience, growth in earnings and/or cash flow that exceeds the average rate of earnings growth of the companies that comprise the S&P 500 Index. The fund may invest in the securities of large, well-known companies that offer prospects of long-term earnings growth. However, a significant portion of the fund’s assets may be invested in the securities of small to medium-sized companies because such companies often achieve higher earnings growth rates.

Selection process

The manager emphasizes individual security selection while diversifying the fund’s investments across industries, which may help to reduce risk. The manager focuses primarily, but not exclusively, on emerging growth companies that have passed their “start-up” phase and show positive earnings and the prospect of achieving significant profit gains beginning in the two to three years after the fund acquires their stocks.

   When evaluating an individual stock, the manager considers whether the company may benefit from:

• New technologies, products or services

• New cost reducing measures

• Changes in management

Principal risks of investing in the fund

Investors could lose money on their investment in the fund, or the fund may not perform as well as other investments, if:

• Stock prices decline generally

• Emerging growth companies fall out of favor with investors

• The manager’s judgment about the attractiveness, value or potential appreciation of a particular stock proves to be incorrect

• A particular product or service developed by a company in which the fund invests is unsuccessful, the company does not meet earnings expectations or other events depress the value of the company’s stock

• The value of an individual security or particular type of security can be more volatile than the market as a whole and can perform differently than the market as a whole. Smaller capitalized companies may involve greater risks, such as limited product lines, markets and financial or managerial resources

Compared to large capitalization companies, emerging growth companies are more likely to have:

• More limited product lines

• Fewer capital resources

• More limited management depth

2     Legg Mason Partners Variable Portfolios II

Further, securities of emerging growth companies are more likely to:

• Experience sharper swings in market values

• Be harder to sell at times and prices the manager believes appropriate

• Offer greater potential for gains and losses

   In addition to the foregoing principal risks, the fund is also subject to risks associated with investing in fixed income securities, foreign securities, emerging markets securities and derivatives. The risks are more fully described in “More on the fund’s investments.”

Variable Aggressive Growth Portfolio      3

Fund performance

This bar chart indicates the risks of investing in Class I shares of the fund by showing changes in the fund’s performance for the last ten years. The table shows how the fund’s average annual returns for each of the last ten calendar years compare to the return of the Russell 3000 Growth Index, a broad-based unmanaged index of those Russell 3000 Index Companies with higher price-to-book ratios and higher forecasted growth values. Past performance does not necessarily indicate how the fund will perform in the future. Prior to February 10, 2000, the fund was managed by an adviser not affiliated with Salomon Brothers Asset Management Inc. (“SaBAM” or the “Manager”). Performance figures do not reflect expenses incurred from investing through a separate account; if those expenses had been reflected, performance would have been lower. Please refer to the separate account prospectus for more information on expenses.

Total Return

The bar chart shows the Class I shares’ performance for each full calendar year for the last ten years.

Risk return bar chart

Quarterly returns:

Highest: 63.83% in 4th quarter 1999; Lowest: (24.76)% in 2nd quarter 2002.

4     Legg Mason Partners Variable Portfolios II

Risk return table

Comparative performance

The table indicates the risk of investing in the fund by comparing the average annual total return for the periods shown to that of the Russell 3000 Growth Index. The performance indicated does not reflect Policy charges which, if included, would lessen performance.

   This table assumes redemption of shares at the end of the period and the reinvestment of distributions and dividends.

Average Annual Total Returns (for the periods ended December 31, 2005)

	1 year			5 years			10 years
Class I Shares		9.89	%		1.38	%		18.65	%
Russell 3000 Growth Index*		5.17	%		(3.15	)%		6.48	%

*  It is not possible to invest directly in the index. The index does not reflect deductions for fees, expenses or taxes.

Variable Aggressive Growth Portfolio      5

Fee Table

Fees and Expenses

This table sets forth the fees and expenses you will pay if you invest in Class I shares of the fund.

   The table and the example do not reflect additional charges and expenses which are, or may be, imposed under the variable contracts; such charges and expenses are described in the prospectus of the insurance company separate account. The fund’s expenses should be considered with these charges and expenses in evaluating the overall cost of investing in the separate account.

Shareholder Fees (paid directly from your investment)

		Class I
Maximum sales charge on purchases			N/A
Maximum deferred sales charge on redemptions			N/A
Annual fund operating expenses (paid by the fund as a % of net assets)
	Management fees*		0.75	%
	Distribution (12b-1) fees		None
	Other expenses**		0.15	%
	Total annual fund operating expenses		0.90	%

*

Effective October 1, 2005, the management fees for advisory and administrative services were changed to the following breakpoint schedule: The Fund has a fee schedule that reduces the investment management fee payable on assets in excess of $1 billion as follows: 0.750% on assets up to and including $1 billion; 0.725% on assets over $1 billion and up to and including $2 billion; 0.700% on assets over $2 billion and up to and including $5 billion; 0.675% on assets over $5 billion and up to and including $10 billion; and 0.650% on assets over $10 billion. “Management fees” in the table have been restated to reflect the new fee schedule. Actual management fees for the fiscal year ended December 31, 2005 were 0.790%.

**

“Other expenses” have been restated to reflect the estimated effect of the new transfer agency and custody contracts which became effective January 1, 2006.

Example

This example helps you compare the cost of investing in Class I shares of the fund with other mutual funds. Your actual cost may be higher or lower.

   This example does not include expenses incurred from investing through a Separate Account. If the example included these expenses, the figures shown would be higher.

   The example assumes:

• You invest $10,000 for the period shown

• You reinvest all distributions and dividends without a sales charge

• The fund’s operating expenses (before fee waivers and/or expense reimbursements, if any) remain the same

• Your investment has a 5% return each year — the assumption of a 5% return is required by the SEC for purposes of this example and is not a prediction of the fund’s future performance

• Redemption of your shares at the end of the period

Number of Years You Owned Your Shares

	1 year		3 years		5 years		10 years
Your costs for Class I Shares would be	$	92	$	287	$	498	$	1,108

6     Legg Mason Partners Variable Portfolios II

More on the fund’s investments

Investments and Practices

The fund invests in various instruments subject to its investment policies as described in this prospectus and in the SAI. Listed below is more information on the fund’s investments, its practices and related risks. For a free copy of the SAI, see the back cover of this prospectus. The fund does not guarantee that it will reach its investment objective, and an investment in the fund may lose money.

Equities

Equity securities include exchange-traded and over-the-counter common and preferred stocks, warrants, rights, convertible securities, depositary receipts and shares, trust certificates, limited partnership interests, shares of other investment companies, real estate investment trusts and equity participations.

   Equity securities are subject to market risk. Many factors affect the stock market prices and dividend payouts of equity investments. These factors include general business conditions, investor confidence in the economy, and current conditions in a particular industry or company. Each company determines whether or not to pay dividends on common stock. Equity securities are subject to financial risks relating to the issuer’s earning stability and overall financial sound-ness. Smaller and emerging growth companies are particularly sensitive to these factors.

   The fund may invest up to 10% of its assets in securities of other investment companies, including shares in a portfolio of securities that seeks to track the performance of an underlying equity index or a portion of an equity index. As a shareholder of another investment company, the fund would bear, along with other shareholders, its pro rata portion of the other investment company’s expenses, including advisory fees. These expenses would be in addition to the advisory fees and other expenses that the fund bears directly in connection with its own operations.

Sectors

Companies in similar industries may be grouped together in broad categories called sectors. Sector risk is the possibility that a certain sector may perform differently from other sectors or from the market as a whole. As the manager allocates more of the fund’s portfolio holdings to a particular sector, the fund’s performance will be more susceptible to any economic, business or other developments that generally affect that sector.

Fixed Income Investments (limited extent)

Fixed income securities include bonds, notes (including structured notes), mortgage-related securities, asset-backed securities, convertible securities, Eurodollar and Yankee dollar instruments, preferred stocks and money market instruments. Fixed income securities may be issued by U.S. and foreign companies; U.S. and foreign banks; the U.S. government, its agencies, authorities, instrumentalities or sponsored enterprises; state and municipal governments; supranational organizations; and foreign governments and their political sub-divisions. Fixed income securities may have all types of interest rate

Variable Aggressive Growth Portfolio      7

payment and reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment in kind and auction rate features.

   The value of debt securities varies inversely with interest rates. This means generally that the value of these investments increases as interest rates fall and decreases as interest rates rise. Yields from short-term securities normally may be lower than yields from longer-term securities. A bond’s price is affected by the credit quality of its issuer. An issuer may not always make payments on a fixed income security. Some fixed income securities, such as mortgage-backed securities, are subject to prepayment risk, which occurs when an issuer can prepay the principal owed on a security before its maturity.

Credit quality of fixed income securities

If a security receives different ratings, a fund will treat the securities as being rated in the highest of those ratings. The fund may choose not to sell securities that are downgraded below the fund’s minimum acceptable credit rating after their purchase. The fund’s credit standards also apply to counterparties to OTC derivative contracts.

Foreign Securities Investments

An investment in foreign securities involves risks in addition to those of U.S. securities, including possible political and economic instability and the possible imposition of exchange controls or other restrictions on investments. There are also risks associated with the different accounting, auditing, and financial reporting standards in many foreign countries. If the fund invests in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency rates relative to the U.S. dollar will affect the U.S. dollar value of the fund’s assets. Foreign securities may be less liquid than U.S. securities.

Emerging Market Investments

Emerging markets offer the potential of significant gains but also involve greater risks than investing in more developed countries. Political or economic instability, lack of market liquidity and government actions, such as currency controls or seizure of private business or property may be more likely in emerging markets.

Derivatives And Hedging Techniques

Derivative contracts, such as futures and options on securities, may be used for any of the following purposes:

• To hedge against the economic impact of adverse changes in the market value of the fund’s securities, due to changes in stock market prices, currency exchange rates or interest rates

• As a substitute for buying or selling securities

• As a cash flow management technique

   Even a small investment in derivative contracts can have a big impact on the fund’s stock market, currency and interest rate exposure. Therefore, using derivatives can disproportionately increase losses and reduce opportunities for gain when stock prices, currency rates or interest rates are changing. For a more complete description of derivative and hedging techniques and their associated risks, please refer to the SAI.

8     Legg Mason Partners Variable Portfolios II

Other Risk Factors

Portfolio Risk

Fund investors are subject to portfolio risk in that a strategy used, or stock selected, may fail to have the desired effect. Specifically, stocks believed to show potential for capital growth may not achieve that growth. Strategies or instruments used to hedge against a possible risk or loss may fail to protect against the particular risk or loss.

Temporary Defensive Position

The fund may depart from principal investment strategies in response to adverse market, economic or political conditions by taking a temporary defensive position by investing all or a substantial part of its assets in debt securities including lower-risk debt securities, and money market instruments. If the fund takes a temporary defensive position, it may be unable to achieve its investment goal.

Portfolio Turnover

The fund may actively trade portfolio securities in an attempt to achieve its investment objective. Active trading will cause the fund to have an increased portfolio turnover rate. Actively trading portfolio securities increases the fund’s trading costs and may have an adverse impact on the fund’s performance.

Investment Policies

Unless noted as fundamental, the fund’s investment policies may be changed by the Trust’s Board of Trustees without approval of shareholders or Policy holders. A change in the fund’s investment policies may result in the fund having different investment policies from those that a policy owner selected as appropriate at the time of investment.

Other Investments

The fund may also use other strategies and invest in other securities that are described, along with their risks, in the SAI. However, the fund might not use all of the strategies and techniques or invest in all of the types of securities described in this prospectus or in the SAI. Also note that there are many other factors, which are not described here, that could adversely affect your investment and that could prevent the fund from achieving its goals.

Portfolio holdings

The fund’s policies and procedures with respect to the disclosure of its portfolio securities are available in the SAI.

Variable Aggressive Growth Portfolio      9

Management

The manager

Salomon Brothers Asset Management Inc

The fund’s investment manager is SaBAM. The manager’s address is 399 Park Avenue, New York, New York 10022. The manager selects the fund’s investments, oversees its operations and provides administrative services. A discussion regarding the basis for the board’s approval of the fund’s investment management agreement with SaBAM is available in the fund’s annual report for the fiscal year ended December 31, 2005.

   On June 23, 2005, Citigroup Inc. (“Citigroup”) entered into an agreement to sell substantially all of its asset management business, Citigroup Asset Management (“CAM”), which includes the manager, to Legg Mason, Inc. (“Legg Mason”). The transaction took place on December 1, 2005. As a result, the manager, previously an indirect wholly-owned subsidiary of Citigroup, became a wholly-owned subsidiary of Legg Mason. A new investment management agreement between the fund and the manager became effective on December 1, 2005.

   Legg Mason, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202, is a financial services holding company. As of December 31, 2005, Legg Mason’s asset management operation had aggregate assets under management of approximately $850 billion.

Management fees

The fund’s manager oversees the investment operations of the fund and receives the following fee for these services:

Actual advisory fee paid for the fiscal year	Effective October 1, 2005, contractual
ended December 31, 2005 (as a percentage of	advisory fee (as a percentage of the
the fund’s average daily net assets)	fund’s average daily net assets)
0.62%	First $1 billion	0.750%
	Next $1 billion	0.725%
	Next $3 billion	0.700%
	Next $5 billion	0.675%
	Over $10 billion	0.650%

For its services during the fiscal year ended December 31, 2005, the manager received an administration fee equal to 0.17% of the fund’s average daily net assets.

The portfolio manager

The table below sets forth the name and business experience of the fund’s portfolio manager:

Richard A. Freeman Portfolio manager; Investment Officer of SaBAM. Mr. Freeman has more than 28 years of securities business experience and has been managing the fund since 2000.

10     Legg Mason Partners Variable Portfolios II

   Mr. Freeman is responsible for the day-to-day management of the fund.

   Additional information about the portfolio manager’s compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of securities in the fund is contained in the SAI.

Transfer agent, shareholder servicing agent and distributor

PFPC, Inc. (the “transfer agent”), located at P.O. Box 9699, Providence, Rhode Island 02940-9699, serves as the fund’s transfer agent and shareholder servicing agent. The transfer agent maintains the shareholder account records for the fund, handles certain communications between shareholders and the fund and distributes dividends and distributions payable by the fund.

   Legg Mason Investor Services, LLC (“LMIS”), a wholly owned broker-dealer subsidiary of Legg Mason, and Citigroup Global Markets, Inc. (“CGMI”), serves as the fund’s distributor.

Recent developments

On May 31, 2005, the SEC issued an order in connection with the settlement of an administrative proceeding against Smith Barney Fund Management LLC (“SBFM‘) and CGMI relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds, including the fund (the “Funds”).

   The SEC order finds that SBFM and CGMI willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGMI knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Fund’s then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that CAM, the Citigroup business unit that, at the time, included the manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange, among other things, for a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGMI. The order also finds that SBFM and CGMI willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGMI do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

   The SEC censured SBFM and CGMI and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order required Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has

Variable Aggressive Growth Portfolio      11

already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan submitted for the approval of the SEC. At this time, there is no certainty as to how the above-described proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. The order also required that transfer agency fees received from the Funds since December 1, 2004, less certain expenses, be placed in escrow and provided that a portion of such fees might be subsequently distributed in accordance with the terms of the order. On April 3, 2006, an aggregate amount of approximately $9 million held in escrow was distributed to the affected Funds.

   The order requested SBFM to recommend a new transfer agent contract to the Funds’ boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGMI would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the fund’s Board selected a new transfer agent for the fund. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

   Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.

   On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason.

12     Legg Mason Partners Variable Portfolios II

Shareholder transactions

Fund shares are currently sold only to insurance company separate accounts in connection with the Policies issued by the Participating Insurance Companies. The term “shareholder” as used in this prospectus refers to any insurance company separate account that may use fund shares as a funding option now or in the future. Fund shares are not sold to the general public. Fund shares are sold on a continuing basis without a sales charge at the net asset value next computed after the fund’s custodian receives payment. The separate accounts to which shares are sold, however, may impose sales and other charges, as described in the appropriate contract prospectus.

   All shares participate equally in dividends and distributions and have equal voting, liquidation and other rights. When issued for the consideration described in the prospectus, shares are fully paid and nonassessable by the fund. Shares are redeemable, transferable and freely assignable as collateral. (See your contract prospectus for a discussion of voting rights applicable to Policy holders.)

   Certain insurance companies may have selected, and the distributor may have made available, fund share classes with service and distribution related fees that are higher than other available share classes. As a result of any higher fees paid by investors in such share classes, the amount of fees that may otherwise need to be paid by the distributor or its affiliates to such insurance company would decrease.

Frequent purchases and sales of fund shares

Frequent purchases and redemptions of mutual fund shares may interfere with the efficient management of a fund’s portfolio by its portfolio manager, increase portfolio transaction costs, and have a negative effect on a fund’s long-term shareholders. For example, in order to handle large flows of cash into and out of a fund, the portfolio manager may need to allocate more assets to cash or other short-term investments or sell securities, rather than maintaining full investment in securities selected to achieve the fund’s investment objective. Frequent trading may cause a fund to sell securities at less favorable prices. Transaction costs, such as brokerage commissions and market spreads, can detract from the fund’s performance. In addition, the return received by long term shareholders may be reduced when trades by other shareholders are made in an effort to take advantage of certain pricing discrepancies, when, for example, it is believed that the fund’s share price, which is determined at the close of the New York Stock Exchange (“NYSE”) on each trading day, does not accurately reflect the value of the fund’s portfolio securities. Funds investing in foreign securities have been particularly susceptible to this form of arbitrage, but other funds could also be affected.

   Because of the potential harm to the fund and its long term shareholders, the Board of Trustees of the fund has approved policies and procedures that are intended to discourage and prevent excessive trading and market timing abuses through the use of various surveillance techniques. Under these policies and procedures, the fund may limit additional exchanges or purchases of fund shares by shareholders who are believed by the manager to be engaged in these abusive trading activities. The intent of the policies and procedures is not to inhibit legitimate strategies, such as asset allocation, dollar cost averaging, or similar activities that may nonetheless result in frequent trading of fund shares. For this reason, the

Variable Aggressive Growth Portfolio      13

Board has not adopted any specific restrictions on purchases and sales of fund shares, but the fund reserves the right to reject any exchange or purchase of fund shares with or without prior notice to the account holder. In cases where surveillance of a particular account establishes what the manager believes to be obvious market timing, the manager will seek to block future purchases and exchanges of fund shares by that account. Where surveillance of a particular account indicates activity that the manager believes could be either abusive or for legitimate purposes, the fund may permit the account holder to justify the activity.

   The fund’s shares are offered exclusively to insurance company separate accounts that fund certain insurance contracts, and insurance companies typically hold shares for a number of insurance contracts in a single account. Although the policies and procedures discussed above apply to any account, including such insurance companies separate accounts, the fund’s ability to monitor trading in these accounts may be severely limited due to the lack of access to an individual investor’s trading activity when orders are placed through these types of accounts. There may also be operational and technological limitations on the ability of the fund’s service providers to identify or terminate frequent trading activity within the various types of omnibus accounts.

   The Trust’s policies also require personnel such as portfolio managers and investment staff to report any abnormal or otherwise suspicious investment activity, and prohibit short-term trades by such personnel for their own account in mutual funds managed by the manager and its affiliates, other than money market funds. Additionally, the fund has adopted policies and procedures to prevent the selective release of information about its portfolio holdings, as such information may be used for market-timing and similar abusive practices.

   The Trust’s policies provide for ongoing assessment of the effectiveness of current policies and surveillance tools, and the Board of Trustees reserves the right to modify these or adopt additional policies and restrictions in the future. Shareholders should be aware, however, that any surveillance techniques currently employed by the funds or other techniques that may be adopted in the future, may not be effective, particularly where the trading takes place through certain types of omnibus accounts. As noted above, if the fund is unable to detect and deter trading abuses, its performance, and long-term shareholders, may be harmed. In addition, because the fund has not adopted any specific limitations or restrictions on the trading of fund shares, shareholders may be harmed by the extra costs and portfolio management inefficiencies that result from frequent trading of fund shares, even when the trading is not for abusive purposes. The fund will provide advance notice to its shareholders and prospective investors of any specific restrictions on the trading of fund shares that the Board may adopt in the future.

14     Legg Mason Partners Variable Portfolios II

Pricing of fund shares

The Board of Trustees has approved procedures to be used to value the fund’s securities for the purposes of determining the fund’s net asset value. The valuation of the securities of the fund is determined in good faith by or under the direction of the Board of Trustees. The Board of Trustees has delegated certain valuation functions for the fund to the manager.

   The fund generally values its securities based on market prices determined at the close of regular trading on the NYSE. The fund’s currency valuations, if any, are done as of when the London Stock Exchange closes, which is usually at 12 noon Eastern time. For equity securities that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of securities not traded on an exchange, or if such closing prices are not otherwise available, the market price is typically determined by independent third party pricing vendors approved by the Board using a variety of pricing techniques and methodologies. The market price for debt obligations is generally the price supplied by an independent third party pricing service approved by the Board, which may use a matrix, formula or other objective method that takes into consideration market indices, yield curves and other specific adjustments. Short-term debt obligations that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. If vendors are unable to supply a price, or if the price supplied is deemed by the manager to be unreliable, the market price may be determined using quotations received from one or more broker/ dealers that make a market in the security. When such prices or quotations are not available, or when the manager believes that they are unreliable, the manager may price securities using fair value procedures approved by the Board. The fund may also use fair value procedures if the manager determines that a significant event has occurred between the time at which a market price is determined and the time at which the fund’s net asset value is calculated. In particular, the value of foreign securities may be materially affected by events occurring after the close of the market on which they are valued, but before the fund prices its shares. The fund uses a fair value model developed by an independent third party pricing service to price foreign equity securities on days when there is a certain percentage change in the value of a domestic equity security index, as such percentage may be determined by the manager from time to time.

   Valuing securities at fair value involves greater reliance on judgment than valuation of securities based on readily available market quotations. A fund that uses fair value to price securities may value those securities higher or lower than another fund using market quotations or its own fair value methodologies to price the same securities. There can be no assurance that the fund could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the fund determines its net asset value.

   International markets may be open on days when U.S. markets are closed and the value of foreign securities owned by the fund could change on days when you cannot buy or redeem shares.

   In order to buy, redeem or exchange shares at that day’s price, you must place your order with your Service Agent or the sub-transfer agent before the NYSE closes. If the NYSE closes early, you must place your order prior to the actual closing time. Otherwise, you will receive the next business day’s price.

Variable Aggressive Growth Portfolio      15

Purchases and redemptions

Owners of Policies should follow the purchase and redemption procedures described in the accompanying separate account prospectus. The following is general information with regard to purchases and redemptions of fund shares by insurance company separate accounts.

   Fund shares are purchased and redeemed at the net asset value (“NAV”) next determined after the fund receives a purchase or redemption order. NAVs are adjusted for fractions of a cent. Upon redemption, a shareholder may receive more or less than the amount paid at the time of purchase, depending upon changes in the value of the fund’s investment portfolio between purchase and redemption.

   The fund computes the NAV for purchases and redemptions as of the close of the NYSE on the day that the fund has received all proper documentation from the shareholder. Redemption proceeds are normally wired or mailed either the same or the next business day, but not more than seven days later.

   The fund retains the right to refuse a purchase order. The fund may temporarily suspend the redemption rights or postpone payments when the NYSE is closed (other than on weekends and holidays), when trading on the NYSE is restricted, or when permitted by the SEC.

16     Legg Mason Partners Variable Portfolios II

Tax consequences of dividends and distributions

The fund intends to make distributions of income and capital gains in order to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. Further, the fund intends to meet certain diversification requirements applicable to mutual funds underlying variable insurance products.

   The fund is required to meet certain applicable diversification requirements under the Internal Revenue Code. If the fund should fail to qualify as a regulated investment company for federal income tax purposes, it would be considered as a single investment, which may result in Policies invested in the fund not being treated as annuity, endowment or life insurance contracts for tax purposes. Income and gain earned inside the Policies in current and prior years would be taxed currently to the policyholders, and the Policies would remain subject to taxation as ordinary income thereafter, even if the fund became adequately diversified.

   Capital gains and dividends are distributed in cash or reinvested in additional fund shares, without a sales charge. The fund expects that fund shares will be held under a VA contract or VLI policy. Under current tax law, distributions that are left to accumulate in a Policy are not subject to federal income tax until they are withdrawn from the contract. Policy purchasers should review the accompanying contract prospectus for a discussion of the tax treatment applicable to the Policies.

Variable Aggressive Growth Portfolio      17

Financial highlights

The financial highlights table is intended to help you understand the performance of the fund for the past five years. The information in the following table has been derived from the fund’s financial statements which have been audited by KPMG LLP, an independent registered public accounting firm, whose report, along with the fund’s financial statements, is included in the annual report (available upon request). Certain information reflects financial results for a single share. Total return represents the rate that a shareholder would have earned (or lost) on a share of the fund assuming reinvestment of all dividends and distributions.

   For a share of beneficial interest outstanding throughout each year ended December 31:

Class I Shares(1)		2005			2004			2003			2002			2001(2)
Net asset value, beginning of year			$21.23			$19.46			$13.89			$25.98			$178.99
Income (loss) from operations:
	Net investment loss		(0.06	)		(0.09	)		(0.19	)		(0.25	)		(0.50	)
	Net realized and unrealized gain (loss)		2.16			1.86			5.76			(8.18	)		(9.85	)
Total income (loss) from operations			2.10			1.77			5.57			(8.43	)		(10.35	)
Less distributions from:
	Net realized gains		—			—			—			(3.66	)		(142.66	)
Total distributions			—			—			—			(3.66	)		(142.66	)
Net asset value, end of year			$23.33			$21.23			$19.46			$13.89			$25.98
Total return(3)			9.89	%		9.10	%		40.10	%		(32.65	)%		(5.32	)%
Net assets, end of year (000s)			$33,220			$21,706			$11,684			$5,975			$12,745
Ratios to average net assets:
	Gross expenses		0.93	%		1.04	%		1.56	%		1.56	%		1.18	%
	Net expenses		0.93			1.04	(4)		1.56			1.56			1.18
	Net investment loss		(0.26	)		(0.47	)		(1.16	)		(1.25	)		(0.97	)
Portfolio turnover rate			0	%		4	%		3	%		4	%		0	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	Per share amounts have been restated to reflect a 1 for 7 reverse stock split which was effective on September 7, 2001.
(3)	Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽⁴⁾ The manager voluntarily waived a portion of its fees.

18     Legg Mason Partners Variable Portfolios II

(Investment Company Act
file no. 811-6310)
L02618 4/06

Legg Mason Partners Variable Aggressive Growth Fund
Class I Shares

A separate investment fund of Legg Mason Partners Variable Portfolios II, a Massachusetts business trust.
Additional Information
The fund’s website does not make available its SAI and shareholder reports because the website is currently set up to make available only portfolio holdings information.

Shareholder reports. Annual and semiannual reports to shareholders provide additional information about the fund’s investments. These reports discuss the market conditions and investment strategies that significantly affected the fund’s performance during its last fiscal year or period.

The fund sends one report to a household if more than one account has the same address. Contact your participating life insurance company representative or your Smith Barney Financial Advisor if you do not want this policy to apply to you.

The SAI provides more detailed information about the fund. It is incorporated by reference into this Prospectus.

You can make inquiries about the fund or obtain shareholder reports or the SAI (without charge) by calling 1-800-451-2010 or writing to Legg Mason Partners Variable Portfolios II, 125 Broad Street, New York, New York 10004.

Information about the fund (including the SAI) can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. In addition, information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. Reports and other information about the fund is available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies of this information may be obtained for a duplicating fee by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-0102.

If someone makes a statement about the fund that is not in this Prospectus, you should not rely upon that information. The fund is not offering to sell its shares to any person to whom the fund may not lawfully sell its shares.

Legg Mason Partners Variable Portfolios II
Variable Aggressive Growth Portfolio
Class II Shares

    PROSPECTUS

May 1, 2006

Fund shares are offered only to variable annuity and variable life insurance separate accounts established by insurance companies (“Participating Insurance Companies”) to fund variable annuity contracts (“VA contracts”) and variable life insurance policies (“VLI policies,” and together with VA contracts, the “Policies”). Individuals may not purchase shares of any fund directly from the Legg Mason Partners Variable Portfolio II. The Policies are described in the separate prospectuses issued by the Participating Insurance Companies. This prospectus should be read together with the prospectus for those Policies.

The Statement of Additional Information (“SAI”) provides more detailed information about this fund and is incorporated by reference into (is legally a part of) this prospectus.

The Securities and Exchange Commission (“SEC”) has not approved or disapproved these securities or determined whether this prospectus is accurate or complete. Any statement to the contrary is a crime.

 INVESTMENT PRODUCTS: NOT FDIC INSURED •NO BANK GUARANTEE •MAY LOSE VALUE 

“Smith Barney” and “Salomon Brothers” are service marks of Citigroup, licensed for use by Legg Mason as the names of funds and investment advisers. Legg Mason and its affiliates, as well as the fund’s investment manager, are not affiliated with Citigroup.

Variable Aggressive Growth Portfolio

Class II Shares

Contents

The fund is a separate investment series of Legg Mason Partners Variable Portfolios II, a Massachusetts business trust (the “Trust”).

Investments, risks and performance	2
More on the fund’s investments	6
Management	9
Shareholder transactions	12
Pricing of fund shares	14
Purchases and redemptions	15
Tax consequences of dividends and distributions	16
Financial highlights	17

   The Trust is currently divided into multiple funds, each with its own investment objective, policies and restrictions. The fund is diversified under the Investment Company Act of 1940, as amended (the “1940 Act”). There can be no assurance that the fund will achieve its investment objective.

   Prior to May 1, 2006, the fund was named Greenwich Street Series Fund — Solomon Brothers Variable Aggressive Growth Fund. The fund’s investment objective and strategies were not affected as a result of this change.

Investments, risks and performance

Investment objective

Capital appreciation.

Key investments

The fund invests primarily in common stocks of companies that the manager believes are experiencing, or will experience, growth in earnings and/or cash flow that exceeds the average rate of earnings growth of the companies that comprise the S&P 500 Index. The fund may invest in the securities of large, well-known companies that offer prospects of long-term earnings growth. However, a significant portion of the fund’s assets may be invested in the securities of small to medium-sized companies because such companies often achieve higher earnings growth rates.

Selection process

The manager emphasizes individual security selection while diversifying the fund’s investments across industries, which may help to reduce risk. The manager focuses primarily, but not exclusively, on emerging growth companies that have passed their “start-up” phase and show positive earnings and the prospect of achieving significant profit gains beginning in the two to three years after the fund acquires their stocks.

When evaluating an individual stock, the manager considers whether the company may benefit from:

• New technologies, products or services

• New cost reducing measures

• Changes in management

Principal risks of investing in the fund

Investors could lose money on their investment in the fund, or the fund may not perform as well as other investments, if:

• Stock prices decline generally

• Emerging growth companies fall out of favor with investors

• The manager’s judgment about the attractiveness, value or potential appreciation of a particular stock proves to be incorrect

• A particular product or service developed by a company in which the fund invests is unsuccessful, the company does not meet earnings expectations or other events depress the value of the company’s stock

• The value of an individual security or particular type of security can be more volatile than the market as a whole and can perform differently than the market as a whole. Smaller capitalized companies may involve greater risks, such as limited product lines, markets and financial or managerial resources

   Compared to large capitalization companies, emerging growth companies are more likely to have:

• More limited product lines

• Fewer capital resources

2     Legg Mason Partners Variable Portfolios II

• More limited management depth

   Further, securities of emerging growth companies are more likely to:

• Experience sharper swings in market values

• Be harder to sell at times and prices the manager believes appropriate

• Offer greater potential for gains and losses

   In addition to the foregoing principal risks, the fund is also subject to risks associated with investing in fixed income securities, foreign securities, emerging markets securities and derivatives. The risks are more fully described in “More on the fund’s investments.”

Fund performance

This bar chart indicates the risks of investing in Class I shares of the fund by showing changes in the fund’s performance for the last ten years. The table shows how the fund’s average annual returns for each of the last two calendar years compare to the return of the Russell 3000 Growth Index, a broad-based unmanaged index of those Russell 3000 Index Companies with higher price-to-book ratios and higher forecasted growth values. Past performance does not necessarily indicate how the fund will perform in the future. Prior to February 10, 2000, the fund was managed by an adviser not affiliated with Salomon Brothers Asset Management Inc. (“SaBAM” or the “Manager”). Performance figures do not reflect expenses incurred from investing through a separate account; if those expenses had been reflected, performance would have been lower. Please refer to the separate account prospectus for more information on expenses.

Total Return

The bar chart shows the Class II shares’ performance for each full calendar year for the last two years.

Risk return bar chart

Quarterly returns

Highest: 10.55% in 3rd quarter 2005; Lowest: (4.51)% in 1st quarter 2005

Variable Aggressive Growth Portfolio      3

Risk return table

Comparative performance

The table indicates the risk of investing in the fund by comparing the average annual total return for the periods shown to that of the Russell 3000 Growth Index. The performance indicated does not reflect variable Policy charges which, if included, would lessen performance.

   This table assumes redemption of shares at the end of the period and the reinvestment of distributions and dividends.

Average Annual Total Returns (for the periods ended December 31, 2005)

	1 year			5 years		Since inception*
Class II Shares		9.64	%		N/A		15.89	%
Russell 3000 Growth Index**		5.17	%		N/A		12.14	%

*	Inception date of 5/12/03. Index comparison begins on 5/12/03.
**	It is not possible to invest directly in an index. An index does not reflect deductions for fees, expenses or taxes.

Fee table

Fees and Expenses

This table sets forth the fees and expenses you will pay if you invest in Class II shares of the fund.

   The table and the example do not reflect additional charges and expenses which are, or may be, imposed under the variable contracts; such charges and expenses are described in the prospectus of the insurance company separate account. The fund’s expenses should be considered with these charges and expenses in evaluating the overall cost of investing in the separate account.

Shareholder fees (paid directly from your investment) Class II     

Maximum sales charge on purchases		N/A
Maximum deferred sales charge on redemptions		N/A
Annual fund operating expenses (paid by the fund as a % of net assets)
	Management fees*	0.75%
	Distribution (12b-1) fees	0.25%
	Other expenses**	0.15%
	Total annual fund operating expenses	1.15%

*   Effective October 1, 2005, the management fees for advisory and administrative services were changed to the following breakpoint schedule: The fund has a fee schedule that reduces the investment management fee payable on assets in excess of $1 billion as follows: 0.750% on assets up to and including $1 billion; 0.725% on assets over $1 billion and up to and including $2 billion; 0.700% on assets over $2 billion and up to and including $5 billion; 0.675% on assets over $5 billion and up to and including $10 billion; and 0.650% on assets over $10 billion. “Management fees” in the table have been restated to reflect the new fee schedule. Actual management fees for the fiscal year ended December 31, 2005 were 0.790%.

**  “Other expenses have been restated to reflect the estimated effect of the new transfer agency and custody agreements which became effective January 1, 2006.

4     Legg Mason Partners Variable Portfolios II

Example

This example helps you compare the cost of investing in Class II share of the fund with other mutual funds. Your actual cost may be higher or lower.

   This example does not include expenses incurred from investing through a Separate Account. If the example included these expenses, the figures shown would be higher.

   The example assumes:

• You invest $10,000 for the period shown

• You reinvest all distributions and dividends without a sales charge

• The fund’s operating expenses (before fee waivers and/or expense reimbursements, if any) remain the same

• Your investment has a 5% return each year — the assumption of a 5% return is required by the SEC for purposes of this example and is not a prediction of the fund’s future performance

• Redemption of your shares at the end of the period

Number of Years You Owned Your Shares

	1 year		3 years		5 years		10 years
Your costs for Class II shares would be	$	117	$	365	$	633	$	1,398

Variable Aggressive Growth Portfolio      5

More on the fund’s investments

Investments and Practices

The fund invests in various instruments subject to its investment policies as described in this prospectus and in the SAI. Listed below is more information on the fund’s investments, its practices and related risks. For a free copy of the SAI, see the back cover of this prospectus. The fund does not guarantee that it will reach its investment objective, and an investment in the fund may lose money.

Equities

Equity securities include exchange-traded and over-the-counter common and preferred stocks, warrants, rights, convertible securities, depositary receipts and shares, trust certificates, limited partnership interests, shares of other investment companies, real estate investment trusts and equity participations.

   Equity securities are subject to market risk. Many factors affect the stock market prices and dividend payouts of equity investments. These factors include general business conditions, investor confidence in the economy, and current conditions in a particular industry or company. Each company determines whether or not to pay dividends on common stock. Equity securities are subject to financial risks relating to the issuer’s earning stability and overall financial soundness. Smaller and emerging growth companies are particularly sensitive to these factors.

   The fund may invest up to 10% of its assets in securities of other investment companies, including shares in a portfolio of securities that seeks to track the performance of an underlying equity index or a portion of an equity index. As a shareholder of another investment company, the fund would bear, along with other shareholders, its pro rata portion of the other investment company’s expenses, including advisory fees. These expenses would be in addition to the advisory fees and other expenses that the fund bears directly in connection with its own operations.

Sectors

Companies in similar industries may be grouped together in broad categories called sectors. Sector risk is the possibility that a certain sector may perform differently from other sectors or from the market as a whole. As the manager allocates more of the fund’s portfolio holdings to a particular sector, the fund’s performance will be more susceptible to any economic, business or other developments that generally affect that sector.

Fixed Income Investments (limited extent)

Fixed income securities include bonds, notes (including structured notes), mortgage-related securities, asset-backed securities, convertible securities, Eurodollar and Yankee dollar instruments, preferred stocks and money market instruments. Fixed income securities may be issued by U.S. and foreign companies; U.S. and foreign banks; the U.S. government, its agencies, authorities, instrumentalities or sponsored enterprises; state and municipal governments; supranational organizations; and foreign governments and their political subdivisions. Fixed income securities may have all types of interest rate

6     Legg Mason Partners Variable Portfolios II

payment and reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment in kind and auction rate features.

   The value of debt securities varies inversely with interest rates. This means generally that the value of these investments increases as interest rates fall and decreases as interest rates rise. Yields from short-term securities normally may be lower than yields from longer-term securities. A bond’s price is affected by the credit quality of its issuer. An issuer may not always make payments on a fixed income security. Some fixed income securities, such as mortgage-backed securities, are subject to prepayment risk, which occurs when an issuer can prepay the principal owed on a security before its maturity.

Credit quality of fixed income securities

If a security receives different ratings, a fund will treat the securities as being rated in the highest of those ratings. The fund may choose not to sell securities that are downgraded below the fund’s minimum acceptable credit rating after their purchase. The fund’s credit standards also apply to counterparties to OTC derivative contracts.

Foreign Securities Investments

An investment in foreign securities involves risks in addition to those of U.S. securities, including possible political and economic instability and the possible imposition of exchange controls or other restrictions on investments. There are also risks associated with the different accounting, auditing, and financial reporting standards in many foreign countries. If the fund invests in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency rates relative to the U.S. dollar will affect the U.S. dollar value of the fund’s assets. Foreign securities may be less liquid than U.S. securities.

Emerging Market Investments

Emerging markets offer the potential of significant gains but also involve greater risks than investing in more developed countries. Political or economic instability, lack of market liquidity and government actions, such as currency controls or seizure of private business or property may be more likely in emerging markets.

Derivatives And Hedging Techniques

Derivative contracts, such as futures and options on securities, may be used for any of the following purposes:

• To hedge against the economic impact of adverse changes in the market value of the fund’s securities, due to changes in stock market prices, currency exchange rates or interest rates

• As a substitute for buying or selling securities

• As a cash flow management technique

   Even a small investment in derivative contracts can have a big impact on the fund’s stock market, currency and interest rate exposure. Therefore, using derivatives can disproportionately increase losses and reduce opportunities for gain when stock prices, currency rates or interest rates are changing. For a more complete description of derivative and hedging techniques and their associated risks, please refer to the SAI.

Variable Aggressive Growth Portfolio      7

Other Risk Factors

Portfolio Risk

Fund investors are subject to portfolio risk in that a strategy used, or stock selected, may fail to have the desired effect. Specifically, stocks believed to show potential for capital growth may not achieve that growth. Strategies or instruments used to hedge against a possible risk or loss may fail to protect against the particular risk or loss.

Temporary Defensive Position

The fund may depart from principal investment strategies in response to adverse market, economic or political conditions by taking a temporary defensive position by investing all or a substantial part of its assets in debt securities including lower-risk debt securities, and money market instruments. If the fund takes a temporary defensive position, it may be unable to achieve its investment goal.

Portfolio Turnover

The fund may actively trade portfolio securities in an attempt to achieve its investment objective. Active trading will cause the fund to have an increased portfolio turnover rate. Actively trading portfolio securities increases the fund’s trading costs and may have an adverse impact on the fund’s performance.

Investment Policies

Unless noted as fundamental, the fund’s investment policies may be changed by the Trust’s Board of Trustees without approval of shareholders or Policy holders. A change in the fund’s investment policies may result in the fund having different investment policies from those that a policy owner selected as appropriate at the time of investment.

Other Investments

The fund may also use other strategies and invest in other securities that are described, along with their risks, in the SAI. However, the fund might not use all of the strategies and techniques or invest in all of the types of securities described in this prospectus or in the SAI. Also note that there are many other factors, which are not described here, that could adversely affect your investment and that could prevent the fund from achieving its goals.

Portfolio Holdings

The fund’s policies and procedures with respect to the disclosure of it’s portfolio securities are available in the SAI.

8     Legg Mason Partners Variable Portfolios II

Management

The manager

Salomon Brothers Asset Management Inc.

   The fund’s investment manager is Salomon Brothers Asset Management Inc. (“SaBAM” or the “manager”). The manager’s address is 399 Park Avenue, New York, New York 10022. The manager selects the fund’s investments, oversees its operations and provides administrative services. A discussion regarding the basis for the board’s approval of the fund’s investment management agreement with SBFM is available in the fund’s annual report for the fiscal year ended December 31, 2005.

   On June 23, 2005, Citigroup Inc. (“Citigroup”) entered into an agreement to sell substantially all of its asset management business, Citigroup Asset Management (“CAM”), which includes the manager, to Legg Mason, Inc. (“Legg Mason”). The transaction took place on December 1, 2005. As a result, the manager, previously an indirect wholly-owned subsidiary of Citigroup, became a wholly-owned subsidiary of Legg Mason. A new investment management agreement between the fund and the manager became effective on December 1, 2005.

   Legg Mason, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202, is a financial services holding company. As of December 31, 2005, Legg Mason’s asset management operation had aggregate assets under management of approximately $850 billion.

Management fees

The fund’s manager oversees the investment operations of the fund and receives the following fee for these services:

Actual advisory fee paid for the fiscal year	Effective October 1, 2005, contractual
ended December 31, 2005 (as a percentage of	advisory fee (as a percentage of the
the fund’s average daily net assets)	fund’s average daily net assets)
0.62%	First $1 billion	0.750%
	Next $1 billion	0.725%
	Next $3 billion	0.700%
	Next $5 billion	0.675%
	Over $10 billion	0.650%

For its services during the fiscal year ended December 31, 2005, the manager received an administration fee of 0.17% of the fund’s average daily net assets.

Variable Aggressive Growth Portfolio      9

The portfolio manager

The table below sets forth the name and business experience of the fund’s portfolio manager:

Richard A. Freeman Portfolio manager; Investment Officer of SaBAM; Mr. Freeman is responsible for the day-to-day management of the fund. Mr. Freeman has more than 28 years of securities business experience and has been managing the fund since 2000.

   Additional information about the portfolio manager’s compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of securities in the fund is contained in the SAI.

Transfer agent, shareholder servicing agent and distributor

PFPC, Inc. (the “transfer agent”), located at P.O. Box 9699, Providence, Rhode Island 02940-9699, serves as the fund’s transfer agent and shareholder servicing agent. The transfer agent maintains the shareholder account records for the fund, handles certain communications between shareholders and the fund and distributes dividends and distributions payable by the fund.

   Legg Mason Investor Services, LLC (“LMIS”), a wholly owned broker-dealer subsidiary of Legg Mason, and Citigroup Global Markets, Inc. (“CGMI”), serves as the fund’s distributor.

Recent developments

On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and CGMI relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).

   The SEC order finds that SBFM and CGMI willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGMI knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the fund’s investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGMI. The order also finds that SBFM and CGMI willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGMI do not admit or deny any wrongdoing or

10     Legg Mason Partners Variable Portfolios II

liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

   The SEC censured SBFM and CGMI and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan submitted for the approval of the SEC. At this time, there is no certainty as to how the above-described proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. The order also required that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provided that a portion of such fees might be subsequently distributed in accordance with the terms of the order. On April 3, 2006, an aggregate amount of approximately $9 million held in escrow was distributed to the affected Funds.

   The order required SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGMI would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Fund’s Board selected a new transfer agent for the Fund. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

   Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.

   On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason Inc.

Distribution plan

The Trust on behalf of the fund adopted a Rule 12b-1 distribution plan for its Class II shares. Under the plan, the fund pays a distribution fee of 0.25% of the daily net assets of Class II shares. These fees are an ongoing expense and, over time, may cost you more than other types of sales charges.

   In addition, the distributors may make payments for distribution and/or shareholder servicing activities out of their past profits and other available sources. The distributors may also make payments for marketing, promotional or related expenses to dealers. The amount of these payments is determined by the distributors and may be substantial. The manager or an affiliate may make similar payments under similar arrangements.

   The payments described above are often referred to as “revenue sharing payments.” The recipients of such payments may include the fund’s distributor and other affiliates of the manager, broker-dealers, financial institutions and other financial intermediaries through which investors may purchase shares of a fund. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to

Variable Aggressive Growth Portfolio      11

recommend or sell shares of a fund to you. Please contact your financial intermediary for details about revenue sharing payments it may receive.

Shareholder transactions

Fund shares are currently sold only to insurance company separate accounts in connection with the Policies issued by the Participating Insurance Companies. The term “shareholder” as used in this prospectus refers to any insurance company separate account that may use fund shares as a funding option now or in the future. Fund shares are not sold to the general public. Fund shares are sold on a continuing basis without a sales charge at the net asset value next computed after the fund’s custodian receives payment. The separate account, to which shares are sold, however, may impose sales and other charges, as described in the appropriate contract prospectus.

   All shares participate equally in dividends and distributions and have equal voting, liquidation and other rights. When issued for the consideration described in the prospectus, shares are fully paid and nonassessable by the fund. Shares are redeemable, transferable and freely assignable as collateral. (See your contract prospectus for a discussion of voting rights applicable to Policy holders.)

   Certain insurance companies may have selected, and the distributor may have made available, fund share classes with service and distribution related fees that are higher than other available share classes. As a result of any higher fees paid by investors in such share classes, the amount of fees that may otherwise need to be paid by the distributor or its affiliates to such insurance company would decrease.

Frequent purchases and sales of fund shares

Frequent purchases and redemptions of mutual fund shares may interfere with the efficient management of the fund’s portfolio by its portfolio manager, increase portfolio transaction costs, and have a negative effect on a fund’s long-term shareholders. For example, in order to handle large flows of cash into and out of a fund, the portfolio manager may need to allocate more assets to cash or other short-term investments or sell securities, rather than maintaining full investment in securities selected to achieve the fund’s investment objective. Frequent trading may cause a fund to sell securities at less favorable prices. Transaction costs, such as brokerage commissions and market spreads, can detract from the fund’s performance. In addition, the return received by long term shareholders may be reduced when trades by other shareholders are made in an effort to take advantage of certain pricing discrepancies, when, for example, it is believed that the fund’s share price, which is determined at the close of the New York Stock Exchange (“NYSE”) on each trading day, does not accurately reflect the value of the fund’s portfolio securities. Funds investing in foreign securities have been particularly susceptible to this form of arbitrage, but other funds could also be affected.

   Because of the potential harm to the fund and its long term shareholders, the Board of Trustees of the fund has approved policies and procedures that are intended to discourage and prevent excessive trading and market timing abuses through the use of various surveillance techniques. Under these policies and procedures, the fund may limit additional

12     Legg Mason Partners Variable Portfolios II

exchanges or purchases of fund shares by shareholders who are believed by the manager to be engaged in these abusive trading activities. The intent of the policies and procedures is not to inhibit legitimate strategies, such as asset allocation, dollar cost averaging, or similar activities that may nonetheless result in frequent trading of fund shares. For this reason, the Board has not adopted any specific restrictions on purchases and sales of fund shares, but the fund reserves the right to reject any exchange or purchase of fund shares with or without prior notice to the account holder. In cases where surveillance of a particular account establishes what the manager believes to be obvious market timing, the manager will seek to block future purchases and exchanges of fund shares by that account. Where surveillance of a particular account indicates activity that the manager believes could be either abusive or for legitimate purposes, the fund may permit the account holder to justify the activity.

   The fund’s shares are offered exclusively to insurance company separate accounts that fund certain insurance contracts, and insurance companies typically hold shares for a number of insurance contracts in a single account. Although the policies and procedures discussed above apply to any account, including such insurance companies separate accounts, the fund’s ability to monitor trading in these accounts may be severely limited due to the lack of access to an individual investor’s trading activity when orders are placed through these types of accounts. There may also be operational and technological limitations on the ability of the fund’s service providers to identify or terminate frequent trading activity within the various types of omnibus accounts.

   The Trust’s policies also require personnel such as portfolio managers and investment staff to report any abnormal or otherwise suspicious investment activity, and prohibit short-term trades by such personnel for their own account in mutual funds managed by the manager and its affiliates, other than money market funds. Additionally, the fund has adopted policies and procedures to prevent the selective release of information about its portfolio holdings, as such information may be used for market-timing and similar abusive practices.

   The Trust’s policies provide for ongoing assessment of the effectiveness of current policies and surveillance tools, and the Board of Trustees reserves the right to modify these or adopt additional policies and restrictions in the future. Shareholders should be aware, however, that any surveillance techniques currently employed by the funds or other techniques that may be adopted in the future, may not be effective, particularly where the trading takes place through certain types of omnibus accounts. As noted above, if the fund is unable to detect and deter trading abuses, its performance, and long-term shareholders, may be harmed. In addition, because the fund has not adopted any specific limitations or restrictions on the trading of fund shares, shareholders may be harmed by the extra costs and portfolio management inefficiencies that result from frequent trading of fund shares, even when the trading is not for abusive purposes. The fund will provide advance notice to its shareholders and prospective investors of any specific restrictions on the trading of fund shares that the Board may adopt in the future.

Variable Aggressive Growth Portfolio      13

Pricing of fund shares

The Board of Trustees has approved procedures to be used to value the fund’s securities for the purposes of determining the fund’s net asset value. The valuation of the securities of the fund is determined in good faith by or under the direction of the Board of Trustees. The Board of Trustees has delegated valuation functions for the fund to the manager.

   The fund generally values its securities based on market quotations determined at the close of trading on the NYSE. Debt obligations that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. The fund’s currency conversions, if any, are done as of when the London Stock Exchange closes, which is at 12 noon Eastern time. For securities that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of securities not traded on an exchange, or if such closing prices are not otherwise available, the market price is typically determined by third party pricing vendors using a variety of pricing techniques and methodologies. If vendors are unable to supply a price, or if the price supplied is deemed by the manager to be unreliable, the market price may be determined by the manager, using quotations received from one or more broker/ dealers that make a market in the security. When such prices or quotations are not available, or when the manager believes that they are unreliable, the manager may price securities using fair value procedures approved by the Board. The fund may also use fair value procedures if the manager determines that a significant event has occurred between the time at which a market price is determined and the time at which the fund’s net asset value is calculated. In particular, the value of foreign securities may be materially affected by events occurring after the close of the market on which they are valued, but before the fund prices its shares. The fund uses a fair value model developed by a pricing service to price foreign equity securities on days when there is a certain percentage change in the value of a domestic equity security index, as such percentage may be determined by the manager from time to time.

   Valuing securities at fair value involves greater reliance on judgment than valuation of securities based on readily available market quotations. A fund that uses fair value to price securities may value those securities higher or lower than another fund using market quotations or fair value to price the same securities. There can be no assurance that the fund could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the fund determines its net asset value.

   International markets may be open on days when U.S. markets are closed and the value of foreign securities owned by the fund could change on days when you cannot buy or redeem shares.

14     Legg Mason Partners Variable Portfolios II

Purchases and redemptions

Owners of Policies should follow the purchase and redemption procedures described in the accompanying separate account prospectus. The following is general information with regard to purchases and redemptions of fund shares by insurance company separate accounts.

   Fund shares are purchased and redeemed at the net asset value (“NAV”) next determined after the fund receives a purchase or redemption order. NAVs are adjusted for fractions of a cent. Upon redemption, a shareholder may receive more or less than the amount paid at the time of purchase, depending upon changes in the value of the fund’s investment portfolio between purchase and redemption.

   The fund computes the NAV for purchases and redemptions as of the close of the NYSE on the day that the fund has received all proper documentation from the shareholder. Redemption proceeds are normally wired or mailed either the same or the next business day, but not more than seven days later.

   The fund retains the right to refuse a purchase order. The fund may temporarily suspend the redemption rights or postpone payments when the NYSE is closed (other than on weekends and holidays), when trading on the NYSE is restricted, or when permitted by the SEC.

Variable Aggressive Growth Portfolio      15

Tax consequences of dividends and distributions

The fund intends to make distributions of income and capital gains in order to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. Further, the fund intends to meet certain diversification requirements applicable to mutual funds underlying variable insurance products.

   The fund is required to meet certain applicable diversification requirements under the Internal Revenue Code. If the fund should fail to qualify as a regulated investment company for federal income tax purposes, it would be considered as a single investment, which may result in Policies invested in the fund not being treated as annuity, endowment or life insurance contracts for tax purposes. Income and gain earned inside the Policies in current and prior years would be taxed currently to the policyholders, and the Policies would remain subject to taxation as ordinary income thereafter, even if the fund became adequately diversified.

   Capital gains and dividends are distributed in cash or reinvested in additional fund shares, without a sales charge. The fund expects that fund shares will be held under a VA contract or VLI policy. Under current tax law, distributions that are left to accumulate in a Policy are not subject to federal income tax until they are withdrawn from the contract. Policy purchasers should review the accompanying contract prospectus for a discussion of the tax treatment applicable to the Policies.

16     Legg Mason Partners Variable Portfolios II

Financial highlights

The financial highlights table is intended to help you understand the performance of the fund for the past five years (or since inception, if less than five years). The information in the following table has been derived from the fund’s financial statements which have been audited by KPMG LLP an independent registered public accounting firm, whose report, along with the Fund’s Financial Statements, is included in the annual report (available upon request). Certain information reflects financial results for a single share. Total return represents the rate that a shareholder would have earned (or lost) on a share of the fund assuming reinvestment of all dividends and distributions.

   For a share of beneficial interest outstanding throughout each year ended December 31:

Class II Shares(1)		2005			2004			2003(2)
Net asset value, beginning of year			$21.05			$19.35			$15.64
Income (loss) from operations:
	Net investment loss		(0.11	)		(0.14	)		(0.13	)
	Net realized and unrealized gain		2.14			1.84			3.84
Total income from operations			2.03			1.70			3.71
Net asset value, end of year			$23.08			$21.05			$19.35
Total return(3)			9.64	%		8.79	%		23.72	%
Net assets, end of year (000s)			$28,084			$20,752			$5,419
Ratios to average net assets:
	Gross expenses		1.18	%		1.28	%		1.64	%(4)
	Net expenses		1.18			1.28	(5)		1.64	(4)
	Net investment loss		(0.51	)		(0.70	)		(1.25	)(4)
Portfolio turnover rate			0	%		4	%		3	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	For the period May 12, 2003 (inception date) to December 31, 2003.
(3)	Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

(4)	Annualized.
(5)	The manager voluntarily waived a portion of its fees.

Variable Aggressive Growth Portfolio      17

(Investment Company Act
file no. 811-6310)
L02618

Legg Mason Partners Variable
Aggressive Growth Portfolio
Class II Shares

A separate investment fund of Legg Mason Partners Variable Portfolios II, a Massachusetts business trust.
Additional Information
The fund’s website does not make available its SAI and shareholder reports because the website is currently set up to make available only portfolio holdings information.

Shareholder reports. Annual and semiannual reports to shareholders provide additional information about the fund’s investments. These reports discuss the market conditions and investment strategies that significantly affected the fund’s performance during its last fiscal year or period.

The fund sends one report to a household if more than one account has the same address. Contact your participating life insurance company representative or your Smith Barney Financial Advisor if you do not want this policy to apply to you.

The SAI provides more detailed information about the fund. It is incorporated by reference into this Prospectus.

You can make inquiries about the fund or obtain shareholder reports or the statement of additional information (without charge) by calling 1-800-451-2010 or writing to Legg Mason Partners Variable Portfolio II, 125 Broad Street, New York, New York 10004.

Information about the fund (including the SAI) can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. In addition, information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. Reports and other information about the fund is available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies of this information may be obtained for a duplicating fee by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-0102.

If someone makes a statement about the fund that is not in this Prospectus, you should not rely upon that information. The fund is not offering to sell its shares to any person to whom the fund may not lawfully sell its shares.

May 1, 2006,

STATEMENT OF ADDITIONAL INFORMATION

LEGG MASON PARTNERS VARIABLE PORTFOLIOS II

125 Broad Street

New York, New York 10004

(800) 451-2010

      This Statement of Additional Information (“SAI”), is not a prospectus and is meant to be read in conjunction with the current prospectus of the Legg Mason Partners Variable Appreciation Portfolio (“Appreciation Portfolio”), Legg Mason Partners Variable Capital and Income Portfolio (“Capital and Income Portfolio”), Legg Mason Partners Variable Diversified Strategic Income Portfolio (“Diversified Strategic Income Portfolio”), Legg Mason Partners Variable Equity Index Portfolio (“Equity Index Portfolio”), Legg Mason Partners Variable Fundamental Value Portfolio (“Fundamental Value Portfolio”), Legg Mason Partners Variable Aggressive Growth Portfolio (“Aggressive Growth Portfolio”) and Legg Mason Partners Variable Growth & Income Portfolio (“Growth & Income Portfolio”), each dated May 1, 2006 (each, a “Portfolio,” and collectively, the “Portfolios”) of Legg Mason Partners Variable Portfolios II (the “Fund”), as each may be revised from time to time.

      PORTFOLIO SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

      Portfolio shares are offered only to variable annuity and variable life insurance separate accounts established by insurance companies (“Participating Insurance Companies”) to fund variable annuity contracts (“VA contracts”) and variable life insurance policies (“VLI policies,” and together with VA contracts, the “Policies”). Individuals may not purchase shares of any Portfolio directly from the Fund. The Policies are described in the separate prospectuses issued by the Participating Insurance Companies.

      Each of the Equity Index Portfolio, Aggressive Growth Portfolio and Growth & Income Portfolio currently offers two classes of shares: Class I shares and Class II shares. VA contract holders and VLI policyholders should consult the applicable prospectus of the separate account of the Participating Insurance Company to determine which class of Portfolio shares may be purchased by the separate account.

      The most recent Annual Report and Semi-Annual Report to Shareholders for each Portfolio are separate documents supplied with this SAI, and the financial statements, accompanying notes and report of independent registered public accounting firm appearing in the Annual Report are incorporated by reference into this SAI. The prospectus and copies of the reports may be obtained free of charge by contacting a Smith Barney Financial Advisor, a broker/ dealer, financial intermediary, or financial institution (each called a “Service Agent”) or by writing or calling the fund at the address or telephone number above.

      THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.

TABLE OF CONTENTS

Investment Goals and Policies of Each Portfolio	2
Appreciation Portfolio	3
Capital and Income Portfolio	3
Diversified Strategic Income Portfolio	4
Equity Index Portfolio	4
Fundamental Value Portfolio	5
Aggressive Growth Portfolio	6
Growth & Income Portfolio	6
Investment Objectives, Management Policies and Risk Factors	7
Disclosure of Portfolio Holdings	27
Investment Restrictions	30
Portfolio Turnover	33
Portfolio Manager Disclosure	36
Portfolio Transactions	39
Management of the Fund	43
Trustees and Officers of the Fund	44
Investment Manager, Sub-Adviser and Administrator	50
Purchase and Redemption of Shares	57
Purchase of Shares	57
Dividends and Distributions	57
Taxes	57
Organization of the Fund	59
Custodian, Transfer Agent and Sub-Transfer Agent	60
Financial Statements	62
Appendix A — Summary of Proxy Voting Policy & Procedures	A-1
Appendix B — Summary of Subadvisor’s Proxy Voting Policy and Procedures	B-1
Appendix C — Special Considerations
Appendix C — Ratings on Debt Obligations	C-1
EX-99.A.9: AMENDMENT NO. 10 TO FIRST AMENDED AND RESTATED MASTER TRUST AGREEMENT
EX-99.D.1: MANAGEMENT AGREEMENT
EX-99.D.2: MANAGEMENT AGREEMENT
EX-99.D.3: MANAGEMENT AGREEMENT
EX-99.D.4: MANAGEMENT AGREEMENT
EX-99.D.5: MANAGEMENT AGREEMENT
EX-99.D.6: MANAGEMENT AGREEMENT
EX-99.D.7: ADVISORY AGREEMENT
EX-99.D.8: SUBADVISORY AGREEMENT
EX-99.D.9: ADMINISTRATION AGREEMENT
EX-99.E.1: DISTRIBUTION AGREEMENT
EX-99.E.2: AMENDMENT TO DISTRIBUTION AGREEMENT
EX-99.G.1: CUSTODIAN SERVICES AGREEMENT
EX-99.H.1: TRANSFER AGENCY AND SERVICES AGREEMENT
EX-99.H.2: LICENSE AGREEMENT
EX-99.H.3: LICENSE AGREEMENT
EX-99.J: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EX-99.M.1: AMENDED SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
EX-99.N: FORM OF AMENDED RULE 18F-3(D) MULTIPLE CLASS PLAN
EX-99.P.1: AMENDED CODE OF ETHICS
EX-99.P.4: CODE OF ETHICS OF LMIS

INVESTMENT GOALS AND POLICIES OF EACH PORTFOLIO

      The Fund’s prospectus discusses the investment goals of the Portfolios currently offered by the Fund and the policies to be employed to achieve those goals. This section contains supplemental information concerning the types of securities and other instruments in which the Portfolios may invest, the investment policies and portfolio strategies that the Portfolios may utilize and certain risks attendant to such investments, policies and strategies.

      The Fund is registered with the Securities and Exchange Commission (“SEC”), as an open-end management investment company, and is organized as a business trust under the laws of the Commonwealth of Massachusetts. The Amended and Restated Master Trust Agreement (the “Master Trust Agreement”) authorizes the Board of Trustees (“Board”) to divide the Fund’s shares into two or more series related to separate investment portfolios (“Portfolios”) and further allows the Board to establish additional series at any time.

      The Fund is currently divided into multiple Portfolios, each with its own investment objective, policies and restrictions. Each Portfolio is diversified for purposes of the Investment Company Act of 1940, as amended (the “1940 Act”). There can be no assurance that a Portfolio will achieve its investment objective.

2

Appreciation Portfolio

      The Portfolio invests primarily in equity and equity-related securities believed to afford attractive opportunities for appreciation. The Portfolio may also hold securities convertible into common stocks and warrants. When the adviser believes that a conservative or defensive investment posture is warranted or when opportunities for capital appreciation do not appear attractive, the Portfolio may invest temporarily in debt obligations, preferred securities or short-term money market instruments. The Portfolio may from time to time lend its portfolio securities and invest up to 10% of its assets (at the time of investment) in foreign securities. The Portfolio may invest directly in foreign issuers or invest in depository receipts.

      The Portfolio may, as a cash management tool, hold up to 20% of the value of its total assets in cash and invest in short-term instruments and, for temporary defensive purposes, may hold cash and invest in short-term instruments without limitation.

      The Portfolio may not invest in a master demand note if as a result more than 10% of the value of the Portfolio’s total assets would be invested in such notes and other illiquid securities. The Portfolio may invest up to 10% of the value of its net assets in restricted securities and in other securities that are not readily marketable, including repurchase agreements maturing in more than seven days.

      The purpose of the acquisition or sale of a futures contract by the Portfolio is to mitigate the effects of fluctuations in the value of its securities caused by anticipated changes in interest rates, market conditions or currency values without actually buying or selling the securities.

Capital and Income Portfolio

      The Portfolio invests in equity and fixed income securities of both U.S. and foreign issuers. The Portfolio seeks to generate income and appreciation by allocating Portfolio assets to income and non-income producing equity and equity related securities, including common stocks, real estate investment trusts and convertible securities, including synthetic convertible securities. To generate income and enhance exposure to the equity markets, the Portfolio will purchase investment grade and high yield fixed income securities or unrated securities of equivalent quality along with options on securities indices. Securities rated below investment grade are commonly referred to as “junk bonds.” Fixed income securities may be of any maturity.

      By investing in a combination of equity and fixed income securities, the Portfolio seeks to produce a pattern of total return that moves with the S&P 500 Index, while generating high income. The Portfolio may also use options, futures and options on futures to increase exposure to part or all of the market or to hedge against adverse changes in the market value of its securities. The Portfolio may write covered put and call options on securities. The Portfolio may invest in yield capital options. The Portfolio may invest in swaps, caps, floors, collars and swaptions. The Portfolio may enter into short sales including short sales against the box.

      The Portfolio’s investments in equity securities may include common stocks traded on an exchange or in the over-the-counter market, preferred stocks, warrants, rights, convertible securities, trust certificates, limited partnership interests, equity-linked debt securities, depository receipts, real estate investment trusts and other equity participations. The Portfolio may lend portfolio securities up to 10% of the Portfolio’s total assets.

      The Portfolio’s investments in fixed income securities may include bonds, notes (including structured notes), mortgage-related and asset-backed securities, convertible securities, preferred stocks and money market instruments. Fixed income securities may have all types of interest rate, payment and reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment in kind and auction rate features. The price of fixed income securities will go down if interest rates go up, or the credit rating of the security is downgraded or the issuer defaults on its obligation to pay principal or interest. The Portfolio may invest up to 10% of its total assets in corporate loans.

      Because the Portfolio may invest in securities of foreign issuers, the Portfolio carries additional risks. Prices of foreign securities may go down because of foreign government actions, political instability or the more limited availability of accurate information about foreign companies. Currency fluctuations could erase investment gains or add to investment losses.

3

Diversified Strategic Income Portfolio

      The Portfolio invests primarily in three types of fixed-income securities: U.S. government and mortgage-related securities, foreign government bonds and corporate bonds rated below investment grade. Below investment grade securities are commonly referred to as “junk bonds.” The Portfolio may invest up to 20% of its total assets in emerging market debt rated below investment grade.

      The Portfolio may invest in Eurodollar and Yankee obligations. Up to 20% of the Portfolio’s total assets may be invested in cash and money market instruments at any time. Although the Portfolio invests primarily in fixed income securities, it may invest up to 20% of its assets in common stock and other equity-related securities, including convertible securities, preferred stock, warrants and rights.

      The Portfolio may also invest in fixed-income securities issued by supranational organizations and may engage in transactions in options, interest rate futures contracts, options on interest rate futures contracts, forward currency contracts, options on foreign currencies and foreign currency futures contracts. Up to 5% of the Portfolio’s assets may be invested in developing countries.

      The Portfolio may, as a cash management tool, hold up to 20% of the value of its total assets in cash and invest in short-term instruments and, for temporary defensive purposes, may hold cash and invest in short-term instruments without limitation.

      The Portfolio may not invest in a master demand note if as a result more than 10% of the value of the Portfolio’s total assets would be invested in such notes and other illiquid securities. The Portfolio may invest up to 15% of the value under its net assets in restricted securities and in other securities that are not readily marketable, including repurchase agreements maturing in more than seven days. This restriction will not apply to securities subject to Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”). The Portfolio does not currently intend to commit more than 5% of the Portfolio’s net assets to reverse repurchase agreements.

      The Portfolio may invest up to 15% of its total assets in corporate loans.

      The Portfolio also may purchase put and call options. Because of this and current trading conditions, the Portfolio expects to purchase not only call or put options issued by the Options Clearing Corporation (“OCC”), but also options in the domestic and foreign over-the-counter markets. The Portfolio expects to write options only if a secondary market exists on a U.S. securities exchange or in the over-the-counter market.

      The purpose of the acquisition or sale of a futures contract by the Portfolio is to mitigate the effects of fluctuations in the value of its securities caused by anticipated changes in interest rates, market conditions or currency values without actually buying or selling the securities.

Equity Index Portfolio

      The Portfolio invests primarily in common stocks included in the S&P 500 Index. The Portfolio will seek to achieve its goal by owning substantially all 500 stocks in the S&P 500 Index in proportion to their actual market capitalization weightings. The Portfolio will be reviewed daily and adjusted, when necessary, to maintain security weightings as close to those of the S&P 500 Index as possible, given the amount of assets in the Portfolio at that time.

      The Portfolio may invest up to 5% of its assets in equity securities that are not included in the S&P 500 Index if the adviser believes such investments will assist the Portfolio in approximating the return of the S&P 500 Index.

      The Portfolio may use up to an additional 20% of its assets to enter into stock index futures and related options to increase efficiency, may lend portfolio securities and write covered options to help offset operating expenses, and may acquire money market instruments. Portfolio turnover is expected to be lower than for most other investment companies.

4

      No attempt will be made to manage the Portfolio in the traditional sense using economic, financial and market analysis, nor will the adverse financial situation of an issuer necessarily result in the elimination of its securities from the Portfolio, unless the securities are removed from the S&P 500 Index. From time to time, administrative adjustments may be made in the Portfolio because of changes in the composition of the S&P 500 Index.

      The Portfolio will use the S&P 500 Index as its standard for performance comparison because the S&P 500 Index is well known to investors and is representative of the performance of publicly traded U.S. common stocks.

      The S&P 500 Index is composed of 500 selected common stocks, most of which are listed on the New York Stock Exchange (the “NYSE”). Standard & Poor Rating Group (“S&P”) chooses the stocks to be included in the S&P 500 Index solely on a statistical basis. The S&P 500 Index is a trademark of S&P and inclusion of a stock in the S&P 500 Index in no way implies an opinion by S&P as to its attractiveness as an investment. S&P is neither a sponsor of nor in any way affiliated with the Portfolio.

      The Portfolio’s ability to replicate the performance of the S&P 500 Index will depend to some extent on the size of cash flows into and out of the Portfolio. Investment changes to accommodate these cash flows will be made to maintain the similarity of the Portfolio’s assets to the S&P 500 to the maximum extent practicable.

      The Portfolio may, as a cash management tool, hold up to 20% of the value of its total assets in cash and invest in short-term instruments and, for temporary defensive purposes, may hold cash and invest in short-term instruments without limitation.

      The Portfolio may not invest in a master demand note if as a result more than 10% of the value of the Portfolio’s total assets would be invested in such notes and other illiquid securities. The Portfolio may invest up to 10% of the value of its net assets in restricted securities and in other securities that are not readily marketable, including repurchase agreements maturing in more than seven days.

      The Portfolio may purchase call options on stock indexes listed on U.S. securities exchanges for the purpose of hedging their portfolios.

      The Portfolio in anticipation of the purchase of securities may enter into closing transactions with respect to such options to terminate existing positions. There is no guarantee that such closing transactions can be effected.

Fundamental Value Portfolio

      The Portfolio invests primarily in common stocks and common stock equivalents of companies the adviser believes are undervalued in the marketplace. The Portfolio’s investment in common stocks and common stock equivalents, include preferred stocks and other securities convertible into common stocks.

      The Portfolio may also invest up to 10% of its assets in securities rated less than investment grade by Moody’s Investors Service, Inc. (“Moody’s”), S&P or the equivalent by another nationally recognized statistical rating organization (“NRSRO”) or, in unrated securities deemed by the adviser to be of comparable quality.

      The Portfolio may invest up to 35% of its assets in interest-paying debt securities such as U.S. government securities, and other securities, including convertible bonds, convertible preferred stock and warrants.

      The Portfolio also may lend its portfolio securities and enter into short sales against the box.

      The Portfolio may, as a cash management tool, hold up to 35% of the value of its total assets in cash and invest in short-term instruments and, for temporary defensive purposes, may hold cash and invest in short-term instruments without limitation.

      The Portfolio may not invest in a master demand note if as a result more than 10% of the value of the Portfolio’s total assets would be invested in such notes and other illiquid securities. The Portfolio may invest

5

up to 15% of the value of its net assets in restricted securities and in other securities that are not readily marketable, including repurchase agreements maturing in more than seven days.

      The Portfolio also may purchase put and call options. Because of this and current trading conditions, the Portfolio expects to purchase not only call or put options issued by the OCC but also options in the domestic and foreign over-the-counter markets. The Portfolio expects to write options only if a secondary market exists on a U.S. securities exchange or in the over-the-counter market.

      The Portfolio may also write call and buy put options on stock indexes.

Aggressive Growth Fund

      The Portfolio invests primarily in common stocks of companies that the manager believes are experiencing, or will experience, growth in earnings that exceeds the average rate of earnings growth of the companies that comprise the S&P 500 Index. The Portfolio may invest in the securities of large, well-known companies that offer prospects of long-term earnings growth. However, a significant portion of the fund’s assets may be invested in the securities of small to medium-sized companies because such companies often achieve higher earnings growth rates.

      The Portfolio also may 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 invest in securities that have above-average volatility of price movement. Because prices of common stocks and other securities fluctuate, the value of an investment in the Portfolio will vary based upon its investment performance. The Portfolio attempts to reduce overall exposure to risk from declines in securities prices by spreading its investments over many different companies in a variety of industries. There is, however, no assurance that the Portfolio will be successful in achieving its objective.

      The Portfolio may invest up to 20% of its total assets in securities of foreign issuers. Additionally, the Portfolio may invest up to 15% of the value of its total assets in restricted securities (i.e., securities that may not be sold without registration under the 1993 Act, and in other securities not having readily available market quotations. The Portfolio may enter into repurchase agreements with domestic banks and broker-dealers, which involve certain risks.

      The Portfolio may, as a cash management tool, hold up to 35% of the value of its total assets in cash and invest in short-term instruments and, for temporary defensive purposes, may hold cash and invest in short-term instruments without limitation.

      The Portfolio may not invest in a master demand note if as a result more than 10% of the value of the Portfolio’s total assets would be invested in such notes and other illiquid securities. The Portfolio may invest up to 15% of the value of its net assets in restricted securities and in other securities that are not readily marketable, including repurchase agreements maturing in more than seven days.

Growth & Income Fund

      The Portfolio invests primarily in income-producing equity securities, including dividend-paying common stocks, securities that are convertible into common stocks and warrants. The Portfolio may invest the remainder of its assets in money market instruments, as well as in corporate bonds, convertible securities and mortgage-related securities rated investment grade or deemed to be of comparable quality.

      The Portfolio may enter into repurchase agreements, lend portfolio securities, enter into interest rate and stock index futures and related options, purchase or sell securities on a when-issued or delayed-delivery basis and write covered options.

6

      The Portfolio may, as a cash management tool, hold up to 20% of the value of its total assets in cash and invest in short-term instruments and, for temporary defensive purposes, may hold cash and invest in short-term instruments without limitation.

      The Portfolio may not invest in a master demand note if as a result more than 10% of the value of the Portfolio’s total assets would be invested in such notes and other illiquid securities. The Portfolio may invest up to 10% of the value of its net assets in restricted securities and in other securities that are not readily marketable, including repurchase agreements maturing in more than seven days.

      The purpose of the acquisition or sale of a futures contract by the Portfolio is to mitigate the effects of fluctuations in the value of its securities caused by anticipated changes in interest rates, market conditions or currency values without actually buying or selling the securities.

Investment Objectives, Management Policies And Risk Factors

      The following section explains more about the investments and investment techniques listed above. It also includes a brief discussion about the specific risks associated with a particular investment or investment technique.

      Each Portfolio is a diversified, open-end management investment company. The prospectus discusses the investment objectives of the Portfolios, which are a separate series of the Fund, and the policies to be employed to achieve those objectives. Supplemental information is set out below concerning the types of securities and other instruments in which the Portfolios may invest, the investment policies and strategies that the Portfolios may utilize and certain risks attendant to those investments, policies and strategies.

      Equity Securities. Common stock is an interest in a company, limited liability company, or similar entity that entitles the holder to a share in the profits of the company, in the form of dividends, and the proceeds from a sale or liquidation of the company. The interests of common shareholders are the most junior in a corporate structure. This means that in the event of the bankruptcy of the company its creditors and any holders of a preferred class of equity securities are paid before the common stockholders are entitled to receive anything. However, any assets of the company in excess of the amount owed to creditors or preferred stockholders are shared pro-rata among the common stockholders. Common stockholders normally have voting control of the company and are entitled to vote on the election of directors and certain fundamental corporate actions.

      Preferred stocks are equity securities, but they have many characteristics of fixed income securities. Their similarities to fixed income securities generally cause preferred stocks to trade more like debt instruments than common stocks. Thus, the value of preferred stocks reflects the credit risk of the company and the dividend yield on the preferred stocks compared to prevailing interest rates. Preferred stocks are entitled to receive dividends before any dividend is paid to the holders of common stock. The dividend may be at a fixed or variable dividend payment rate, may be payable on fixed dates or at times determined by the company and may be payable in cash, additional shares of preferred stock or other securities. Many preferred stocks are redeemable at the option of the company after a certain date. Holders of preferred stock are also entitled to receive a payment upon the sale or liquidation of a company before any payment is made to the company’s common stockholders. However, preferred stock is an equity security and, therefore, is junior in priority of payment to the company’s creditors in the event of a bankruptcy, including holders of the company’s debt securities. This junior ranking to creditors makes preferred stock riskier than fixed income securities.

      Convertible securities are preferred stocks or fixed income securities that are convertible at the option of the holder, or in some circumstances at the option of the issuing company, at a stated exchange rate or formula into the company’s common stock or other equity securities. At the time a company sells the convertible securities, the conversion price is normally higher than the market price of the common stock. A holder of convertible securities will generally receive interest or dividends at a rate lower than comparable debt securities, but the holder has the potential for additional gain if the market value of the common stock exceeds the conversion price.

7

      When the market price of the common stock is below the conversion price, convertible securities tend to trade like fixed income securities. If the market price of the common stock is higher than the conversion price, convertible securities tend to trade like the common stock. Convertible securities rank senior to common stocks in an issuer’s capital structure and consequently may be of higher quality and entail less risk than the issuer’s common stock.

      Certain Portfolios may invest in synthetic convertible securities. Synthetic convertible securities differ from convertible securities in certain respects, including that each component of a synthetic convertible security has a separate market value and responds differently to market fluctuations. Investing in synthetic convertible securities involves the risk normally involved in holding the securities comprising the synthetic convertible security.

      Unlike a convertible security, which is a single security, a synthetic convertible security is comprised of distinct securities that together resemble convertible securities in certain respects. Synthetic convertible securities are typically created by combining non-convertible bonds or preferred stocks with warrants or stock call options. The options that will form elements of synthetic convertible securities may be listed on a securities exchange or on Nasdaq or may be privately traded. The components of a synthetic convertible security generally are not offered as a unit and may be purchased and sold by the Portfolio at different times.

      Warrants and stock purchase rights are securities permitting, but not obligating, their holder to purchase other securities, normally the issuer’s common stock. Stock purchase rights are frequently issued as a dividend to a company’s stockholders and represent the right to purchase a fixed number of shares at a fixed or formula price. The price may reflect a discount to the market price. Warrants are generally sold by a company or issuer together with fixed income securities and represent the right to a fixed number of shares of common stock or other securities at a fixed or formula price. The exercise price is normally higher than the market price at the time the company sells the warrant.

      Warrants and stock purchase rights do not carry with them the right to receive dividends on or to vote the securities that they entitle their holders to purchase. They also do not entitle the holder to share in the assets of the company in liquidation. The rights to purchase common stock or other securities conferred by a warrant or stock purchase right can only be exercised on specific dates or for a specific period. Trading in these instruments is affected both by the relationship of the exercise price to the current market price of the common stock or other securities and also by the period remaining until the right or warrant expires. An investment in warrants and stock purchase rights may be considered more speculative than other types of equity investments. A warrant or stock purchase right expires worthless if it is not exercised on or prior to its expiration date.

      Real Estate Investment Trusts (“REITs”). REITs are pooled investment vehicles, which invest primarily in income producing real estate, or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs are not taxed on income distributed to shareholders provided they comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the “Code”). Debt securities issued by REITs, for the most part, are general and unsecured obligations and are subject to risks associated with REITs.

      Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. An equity REIT may be affected by changes in the value of the underlying properties owned by the REIT. A mortgage REIT may be affected by changes in interest rates and the ability of the issuers of its portfolio mortgages to repay their obligations. REITs are dependent upon the skills of their managers and are not diversified. REITs are generally dependent upon maintaining cash flows to repay borrowings and to make distributions to shareholders and are subject to the risk of default by lessees or borrowers. REITs whose underlying assets are concentrated in properties used by a particular industry, such as health care, are also subject to industry related risks.

8

      REITs (especially mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT’s investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT’s investment in fixed rate obligations can be expected to decline. If the REIT invests in adjustable rate mortgage loans the interest rates on which are reset periodically, yields on a REIT’s investments in such loans will gradually align themselves to reflect changes in market interest rates. This causes the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations. REITs may have limited financial resources, may trade less frequently and in a limited volume and may be subject to more abrupt or erratic price movements than larger company securities. Historically, REITs have been more volatile in price than the larger capitalization stocks included in S&P 500 Index.

      Other Investment Companies. Under the 1940 Act, a Portfolio may not acquire the securities of other domestic or foreign investment companies if, as a result, (i) more than 10% of the Portfolio’s total assets would be invested in securities of other investment companies, (ii) such purchase would result in more than 3% of the total outstanding voting securities of any one investment company being held by the Portfolio, or (iii) more than 5% of the Portfolio’s total assets would be invested in any one investment company. These limitations do not apply to the purchase of shares of any investment company in connection with a merger, consolidation, reorganization or acquisition of substantially all the assets of another investment company.

      Other investment companies’ securities include shares in a portfolio of securities that seeks to track the performance of an underlying equity index or a portion of an equity index (“Exchange Traded Funds”).

      A Portfolio, as a holder of the securities of other investment companies, will bear its pro rata portion of the other investment companies’ expenses, including advisory fees. These expenses are in addition to the direct expenses of the Portfolio’s own operations.

      Short Sales. If a Portfolio anticipates that the price of a company’s stock is overvalued and will decline, it may sell the security short and borrow the same security from a broker or other institution to complete the sale. A Portfolio may realize a profit or loss depending on whether the market price of a security decreases or increases between the date of the short sale and the date on which the fund replaces the borrowed security. Short selling is a technique that may be considered speculative and involves risks beyond the initial capital necessary to secure each transaction. Whenever a Portfolio sells short, it is required to deposit collateral in segregated accounts to cover its obligation, and to maintain the collateral in an amount at least equal to the market value of the short position. As a hedging technique, each Portfolio may purchase call options to buy securities sold short by the Portfolio. Such options would lock in a future price and protect the Portfolio in case of an unanticipated increase in the price of a security sold short by the Portfolio.

      To avoid limitations under the 1940 Act on borrowing by investment companies, short sales by a Portfolio will be “against the box,” or the Portfolio’s obligation to deliver the securities sold short will be “covered.” A Portfolio will not make short sales of securities or maintain a short position if doing so could create liabilities or require collateral deposits and segregation of assets aggregating more than 25% of the value of the Portfolio’s total assets. Management currently intends to limit each Portfolio’s short sales to shares issued by Exchange Traded Funds. Utilizing this strategy will allow the subadviser to adjust a Portfolio’s exposure in a particular sector, in a cost effective and convenient manner, without having to sell a Portfolio’s holdings of individual stocks in that sector.

      Short Sales “Against the Box.” In a short sale, a Portfolio borrows from a broker or bank securities identical to those being sold and delivers the borrowed securities to the buying party. The Portfolio is said to have a short position in the securities sold until it replaces the borrowed securities, at which time it receives the proceeds of the sale. A short sale is “against the box” if the Portfolio owns or has the right to acquire at no added cost securities identical to those sold short.

      Investing in Small and Medium Capitalization Companies. Investing in the equity securities of small and medium capitalization companies involves additional risks compared to investing in large capitalization companies. Compared to large companies, these companies may have more limited product lines and capital resources; have less established markets for their products; have earnings that are more sensitive to changes in

9

the economy, competition and technology; and be more dependent upon key members of management. The market value of the common stock of small and medium capitalization companies may be more volatile, particularly in response to company announcements or industry events, have less active trading markets and be harder to sell at the time and prices that an adviser considers appropriate.

      Fixed Income Securities. The market value of the obligations held by the Portfolios can be expected to vary inversely to changes in prevailing interest rates. Investors also should recognize that, in periods of declining interest rates, the Portfolios’ yield will tend to be somewhat higher than prevailing market rates and, in periods of rising interest rates, the Portfolios’ yield will tend to be somewhat lower. Also, when interest rates are falling, the inflow of net new money to the Portfolios from the continuous sale of their shares will tend to be invested in instruments producing lower yields than the balance of their portfolios, thereby reducing the Portfolios’ current yield. In periods of rising interest rates, the opposite can be expected to occur. In addition, securities in which the Portfolios may invest may not yield as high a level of current income as might be achieved by investing in securities with less liquidity, less creditworthiness or longer maturities.

      The Portfolios invest in U.S. Government securities, corporate bonds, debentures, non-convertible fixed income preferred stocks, mortgage related securities, asset-backed securities (“ABS”), Eurodollar certificates of deposit, Eurodollar bonds and Yankee bonds.

      Debt Securities Rating Criteria. Investment grade debt securities are those rated “BBB” or higher by the S&P, the equivalent rating of other NRSROs or determined to be of equivalent credit quality by an adviser. Debt securities rated BBB are considered medium grade obligations. Adverse economic conditions or changing circumstances may weaken the issuer’s ability to pay interest and repay principal.

      Below investment grade debt securities are those rated “BB” and below by S&P or the equivalent rating of other NRSROs. Below investment grade debt securities or comparable unrated securities are commonly referred to as “junk bonds” and are considered predominantly speculative and may be questionable as to capacity to make principal and interest payments. Changes in economic conditions are more likely to lead to a weakened capacity to make principal payments and interest payments. The amount of junk bond securities outstanding has proliferated as an increasing number of issuers have used junk bonds for corporate financing. An economic downturn could severely affect the ability of highly leveraged issuers to service their debt obligations or to repay their obligations upon maturity. Factors having an adverse impact on the market value of lower quality securities will have an adverse effect on a Portfolio’s net asset value to the extent it invests in such securities. In addition, the Portfolios may incur additional expenses to the extent they are required to seek recovery upon a default in payment of principal or interest on their portfolio holdings. The secondary market for junk bond securities, which is concentrated in relatively few market makers, may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse effect on a Portfolio’s ability to dispose of a particular security when necessary to meet its liquidity needs. Under adverse market or economic conditions, the secondary market for junk bond securities could contract further, independent of any specific adverse changes in the condition of a particular issuer. As a result, a Portfolio could find it more difficult to sell these securities or may be able to sell the securities only at prices lower than if such securities were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under these circumstances, may be less than the prices used in calculating the Portfolio’s net asset value. Since investors generally perceive that there are greater risks associated with lower quality debt securities of the type in which a Portfolio may invest a portion of its assets, the yields and prices of such securities may tend to fluctuate more than those for higher rated securities. In the lower quality segments of the debt securities market, changes in perceptions of issuers’ creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher quality segments of the debt securities market, resulting in greater yield and price volatility.

      Lower rated and comparable unrated debt securities tend to offer higher yields than higher rated securities with the same maturities because the historical financial condition of the issuers of such securities may not have been as strong as that of other issuers.

      However, lower rated securities generally involve greater risks of loss of income and principal than higher rated securities. The advisers will attempt to reduce these risks through portfolio diversification and by

10

analysis of each issuer and its ability to make timely payments of income and principal, as well as broad economic trends and corporate developments. The definitions of the ratings of debt obligations may be found in Appendix D following this SAI.

      Ratings as Investment Criteria. In general, the ratings of an NRSRO such as Moody’s and S&P represent the opinions of those agencies as to the quality of debt obligations that they rate. It should be emphasized, however, that these ratings are relative and subjective, are not absolute standards of quality and do not evaluate the market risk of securities. These ratings will be used by the Portfolios as initial criteria for the selection of portfolio securities, but the Portfolios also will rely upon the independent advice of their advisers to evaluate potential investments. Among the factors that will be considered is the long-term ability of the issuer to pay principal and interest and general economic trends.

      Subsequent to its purchase by a Portfolio, an issue of debt obligations may cease to be rated or its rating may be reduced below the minimum required for purchase by that Portfolio. Neither event will require the sale of the debt obligation by the Portfolio, but the Portfolio’s Advisers will consider the event in their determination of whether the Portfolio should continue to hold the obligation. In addition, to the extent that the ratings change as a result of changes in rating organizations or their rating systems or owing to a corporate restructuring of an NRSRO, a Portfolio will attempt to use comparable ratings as standards for its investments in accordance with its investment objectives and policies.

      Bank Obligations. U.S. commercial banks organized under Federal law are supervised and examined by the U.S. Comptroller of the Currency and are required to be members of the Federal Reserve System and to be insured by the FDIC. U.S. banks organized under state law are supervised and examined by state banking authorities but are members of the Federal Reserve System only if they elect to join. Most state banks are insured by the FDIC (although such insurance may not be of material benefit to a portfolio, depending upon the principal amount of CDs of each bank held by the portfolio) and are subject to Federal examination and to a substantial body of Federal law and regulation. As a result of government regulations, U.S. branches of U.S. banks are, among other things, generally required to maintain specified levels of reserves and are subject to other supervision and regulation designed to promote financial soundness.

      Obligations of foreign branches of U.S. banks and of foreign branches of foreign banks, such as CDs and TDs, may be general obligations of the parent bank in addition to the issuing branch, or may be limited by the terms of a specific obligation and governmental regulation. Such obligations are subject to different risks than are those of U.S. banks or U.S. branches of foreign banks. These risks include foreign economic and political developments, foreign governmental restrictions that may adversely affect payment of principal and interest on the obligations, foreign exchange controls and foreign withholding and other taxes on interest income. Foreign branches of U.S. banks and foreign branches of foreign banks are not necessarily subject to the same or similar regulatory requirements that apply to U.S. banks, such as mandatory reserve requirements, loan limitations and accounting, auditing and financial record keeping requirements. In addition, less information may be publicly available about a foreign branch of a U.S. bank or about a foreign bank than about a U.S. bank. Obligations of U.S. branches of foreign banks may be general obligations of the parent bank, in addition to being general obligations of the issuing branch, or may be limited by the terms of specific obligations and by governmental regulation as well as governmental action in the country in which the foreign bank is headquartered. A U.S. branch of a foreign bank with assets in excess of $1 billion may or may not be subject to reserve requirements imposed by the Federal Reserve System or by the state in which the branch is located if the branch is licensed in that state. In addition, branches licensed by the Comptroller of the Currency and branches licensed by certain states may or may not be required to (a) pledge to the regulator an amount of its assets equal to 5% of its total liabilities by depositing assets with a designated bank within the state and (b) maintain assets within the state in an amount equal to a specified percentage of the aggregate amount of liabilities of the foreign bank payable at or through all of its agencies or branches within the state. The deposits of state branches may not necessarily be insured by the FDIC. In addition, there may be less publicly available information about a U.S. branch of a foreign bank than about a U.S. bank. In view of the foregoing factors associated with the purchase of CDs and TDs issued by foreign branches of U.S. banks, by U.S. branches of foreign banks or by foreign branches of foreign banks, the portfolios’ advisers will carefully evaluate such investments on a case-by-case basis.

11

      Money Market Instruments. A Portfolio may invest for temporary defensive purposes in corporate and government bonds and notes and money market instruments. Money market instruments include: U.S. government CDs, TDs and bankers’ acceptances issued by domestic banks (including their branches located outside the United States and subsidiaries located in Canada), domestic branches of foreign banks, savings and loan associations and similar institutions; high grade commercial paper; and repurchase agreements with respect to the foregoing types of instruments. CDs are short-term, negotiable obligations of commercial banks. TDs are non-negotiable deposits maintained in banking institutions for specified periods of time at stated interest rates. Bankers’ acceptances are time drafts drawn on commercial banks by borrowers, usually in connection with international transactions. A Portfolio may invest in cash and in short-term instruments, and it may hold cash and short-term instruments without limitation when the manager determines that it is appropriate to maintain a temporary defensive posture. Short-term instruments in which a Portfolio may invest include: (a) obligations issued or guaranteed as to principal and interest by the United States government, its agencies or instrumentalities (including repurchase agreements with respect to such securities); (b) bank obligations (including CDs, TDs and bankers’ acceptances of domestic or foreign banks, domestic savings and loan associations and similar institutions); (c) floating rate securities and other instruments denominated in U.S. dollars issued by international development agencies, banks and other financial institutions, governments and their agencies or instrumentalities and corporations located in countries that are members of the Organization for Economic Cooperation and Development; and (d) commercial paper rated no lower than A-2 by S&P or Prime-2 by Moody’s or the equivalent from another major rating service or, if unrated, of an issuer having an outstanding, unsecured debt issue then rated within the three highest rating categories.

      Investment in Other Investment Companies. Each Portfolio can invest up to 10% of its assets in the securities of other investment companies, which can include open-end funds, closed-end funds and unit investment trusts, subject to the limits set forth in the 1940 Act that apply to those types of investments. For example, a Portfolio can invest in Exchange-Traded Funds, which are typically open-end funds or unit investment trusts, listed on a stock exchange. A Portfolio might do so as a way of gaining exposure to the segments of the equity or fixed income markets represented by the Exchange Traded Funds portfolio, at times when the Portfolio may not be able to buy those portfolio securities directly.

      Investing in another investment company may involve the payment of substantial premiums above the value of such investment company’s portfolio securities and is subject to limitations under the 1940 Act. No Portfolio intends to invest in other investment companies unless the subadviser believes that the potential benefits of the investment justify the payment of any premiums or sales charges. As a shareholder of an investment company, a Portfolio would be subject to its ratable share of that investment company’s expenses, including its advisory and administration expenses.

      Repurchase Agreements. Each Portfolio may agree to purchase securities from a bank or recognized securities dealer and simultaneously commit to resell the securities to the bank or dealer at an agreed-upon date and price reflecting a market rate of interest unrelated to the coupon rate or maturity of the purchased securities (“repurchase agreements”). Each Portfolio would maintain custody of the underlying securities prior to their repurchase; thus, the obligation of the bank or dealer to pay the repurchase price on the date agreed to would be, in effect, secured by such securities. If the value of such securities were less than the repurchase price, plus interest, the other party to the agreement would be required to provide additional collateral so that at all times the collateral is at least 102% of the repurchase price plus accrued interest. Default by or bankruptcy of a seller would expose the Portfolio to possible loss because of adverse market action, expenses and/or delays in connection with the disposition of the underlying obligations. The financial institutions with which the Portfolio may enter into repurchase agreements will be banks and non-bank dealers of U.S. government securities that are on the Federal Reserve Bank of New York’s list of reporting dealers, if such banks and non-bank dealers are deemed creditworthy by the fund’s manager. The adviser will continue to monitor creditworthiness of the seller under a repurchase agreement, and will require the seller to maintain during the term of the agreement the value of the securities subject to the agreement to equal at least 102% of the repurchase price (including accrued interest). In addition, the adviser will require that the value of this collateral, after transaction costs (including loss of interest) reasonably expected to be incurred on a default,

12

be equal to 102% or greater than the repurchase price (including accrued premium) provided in the repurchase agreement or the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The adviser will mark-to-market daily the value of the securities.

      Pursuant to an exemptive order issued by the SEC, each fund, along with other affiliated entities managed by the adviser, may transfer uninvested cash balances into one or more joint repurchase accounts. These balances are invested in one or more repurchase agreements, secured by U.S. government securities. Each joint repurchase arrangement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention or sale of the collateral may be subject to legal proceedings.

      Mortgage-Backed Securities. Certain Portfolios may invest in mortgage related securities. The average maturity of pass-through pools of mortgage backed securities varies with the maturities of the underlying mortgage instruments. In addition, a pool’s stated maturity may be shortened by unscheduled payments on the underlying mortgages. Factors affecting mortgage prepayments include the level of interest rates, general economic and social conditions, the location of the mortgaged property and age of the mortgage. Because prepayment rates of individual pools vary widely, it is not possible to accurately predict the average life of a particular pool. Common practice is to assume that prepayments will result in an average life ranging from two to ten years for pools of fixed rate 30-year mortgages. Pools of mortgages with other maturities or different characteristics will have varying average life assumptions.

      Mortgage-backed securities may be classified as private, governmental or government related, depending on the issuer or guarantor. Private mortgage backed securities represent pass-through pools consisting principally of conventional residential mortgage loans created by non-governmental issuers, such as commercial banks, savings and loan associations and private mortgage insurance companies. Governmental mortgage backed securities are backed by the full faith and credit of the United States. Government National Mortgage Association (“GNMA”), the principal U.S. guarantor of such securities, is a wholly owned U.S. Governmental Corporation within the Department of Housing and Urban Development. Government related mortgage backed securities are not backed by the full faith and credit of the United States. Issuers of these securities include the Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”). FNMA is a government-sponsored corporation owned entirely by private stockholders that is subject to general regulation by the Secretary of Housing and Urban Development. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA. FHLMC is a government sponsored corporation owned entirely by private stockholders that is subject to general regulation by the Secretary of Housing and Urban Development. Participation certificates representing interests in mortgages from FHLMC’s national portfolio are guaranteed as to the timely payment of interest and ultimate collection of principal by FHLMC.

      The Portfolio expects that private and governmental entities may create mortgage loan pools offering pass-through investments in addition to those described above. The mortgages underlying these securities may be alternative mortgage instruments; that is, mortgage instruments whose principal or interest payments may vary or whose terms to maturity may be shorter than previously customary. As new types of mortgage backed securities are developed and offered to investors, the Portfolio, consistent with its investment objectives and policies, will consider making investments in those new types of securities. A Portfolio may invest in government stripped mortgage related securities, collateralized mortgage obligations (“CMOs”) collateralized by mortgage loans or mortgage pass-through certificates and zero coupon securities, which, because of changes in interest rates, may be more speculative and subject to greater fluctuations in value than securities that currently pay interest. CMOs are obligations fully collateralized by a portfolio of mortgages or mortgage related securities. Payments of principal and interest on the mortgages are passed through to the holders of the CMOs on the same schedule as they are received, although certain classes of CMOs have priority over others with respect to the receipt of prepayments on the mortgages. Therefore, depending on the type of CMOs in which a Portfolio invests, the investment may be subject to a greater or lesser risk of prepayment than other types of mortgage related securities. The Portfolios also may invest in pass-through securities backed by adjustable rate mortgages that have been introduced by GNMA, FNMA and FHLMC. These securities bear

13

interest at a rate that is adjusted monthly, quarterly or annually. The prepayment experience of the mortgages underlying these securities may vary from that for fixed rate mortgages. The Portfolios will purchase only mortgage related securities issued by persons that are governmental agencies or instrumentalities or fall outside, or are excluded from, the definition of investment company under the 1940 Act.

      Asset-Backed Securities. Certain Portfolios may invest in asset-backed securities. These securities, issued by trusts and special purpose corporations, are backed by a pool of assets, such as credit card and automobile loan receivables, representing the obligations of a number of different parties. Asset-backed securities arise through the grouping by governmental, government-related and private organizations of loans, receivables and other assets originated by various lenders. Interests in pools of these assets differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal paid at maturity or specified call dates. Instead, asset-backed securities provide periodic payments, which generally consist of both interest, and principal payments.

      Corporate asset-backed securities present certain risks. For instance, in the case of credit card receivables, these securities may not have the benefit of any security interest in the related collateral. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. Most issuers of automobile receivables permit the servicers to retain possession of the underlying obligations. If the servicer were to sell these obligations to another party, there is a risk that the purchaser would acquire an interest superior to that of the holders of the related automobile receivables. In addition, because of the large number of vehicles involved in a typical issuance and technical requirements under state laws, the trustee for the holders of the automobile receivables may not have a proper security interest in all of the obligations backing such receivables. Therefore, there is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities.

      Corporate asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors to make payments on underlying assets, the securities may contain elements of credit support which fall into two categories: (i) liquidity protection and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses resulting from ultimate default ensures payment through insurance policies or letters of credit obtained by the issuer or sponsor from third parties. The Portfolio will not pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on historical information respecting the level of credit risk associated with the underlying assets. Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an instrument in such a security.

      Mortgage Dollar Roll Transactions. In a mortgage dollar roll transaction, a Portfolio sells a mortgage related security to a financial institution, such as a bank or a broker-dealer, and simultaneously agrees to repurchase a similar security from the institution at a later date at an agreed upon price. The mortgage related securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories than those sold. During the period between the sale and repurchase, a Portfolio will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale will be invested in short-term instruments, particularly repurchase agreements, and the income from these investments, together with any additional fee income received on the sale, is intended to generate income for a Portfolio exceeding the yield on the securities sold. Mortgage dollar roll transactions involve the risk that the market value of the securities sold by a Portfolio may decline below the repurchase price of those securities. At the time a Portfolio enters into a mortgage dollar roll transaction, it will place in a segregated custodial account liquid securities having a value equal to the repurchase price (including accrued interest) and will subsequently monitor the account to insure that the equivalent value is maintained. Mortgage dollar roll transactions are considered to be borrowings by a Portfolio.

14

      High Yield Securities. High yield securities are medium or lower rated securities and unrated securities of comparable quality, sometimes referred to as “junk bonds.” Generally, such securities offer a higher current yield than is offered by higher rated securities, but also (i) will likely have some quality and protective characteristics that, in the judgment of the rating organizations, are outweighed by large uncertainties or major risk exposures to adverse conditions and (ii) are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the terms of the obligations. The market values of certain of these securities also tend to be more sensitive to individual corporate developments and changes in economic conditions than higher quality bonds. In addition, medium and lower rated securities and comparable unrated securities generally present a higher degree of credit risk. The risk of loss because of default by these issuers is significantly greater because medium and lower rated securities generally are unsecured and frequently subordinated to the prior payment of senior indebtedness. In light of these risks, the Board has instructed the advisers, in evaluating the creditworthiness of an issue, whether rated or unrated, to take various factors into consideration, which may include, as applicable, the issuer’s financial resources, its sensitivity to economic conditions and trends, the operating history of and the community support for the facility financed by the issue, and the ability of the issuer’s management and regulatory matters. In addition, the market value of securities in lower rated categories is more volatile than that of higher quality securities, and the markets in which medium and lower rated securities are traded are more limited than those in which higher rated securities are traded. The existence of limited markets may make it more difficult for a Portfolio to obtain accurate market quotations for purposes of valuing its securities and calculating its net asset value. Moreover, the lack of a liquid trading market may restrict the availability of securities for the Portfolio to purchase and may also have the effect of limiting the ability of the Portfolio to sell securities at their fair value either to meet redemption requests or to respond to changes in the economy or the financial markets.

      Lower rated debt obligations also present risks based on payment expectations. If an issuer calls the obligation for redemption, a Portfolio may have to replace the security with a lower yielding security, resulting in a decreased return for investors. Also, the principal value of bonds moves inversely with movements in interest rates; in the event of rising interest rates, the value of the securities held by the Portfolio may decline more than a portfolio consisting of higher rated securities. If the Portfolio experiences unexpected net redemptions, it may be forced to sell its higher rated bonds, resulting in a decline in the overall credit quality of the securities held by the Portfolio and increasing the exposure of the Portfolio to the risks of lower rated securities. Investments in zero coupon bonds may be more speculative and subject to greater fluctuations in value because of changes in interest rates than bonds that pay interest currently.

      Subsequent to its purchase by a Portfolio, an issue of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by the Portfolio. Neither event will require sale of these securities by the Portfolio, but the adviser will consider the event in determining whether the Portfolio should continue to hold the security.

      Non-Publicly Traded Securities. Non-publicly traded securities may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by a Portfolio. In addition, companies whose securities are not publicly traded are not subject to the disclosure and other investor protection requirements that may be applicable if their securities were publicly traded.

      Supranational Entities. Debt securities issued by supranational organizations such as the International Bank for Reconstruction and Development (commonly referred to as the World Bank), which was chartered to finance development projects in developing member countries; and the Asian Development Bank, which is an international development bank established to lend funds, promote investment and provide technical assistance to member nations in the Asian and Pacific regions. As supranational entities do not possess taxing authority, they are dependent upon their members’ continued support in order to meet interest and principal payments.

      ADRs, EDRs and GDRs. American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”), Global Depositary Receipts (“GDRs”) 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

15

issued through “sponsored” or “unsponsored” arrangements. In a sponsored ADR arrangement, the foreign issuer assumes the obligation to pay some or all of the depository’s transaction fees, whereas under an unsponsored arrangement, the foreign issuer assumes no obligation and the depository’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. A Portfolio may invest in ADRs through both sponsored and unsponsored arrangements.

      Eurodollar Instruments and Yankee Bonds. Eurodollar instruments are bonds of corporate and government issuers that pay interest and principal in U.S. dollars but are issued in markets outside the United States, primarily in Europe. Yankee bonds are bonds of foreign governments and their agencies and foreign banks and corporations that pay interest in U.S. dollars and are typically issued in the U.S. ECDs are U.S. dollar-denominated certificates of deposit issued by foreign branches of domestic banks.

Foreign Securities.

      Risks of Non-U.S. Investments. To the extent a Portfolio invests in the securities of non-U.S. issuers, those investments involve considerations and risks not typically associated with investing in the securities of issuers in the U.S. These risks are heightened with respect to investments in countries with emerging markets and economies. The risks of investing in securities of non-U.S. issuers or issuers with significant exposure to non-U.S. markets may be related, among other things, to (i) differences in size, liquidity and volatility of, and the degree and manner of regulation of, the securities markets of certain non-U.S. markets compared to the securities markets in the U.S.; (ii) economic, political and social factors; and (iii) foreign exchange matters, such as restrictions on the repatriation of capital, fluctuations in exchange rates between the U.S. dollar and the currencies in which a Portfolio’s portfolio securities are quoted or denominated, exchange control regulations and costs associated with currency exchange. The political and economic structures in certain non-U.S. countries, particularly emerging markets, are expected to undergo significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of more developed countries.

      Unanticipated political or social developments may affect the values of a Portfolio’s investments in such countries. The economies and securities and currency markets of many emerging markets have experienced significant disruption and declines. There can be no assurances that these economic and market disruptions will not continue.

      Foreign Securities Markets and Regulations. There may be less publicly available information about non-U.S. markets and issuers than is available with respect to U.S. securities and issuers. Non-U.S. companies generally are not subject to accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies. The trading markets for most non-U.S. securities are generally less liquid and subject to greater price volatility than the markets for comparable securities in the U.S. The markets for securities in certain emerging markets are in the earliest stages of their development. Even the markets for relatively widely traded securities in certain non-U.S. markets, including emerging countries, may not be able to absorb, without price disruptions, a significant increase in trading volume or trades of a size customarily undertaken by institutional investors in the U.S. Additionally, market making and arbitrage activities are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity. The less liquid a market, the more difficult it may be for a Portfolio to accurately price its portfolio securities or to dispose of such securities at the times determined by the adviser to be appropriate. The risks associated with reduced liquidity may be particularly acute in situations in which a Portfolio’s operations require cash, such as in order to meet redemptions and to pay its expenses.

      Economic, Political and Social Factors. Certain non-U.S. countries, including emerging markets, may be subject to a greater degree of economic, political and social instability than is the case in the U.S. and Western European countries. Such instability may result from, among other things: (i) authoritarian governments or military involvement in political and economic decision making; (ii) popular unrest associated

16

with demands for improved economic, political and social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; and (v) ethnic, religious and racial disaffection and conflict. Such economic, political and social instability could significantly disrupt the financial markets in such countries and the ability of the issuers in such countries to repay their obligations. Investing in emerging countries also involves the risk of expropriation, nationalization, confiscation of assets and property or the imposition of restrictions on foreign investments and on repatriation of capital invested. In the event of such expropriation, nationalization or other confiscation in any emerging country, a Portfolio could lose its entire investment in that country. Certain emerging market countries restrict or control foreign investment in their securities markets to varying degrees. These restrictions may limit a Portfolio’s investment in those markets and may increase the expenses of the Portfolio. In addition, the repatriation of both investment income and capital from certain markets in the region is subject to restrictions such as the need for certain governmental consents. Even where there is no outright restriction on repatriation of capital, the mechanics of repatriation may affect certain aspects of a Portfolio’s operation. Economies in individual non-U.S. countries may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rates of inflation, currency valuation, capital reinvestment, resource self-sufficiency and balance of payments positions. Many non-U.S. countries have experienced substantial, and in some cases extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, very negative effects on the economies and securities markets of certain emerging countries. Economies in emerging countries generally are dependent heavily upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been, and may continue to be, affected adversely by economic conditions in the countries with which they trade.

      Currency Risks. The value of the securities quoted or denominated in international currencies may be adversely affected by fluctuations in the relative currency exchange rates and by exchange control regulations. A Portfolio’s investment performance may be negatively affected by a devaluation of a currency in which the Portfolio’s investments are quoted or denominated. Further, a Portfolio’s investment performance may be significantly affected, either positively or negatively, by currency exchange rates because the U.S. dollar value of securities quoted or denominated in another currency will increase or decrease in response to changes in the value of such currency in relation to the U.S. dollar.

      Custodian Services and Related Investment Costs. Custodian services and other costs relating to investment in international securities markets generally are more expensive than in the U.S. Such markets have settlement and clearance procedures that differ from those in the U.S. In certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. The inability of a Portfolio to make intended securities purchases because of settlement problems could cause the Portfolio to miss attractive investment opportunities. Inability to dispose of a portfolio security caused by settlement problems could result either in losses to a Portfolio because of a subsequent decline in value of the portfolio security or could result in possible liability to the Portfolio. In addition, security settlement and clearance procedures in some emerging countries may not fully protect a Portfolio against loss or theft of its assets.

      Withholding and Other Taxes. The Portfolios may be subject to taxes, including withholding taxes imposed by certain non-U.S. countries on income (possibly including, in some cases, capital gains) earned with respect to a Portfolio’s investments in such countries. These taxes will reduce the return achieved by a Portfolio. Treaties between the U.S. and such countries may reduce the otherwise applicable tax rates.

      Currency Exchange Rates. A Portfolio’s share value may change significantly when the currencies, other than the U.S. dollar, in which that Portfolio’s investments are quoted or denominated, strengthen or weaken against the U.S. dollar. Currency exchange rates generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries as seen from an international perspective. Currency exchange rates can also be affected unpredictably by intervention by U.S. or foreign governments or central banks or by currency controls or political developments in the United States or abroad.

17

      Forward Currency Contracts. The Portfolios may invest in securities quoted or denominated in foreign currencies, may hold currencies to meet settlement requirements for foreign securities and may engage in currency exchange transactions in order to protect against uncertainty in the level of future exchange rates between a particular foreign currency and the U.S. dollar or between foreign currencies in which a Portfolio’s securities are or may be quoted or denominated. Forward currency contracts are agreements to exchange one currency for another, for example, to exchange a certain amount of U.S. dollars for a certain amount of Japanese Yen at a future date. The date (which may be any agreed upon fixed number of days in the future), the amount of currency to be exchanged and the price at which the exchange will take place will be negotiated with a currency trader and fixed for the term of the contract at the time a Portfolio enters into the contract. To assure that a Portfolio’s forward currency contracts are not used to achieve investment leverage, the Portfolio will segregate cash or high grade securities with its custodian in an amount at all times equal to or exceeding the Portfolio’s commitment with respect to these contracts.

      Forward currency contracts (i) are traded in an interbank market conducted directly between currency traders (typically commercial banks or other financial institutions) and their customers, (ii) generally have no deposit requirements, and (iii) are typically consummated without payment of any commissions. The Portfolios, however, may enter into forward currency contracts containing either or both deposit requirements and commissions. At or before the maturity of a forward currency contract, a Portfolio may either sell a portfolio security and make delivery of the currency, or retain the security and offset its contractual obligation to deliver the currency by purchasing a second contract pursuant to which the Portfolio will obtain, on the same maturity date, the same amount of the currency that it is obligated to deliver. If the Portfolio retains the portfolio security and engages in an offsetting transaction, the Portfolio, at the time of execution of the offsetting transaction, will incur a gain or a loss to the extent movement has occurred in forward currency contract prices. Should forward prices decline during the period between the Portfolio’s entering into a forward currency contract for the sale of a currency and the date it enters into an offsetting contract for the purchase of the currency, the Portfolio will realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should forward prices increase, the Portfolio will suffer a loss to the extent the price of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell.

      In hedging specific portfolio positions, a Portfolio may enter into a forward contract with respect to either the currency in which the positions are denominated or another currency deemed appropriate by the Portfolio’s Adviser. The amount the Portfolio may invest in forward currency contracts is limited to the amount of the Portfolio’s aggregate investments in foreign currencies. Risks associated with entering into forward currency contracts include the possibility that the market for forward currency contracts may be limited with respect to certain currencies and, upon a contract’s maturity, the inability of a Portfolio to negotiate with the dealer to enter into an offsetting transaction. Forward currency contracts may be closed out only by the parties entering into an offsetting contract. In addition, the correlation between movements in the prices of those contracts and movements in the price of the currency hedged or used for cover will not be perfect. There is no assurance an active forward currency contract market will always exist. These factors will restrict a Portfolio’s ability to hedge against the risk of devaluation of currencies in which the Portfolio holds a substantial quantity of securities and are unrelated to the qualitative rating that may be assigned to any particular security. In addition, although forward currency contracts limit the risk of loss owing to a decline in the value of the hedged currency, at the same time they limit any potential gain that might result should the value of the currency increase. If a devaluation is generally anticipated, a Portfolio may not be able to contract to sell currency at a price above the devaluation level it anticipates. The successful use of forward currency contracts as a hedging technique draws upon special skills and experience with respect to these instruments and usually depends on the ability of the Portfolio’s Adviser to forecast interest rate and currency exchange rate movements correctly. Should interest or exchange rates move in an unexpected manner, the Portfolio may not achieve the anticipated benefits of forward currency contracts or may realize losses and thus be in a worse position than if those strategies had not been used. Many forward currency contracts are subject to no daily price fluctuation limits so adverse market movements could continue with respect to those contracts to an unlimited extent over a period of time.

18

      Options on Securities and Securities Indices. Certain Portfolios may purchase put and call options on any security in which it may invest or options on any securities index based on securities in which it may invest. A Portfolio would also be able to enter into closing sale transactions in order to realize gains or minimize losses on options it has purchased.

      Writing Covered Call and Put Options on Securities and Securities Indices. Certain Portfolios may also write (sell) covered call and put options on any securities and on any securities index composed of securities in which it may invest. Options on securities indices are similar to options on securities, except that the exercise of securities index options requires cash payments and does not involve the actual purchase or sale of securities. In addition, securities index options are designed to reflect price fluctuations in a group of securities or segments of the securities market rather than price fluctuations in a single security.

      A Portfolio may cover call options on a securities index by owning securities whose price changes are expected to be similar to those of the underlying index, or by having an absolute and immediate right to acquire such securities without additional cash consideration (or for additional consideration if cash in such amount is segregated) upon conversion or exchange of other securities in its portfolio. A Portfolio may cover call and put options on a securities index by segregating assets with a value equal to the exercise price.

      Purchasing Call and Put Options. Certain Portfolios will normally purchase call options in anticipation of an increase in the market value of securities of the type in which they may invest. The purchase of a call option will entitle a Portfolio, in return for the premium paid, to purchase specified securities at a specified price during the option period. A Portfolio will ordinarily realize a gain if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise, the Portfolio will realize either no gain or a loss on the purchase of the call option. A Portfolio will normally purchase put options in anticipation of a decline in the market value of securities in its portfolio (“protective puts”) or in securities in which it may invest. The purchase of a put option will entitle the Portfolio, in exchange for the premium paid, to sell specified securities at a specified price during the option period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of the Portfolio’s securities. Put options may also be purchased by a Portfolio for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own.

      The Portfolio will ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to more than cover the premium and transaction costs; otherwise the Portfolio will realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of the underlying portfolio securities.

      Swaps, Caps, Floors, Collars and Swaptions. As one way of managing its exposure to different types of investments, certain Portfolios may enter into interest rate swaps, currency swaps, and other types of swap agreements, such as caps, collars, floors and swaptions. In a typical interest rate swap, one party agrees to make regular payments equal to a floating interest rate times a “notional principal amount,” in return for payments equal to a fixed rate times the same notional amount, for a specified period of time. If a swap agreement provides for payment in different currencies, the parties might agree to exchange the notional principal amount as well. Swaps may also depend on other prices or rates, such as the value of an index or mortgage prepayments rates.

      In a typical cap or floor agreement, one party agrees to make payments only under specified circumstances, usually in return for payment of a fee by the other party. For example, the buyer of an interest rate cap obtains the right to receive payments to the extent that a specified interest rate exceeds an agreed-upon level, while the seller of an interest rate floor is obligated to make payments to the extent that a specified interest rate falls below an agreed-upon level. An interest rate collar combines elements of buying a cap and selling a floor. A swaption is an option to buy or sell a swap position.

      Swap agreements will tend to shift the Portfolio’s investment exposure from one type of investment to another. For example, if the Portfolio agreed to exchange payments in dollars for payments in a foreign currency, the swap agreement would tend to decrease the Portfolio’s exposure to U.S. interest rates and

19

increase its exposure to foreign currency and interest rates. Caps and floors have an effect similar to buying or writing options. Depending on how they are used, swap agreements may increase or decrease the overall volatility of the Portfolio’s investments and its share price and yield.

      Swap agreements are sophisticated risk management instruments that typically require a small cash investment relative to the magnitude of risks assumed. As a result, swaps can be highly volatile and may have a considerable impact on the Portfolio’s performance. Swap agreements are subject to credit risks related to the counterparty’s ability to perform, and may decline in value if the counterparty’s creditworthiness deteriorates. The Portfolio may also suffer losses if it is unable to terminate outstanding swap agreements or reduce its exposure through offsetting transactions. The Portfolio will maintain in a segregated account cash or liquid securities equal to the net amount, if any, of the excess of the Portfolio’s obligations over its entitlements with respect to swap, cap, collar, floor or swaption transactions.

      Yield Curve Options. Certain Portfolios may enter into options on the “spread,” or yield differential, between two fixed income securities, in transactions referred to as “yield curve” options. In contrast to other types of options, a yield curve option is based on the difference between the yields of designated securities, rather than the prices of the individual securities, and is settled through cash payments. Accordingly, a yield curve option is profitable to the holder if this differential widens (in the case of a call) or narrows (in the case of a put), regardless of whether the yields of the underlying securities increase or decrease. Yield curve options may be used for the same purposes as other options on securities. Specifically, the Portfolio may purchase or write such options for hedging purposes. For example, the Portfolio may purchase a call option on the yield spread between two securities, if it owns one of the securities, anticipates purchasing the other security and wants to hedge against an adverse change in the yield spread between the two securities. The Portfolio may also purchase or write yield curve options for other than hedging purposes (i.e., in an effort to increase its current income) if, in the judgment of the advisers, the Portfolio will be able to profit from movements in the spread between the yields of the underlying securities. The trading of yield curve options is subject to all of the risks associated with the trading of other types of options. In addition, however, such options present risk of loss even if the yield of one of the underlying securities remains constant, if the spread moves in a direction or to an extent that was not anticipated.

      Yield curve options written by the Portfolio will be “covered.” A call (or put) option is covered if the Portfolio holds another call (or put) option on the spread between the same two securities and maintains in a segregated account with its custodian cash or cash equivalents sufficient to cover the Portfolio’s net liability under the two options. Therefore, the Portfolio’s liability for such a covered option is generally limited to the difference between the amount of the Portfolio’s liability under the option written by the Portfolio less the value of the option held by the Portfolio. Yield curve options may also be covered in such other manner as may be in accordance with the requirements of the counterparty with which the option is traded and applicable laws and regulations. Yield curve options are traded over-the-counter and because they have been only recently introduced, established trading markets for these securities have not yet developed.

      Risks of Trading Options. There is no assurance that a liquid secondary market on an options exchange will exist for any particular exchange-traded option, or at any particular time. If a Portfolio is unable to effect a closing purchase transaction with respect to covered options it has written, the Portfolio will not be able to sell the underlying securities or dispose of its segregated assets until the options expire or are exercised. Similarly, if a Portfolio is unable to effect a closing sale transaction with respect to options it has purchased, it will have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities.

      Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the OCC may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class

20

or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange, if any, that had been issued by the OCC as a result of trades on that exchange would continue to be exercisable in accordance with their terms.

      A Portfolio may terminate its obligations under an exchange-traded call or put option by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the counter-party to such option. Such purchases are referred to as “closing purchase transactions.”

      A Portfolio may purchase and sell both options that are traded on U.S. and foreign exchanges and options traded over the counter with broker-dealers who make markets in these options. The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations. Until such time as the staff of the SEC changes its position, a Portfolio will treat purchased over-the-counter options and all assets used to cover written over-the-counter options as illiquid securities, except that with respect to options written with primary dealers in U.S. government securities pursuant to an agreement requiring a closing purchase transaction at a formula price, the amount of illiquid securities may be calculated with reference to the formula.

      Transactions by a Portfolio in options on securities and indices will be subject to limitations established by each relevant exchange, board of trade or other trading facility governing the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert. Thus, the number of options that a Portfolio may write or purchase may be affected by options written or purchased by other investment advisory clients. An exchange, board of trade or other trading facility may order the liquidations of positions found to be in excess of these limits, and it may impose certain other sanctions. The writing and purchase of options is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The successful use of protective puts for hedging purposes depends in part on an adviser’s ability to predict future price fluctuations and the degree of correlation between the options and securities markets. The hours of trading for options may not conform to the hours during which the underlying securities are traded. To the extent the options markets close before the markets for the underlying securities, significant price movements can take place in the underlying markets that cannot be reflected in the options markets. In addition to the risks of imperfect correlation between a Portfolio’s portfolio and the index underlying the option, the purchase of securities index options involves the risk that the premium and transaction costs paid by the Portfolio in purchasing an option will be lost. This could occur as a result of unanticipated movements in the price of the securities comprising the securities index on which the option is based.

      Futures Contracts and Related Options. The Commodity Futures Trading Commission (“CFTC”) eliminated limitations on futures transactions and options thereon by registered investment companies, provided that the investment manager to the registered investment company claims an exclusion from regulation as a commodity pool operator. The fund is operated by a person who has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and therefore is not subject to registration or regulation as a pool operator under the Commodity Exchange Act. As a result of these CFTC rule changes, the fund is no longer restricted in its ability to enter into futures transactions and options thereon under CFTC regulations. The fund however, continues to have policies with respect to futures and options thereon as set forth below. A Portfolio will not enter into futures contracts and related options for which the aggregate initial margin and premiums exceed 5% of the fair market value of that Portfolio’s assets after taking into account unrealized profits and unrealized losses on any contracts it has entered into. All futures and options on futures positions will be covered by owning the underlying security or segregation of assets. With respect to long positions in a futures contract or option (e.g., futures contracts to purchase the underlying instrument and call options purchased or put options written on these futures contracts or instruments), the underlying value of the futures contract at all times will be covered by liquid assets segregated on the Portfolio’s assets.

21

      A Portfolio may lose the expected benefit of these futures or options transactions and may incur losses if the prices of the underlying securities or commodities move in an unanticipated manner. In addition, changes in the value of a Portfolio’s futures and options positions may not prove to be perfectly or even highly correlated with changes in the value of its portfolio securities. Successful use of futures and related options is subject to an Adviser’s ability to predict correctly movements in the direction of the securities markets generally, which ability may require different skills and techniques than predicting changes in the prices of individual securities. Moreover, futures and options contracts may only be closed out by entering into offsetting transactions on the exchange where the position was entered into (or a linked exchange), and as a result of daily price fluctuation limits there can be no assurance that an offsetting transaction could be entered into at an advantageous price at any particular time. Consequently, a Portfolio may realize a loss on a futures contract or option that is not offset by an increase in the value of its portfolio securities that are being hedged or the Portfolio may not be able to close a futures or options position without incurring a loss in the event of adverse price movements.

      A Portfolio will incur brokerage costs whether or not its hedging is successful and will be required to post and maintain “margin” as a good-faith deposit against performance of its obligations under futures contracts and under options written by the Portfolio. Futures and options positions are marked to the market daily and a Portfolio may be required to make subsequent “variation” margin payments depending upon whether its positions increase or decrease in value. In this context margin payments involve no borrowing on the part of a Portfolio.

      U.S. Government Securities. The U.S. government securities in which a Portfolio may invest include debt obligations of varying maturities issued by the U.S. Treasury or issued or guaranteed by an agency or instrumentality of the U.S. government, including the Federal Housing Administration, Federal Financing Bank, Farmers Home Administration, Export-Import Bank of the U.S., Small Business Administration, GNMA, General Services Administration, Central Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, FHLMC, FNMA, Maritime Administration, Tennessee Valley Authority, District of Columbia Armory Board, Student Loan Marketing Association, Resolution Fund Corporation and various institutions that previously were or currently are part of the Farm Credit System. Some U.S. government securities, such as U.S. Treasury bills, Treasury notes and Treasury bonds, which differ only in their interest rates, maturities and times of issuance, are supported by the full faith and credit of the United States. Others are supported by: (i) the right of the issuer to borrow from the U.S. Treasury, such as securities of the Federal Home Loan Banks; (ii) the discretionary authority of the U.S. Government to purchase the agency’s obligations, such as securities of FNMA; or (iii) only the credit of the issuer, such as securities of FHLMC. No assurance can be given that the U.S. government will provide financial support in the future to U.S. government agencies, authorities or instrumentalities that are not supported by the full faith and credit of the United States. Securities guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities include: (i) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. government or any of its agencies, authorities or instrumentalities; and (ii) participations in loans made to foreign governments or other entities that are so guaranteed. The secondary market for certain of these participations is limited and, therefore, may be regarded as illiquid. U.S. government securities may include zero coupon securities that may be purchased when yields are attractive and/or to enhance portfolio liquidity. Zero coupon U.S. government securities are debt obligations that are issued or purchased at a significant discount from face value. The discount approximates the total amount of interest the security will accrue and compound over the period until maturity or the particular interest payment date at a rate of interest reflecting the market rate of the security at the time of issuance. Zero coupon U.S. government securities do not require the periodic payment of interest. These investments benefit the issuer by mitigating its need for cash to meet debt service, but also require a higher rate of return to attract investors who are willing to defer receipt of cash. These investments may experience greater volatility in market value than U.S. government securities that make regular payments of interest. A Portfolio accrues income on these investments for tax and accounting purposes that are distributable to shareholders and which, because no cash is received at the time of accrual, may require the liquidation of other portfolio securities to satisfy the Portfolio’s distribution obligations, in which case the Portfolio will forgo the purchase of additional income producing assets with these funds. Zero coupon U.S. government securities

22

include STRIPS and CUBES, which are issued by the U.S. Treasury as component parts of U.S. Treasury bonds and represent scheduled interest and principal payments on the bonds.

      To attempt to hedge against adverse movements in exchange rates between currencies, a Portfolio may enter into forward currency contracts for the purchase or sale of a specified currency at a specified future date. Such contracts may involve the purchase or sale of a foreign currency against the U.S. dollar or may involve two foreign currencies. A Portfolio may enter into forward currency contracts either with respect to specific transactions or with respect to its portfolio positions. For example, when the subadvisor anticipates making a purchase or sale of a security, it may enter into a forward currency contract in order to set the rate (either relative to the U.S. dollar or another currency) at which the currency exchange transaction related to the purchase or sale will be made (“transaction hedging”). Further, when the subadvisor believes that a particular currency may decline compared to the U.S. dollar or another currency, a Portfolio may enter into a forward contract to sell the currency the subadvisor expects to decline in an amount approximating the value of some or all of a Portfolio’s securities denominated in that currency, or when the subadvisor believes that one currency may decline against a currency in which some or all of the portfolio securities held by a Portfolio are denominated, it may enter into a forward contract to buy the currency expected to appreciate for a fixed amount (“position hedging”). In this situation, a Portfolio may, in the alternative, enter into a forward contract to sell a different currency for a fixed amount of the currency expected to decline where the subadvisor believes that the value of the currency to be sold pursuant to the forward contract will fall whenever there is a decline in the value of the currency in which portfolio securities of a fund are denominated (“cross hedging”). A Portfolio will segregate (i) cash, (ii) U.S. government securities or (iii) equity securities or debt securities (of any grade) in certain currencies provided such assets are liquid, unencumbered and marked to market daily, with a value equal to the aggregate amount of the Portfolio’s commitments under forward contracts entered into with respect to position hedges and cross-hedges. If the value of the segregated securities declines, additional cash or securities are segregated on a daily basis so that the value of the amount will equal the amount of a Portfolio’s commitments with respect to such contracts.

      Exchange Rate-Related U.S. Government Securities. Certain Portfolios may invest up to 5% of its assets in U.S. government securities for which the principal repayment at maturity, while paid in U.S. dollars, is determined by reference to the exchange rate between the U.S. dollar and the currency of one or more foreign countries (“Exchange Rate-Related Securities”). The interest payable on these securities is denominated in U.S. dollars, is not subject to foreign currency risk and, in most cases, is paid at rates higher than most other U.S. Government Securities in recognition of the foreign currency risk component of Exchange Rate-Related Securities.

      Exchange Rate-Related Securities are issued in a variety of forms, depending on the structure of the principal repayment formula. The principal repayment formula may be structured so that the security holder will benefit if a particular foreign currency to which the security is linked is stable or appreciates against the U.S. dollar. In the alternative, the principal repayment formula may be structured so that the securityholder benefits if the U.S. dollar is stable or appreciates against the linked foreign currency. Finally, the principal repayment formula can be a function of more than one currency and, therefore, be designed as a combination of those forms. Investments in Exchange Rate-Related Securities entail special risks. There is the possibility of significant changes in rates of exchange between the U.S. dollar and any foreign currency to which an Exchange Rate-Related Security is linked. If currency exchange rates do not move in the direction or to the extent anticipated by the Adviser at the time of purchase of the security, the amount of principal repaid at maturity might be significantly below the par value of the security, which might not be offset by the interest earned by the Portfolio over the term of the security. The rate of exchange between the U.S. dollar and other currencies is determined by the forces of supply and demand in the foreign exchange markets. These forces are affected by the international balance of payments and other economic and financial conditions, government intervention, speculation and other factors. The imposition or modification of foreign exchange controls by the U.S. or foreign governments or intervention by central banks could also affect exchange rates. Finally, there is no assurance that sufficient trading interest to create a liquid secondary market will exist for a particular Exchange Rate-Related Security because of conditions in the debt and foreign currency markets. Illiquidity in the forward foreign exchange market and the high volatility of the foreign exchange market may from time to

23

time combine to make it difficult to sell an Exchange Rate-Related Security prior to maturity without incurring a significant price loss.

      Custodial Receipts. Certain Portfolios may acquire custodial receipts or certificates, such as CATS, TIGRs and FICO Strips, underwritten by securities dealers or banks that evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued by the U.S. Government, its agencies, authorities or instrumentalities. The underwriters of these certificates or receipts purchase a U.S. government security and deposit the security in an irrevocable Fund or custodial account with a custodian bank, which then issues receipts or certificates that evidence ownership of the periodic unmatured coupon payments and the final principal payments on the U.S. government security. Custodial receipts evidencing specific coupon or principal payments have the same general attributes as zero coupon U.S. government securities, described above. Although typically under the terms of a custodial receipt a Portfolio is authorized to assert its rights directly against the issuer of the underlying obligation, the Portfolio may be required to assert through the custodian bank such rights as may exist against the underlying issuer. Thus, in the event the underlying issuer fails to pay principal and/or interest when due, a Portfolio may be subject to delays, expenses and risks that are greater than those that would have been involved if the Portfolio had purchased a direct obligation of the issuer. In addition, if the Fund or custodial account in which the underlying security has been deposited is determined to be an association taxable as a corporation, instead of a non-taxable entity, the yield on the underlying security would be reduced in respect of any taxes paid.

      When-Issued and Delayed Delivery Securities. Each Portfolio may purchase securities, including U.S. government securities, on a when-issued basis or may purchase or sell securities for delayed delivery. In such transactions, delivery of the securities occurs beyond the normal settlement period, but no payment or delivery is made by a Portfolio prior to the actual delivery or payment by the other party to the transaction. The purchase of securities on a when-issued or delayed delivery basis involves the risk that the value of the securities purchased will decline prior to the settlement date. The sale of securities for delayed delivery involves the risk that the prices available in the market on the delivery date may be greater than those obtained in the sale transaction. When-issued and delayed delivery transactions will be fully collateralized by segregated liquid assets.

      Repurchase Agreements. Under the terms of a typical repurchase agreement, a Portfolio would acquire an underlying debt obligation for a relatively short period (usually not more than one week) subject to an obligation of the seller to repurchase, and the Portfolio to resell, the obligation at an agreed upon price and time, thereby determining the yield during the Portfolio’s holding period. This arrangement results in a fixed rate of return that is not subject to market fluctuations during the Portfolio’s holding period. A Portfolio may enter into repurchase agreements with respect to U.S. government securities with member banks of the Federal Reserve System and certain non-bank dealers. Under each repurchase agreement, the selling institution is required to maintain the value of the securities subject to the repurchase agreement at not less than their repurchase price. An adviser, acting under the supervision of the Board, reviews on an ongoing basis the value of the collateral and the creditworthiness of those non-bank dealers with whom the Portfolio enters into repurchase agreements. In entering into a repurchase agreement, a Portfolio bears a risk of loss in the event the other party to the transaction defaults on its obligations and the Portfolio is delayed or prevented from exercising its rights to dispose of the underlying securities, including the risk of a possible decline in the value of the underlying securities during the period in which the Portfolio seeks to assert its rights to them, the risk of incurring expenses associated with asserting those rights and the risk of losing all or a part of the income from the agreement.

      Reverse Repurchase Agreements. Certain Portfolios may enter into reverse repurchase agreements with the financial institutions with which it may enter into repurchase agreements. Under a reverse repurchase agreement, a Portfolio sells securities to a financial institution and agrees to repurchase them at a mutually agreed upon date, price and rate of interest. During the period between the sale and repurchase, the Portfolio would not be entitled to principal and interest paid on the securities sold by the Portfolio. The Portfolio, however, would seek to achieve gains derived from the difference between the current sale price and the forward price for the future purchase as well as the interest earned on the proceeds on the initial sale. Reverse

24

repurchase agreements will be viewed as borrowings by a Portfolio for the purpose of calculating the Portfolio’s indebtedness and will have the effect of leveraging the Portfolio’s assets.

      Borrowing. Leverage increases investment risk as well as investment opportunity. If the income and investment gains on securities purchased with borrowed money exceed the interest paid on the borrowing, the net asset value of a Portfolio’s shares will rise faster than would otherwise be the case. On the other hand, if the income and investment gains fail to cover the cost, including interest, of the borrowings, or if there are losses, the net asset value of a Portfolio’s shares will decrease faster than otherwise would be the case.

      Lending Portfolio Securities. Consistent with applicable regulatory requirements, a Portfolio may lend portfolio securities to brokers, dealers and other financial organizations. A Portfolio will not lend securities to CGM unless the Portfolio has applied for and received specific authority to do so from the SEC. Cash, letters of credit or U.S. government securities will collateralize a Portfolio’s loan of securities. A Portfolio will maintain the collateral in an amount at least equal to the current market value of the loaned securities. From time to time, a Portfolio may pay a part of the interest earned from the investment of collateral received for securities loaned to the borrower and/or a third party that is unaffiliated with the Portfolio and is acting as a “finder.” A Portfolio will comply with the following conditions whenever it loans securities: (i) the Portfolio must receive at least 102% cash collateral or equivalent securities from the borrower; (ii) the borrower must increase the collateral whenever the market value of the securities loaned rises above the level of the collateral; (iii) the Portfolio must be able to terminate the loan at any time; (iv) the Portfolio must receive reasonable interest on the loan, as well as any dividends, interest or other distributions on the loaned securities and any increase in market value; (v) the Portfolio may pay only reasonable custodian fees in connection with the loan; and (vi) voting rights on the loaned securities may pass to the borrower except that, if a material event adversely affecting the investment in the loaned securities occurs, the Board must terminate the loan and regain the right to vote the securities. From time to time, a Portfolio 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 a Portfolio. Legg Mason, Inc. (“Legg Mason”), of which SBFM is a wholly-owned subsidiary, or Citigroup Global Markets Inc. (“CGMI”), one of the fund’s co-distributors, and is acting as a “finder,” a part of the interest earned from the investment of collateral received for securities loaned.

      Generally, the borrower will be required to make payments to a Portfolio in lieu of any dividends the Portfolio would have otherwise received had it not loaned the shares to the borrower. Any such payments, however, will not be treated as “qualified dividend income” for purposes of determining what portion of the Portfolio’s regular dividends (as defined below) received by individuals may be taxed at the rates generally applicable to long-term capital gains (see “Taxes” below).

      Illiquid Securities. Cannot be resold at their approximate carrying value within 7 days. Repurchase agreements maturing in more than seven days will be included for purposes of the foregoing limit. Securities subject to restrictions on resale under the 1933 Act, are considered illiquid unless they are eligible for resale pursuant to Rule 144A or another exemption from the registration requirements of the 1933 Act and are determined to be liquid by the Adviser. The Advisers determine the liquidity of Rule 144A and other restricted securities according to procedures adopted by the Board. The Board monitors the advisers’ application of these guidelines and procedures. The inability of a Portfolio to dispose of illiquid investments readily or at reasonable prices could impair the Portfolio’s ability to raise cash for redemptions or other purposes.

      Corporate Loans. Corporate loans are negotiated and underwritten by a bank or syndicate of banks and other institutional investors. The portfolio may acquire an interest in corporate loans through the primary market by acting as one of a group of lenders of a corporate loan. The primary risk in an investment in corporate loans is that the borrower may be unable to meet its interest and/or principal payment obligations. The occurrence of such default with regard to a corporate loan in which the portfolio had invested would have an adverse effect on the portfolio’s net asset value. Corporate loans in which the portfolio may invest may be collateralized or uncollateralized and senior or subordinate. Investments in uncollateralized and/or subordinate loans entail a greater risk of nonpayment than do investments in corporate loans which hold a more senior position in the borrower’s capital structure or are secured with collateral.

25

      The Portfolio may also acquire an interest in corporate loans by purchasing both participations (“Participations”) in and assignments (“Assignments”) of portions of corporate loans from third parties. By purchasing a Participation, the Portfolio acquires some or all of the interest of a bank or other leading institution in a loan to a corporate borrower. Participations typically will result in the Portfolio having a contractual relationship only with the lender and not the borrower. The Portfolio will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, the Portfolio generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Portfolio may not directly benefit from any collateral supporting the loan in which it has purchased the Participation. As a result, the Portfolio will assume the credit risk of both the borrower and the lender that is selling the Participation. The Portfolio will acquire Participations only if the lender interpositioned between the Portfolio and the borrower is determined by management to be creditworthy. When the Portfolio purchases Assignments from lenders, the Portfolio will acquire direct rights against the borrower on the loan. However, since Assignments are arranged through private negotiations between potential assignees and assignors, the rights and obligations acquired by the Portfolio as the purchaser of an Assignment may differ from, and be more limited than, those held by the assigned lender.

      In addition, the Portfolio may have difficulty disposing of its investments in corporate loans. The liquidity of such securities is limited and the portfolio anticipates that such securities could be sold only to a limited number of institutional investors. The lack of a liquid secondary market could have an adverse impact on the value of such securities and on the portfolio’s ability to dispose of particular Assignments or Participations when necessary to meet the Portfolio’s liquidity needs or in response to a specific economic event, such as a deterioration in the creditworthiness of the borrower. The lack of a liquid secondary market for corporate loans also may make it more difficult for the Portfolio to assign a value to those securities for purposes of valuing the Portfolio’s investments and calculating its net asset value. The Portfolio’s policy limiting its illiquid securities will be applicable to investments in corporate loans.

      Leverage. If the Portfolio borrows and uses the proceeds to make additional investments, income and appreciation from such investments will improve its performance if they exceed the associated borrowing costs but will 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 Portfolio but, at the same time, creates special risks. For example, leverage may exaggerate changes in the net asset value of the Portfolio’s shares and in the Portfolio’s yield. Although the principal or stated value of such borrowings will be fixed, the Portfolio’s assets may change in value during the time the borrowing is outstanding. Leverage will create interest or dividend expenses for the Portfolio that 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 Portfolio will have to pay in respect thereof, the Portfolio’s net income or other gain will be greater than if leverage had not been used. Conversely, if the income or other gain from the incremental assets is not sufficient to cover the cost of leverage, the net income or other gain of the Portfolio will be less than if leverage had not been used. If the amount of income from the incremental securities is insufficient to cover the cost of borrowing, securities might have to be liquidated to obtain required fluids. Depending on market or other conditions, such liquidations could be disadvantageous to the Portfolio.

      Securities of Unseasoned Issuers. Certain Portfolios may invest in securities of unseasoned issuers, which may have limited marketability and, therefore, may be subject to wide fluctuations in market value. In addition, certain securities may lack a significant operating history and may be dependent on products or services without an established market share.

      Temporary Investments. For temporary defensive purposes, during periods when an adviser of a Portfolio believes that pursuing a Portfolio’s basic investment strategy may be inconsistent with the best interests of its shareholders, that Portfolio may invest its assets in the following money market instruments: U.S. government securities (including those purchased in the form of custodial receipts), repurchase agreements, CD and bankers’ acceptances issued by U.S. banks or savings and loan associations having assets of at least $500 million as of the end of their most recent fiscal year and high quality commercial paper. A

26

Portfolio’s U.S. dollar-denominated temporary investments are managed by Smith Barney Fund Management LLC (“SBFM”). A Portfolio also may hold a portion of its assets in money market instruments or cash in amounts designed to pay expenses, to meet anticipated redemptions or pending investment in accordance with its objectives and policies. Any temporary investments may be purchased on a when-issued basis. A Portfolio’s investment in any other short-term debt instruments would be subject to the Portfolio’s investment objectives and policies, and to approval by the Board. For further discussion regarding money market instruments, see the section entitled, “Money Market Instruments” above.

      For the same purposes, certain Portfolios may invest in obligations issued or guaranteed by foreign governments or by any of their political subdivisions, authorities, agencies or instrumentalities that are rated at least “AA” by an NRSRO, or if unrated, are determined by the adviser to be of equivalent quality. A Portfolio may also invest in obligations of foreign banks, but will limit its investments in such obligations to U.S. dollar-denominated obligations of foreign banks which at the time of investment (i) have assets with a value of more than $10 billion; (ii) are among the 75 largest foreign banks in the world, based on the amount of assets; (iii) have branches in the United States; and (iv) are of comparable quality to obligations issued by United States banks in which the Portfolio may invest in the opinion of the Portfolio’s Adviser.

Disclosure of Portfolio Holdings

      The Fund has adopted policies and procedures developed by Citigroup Asset Management (“CAM”) with respect to the disclosure of the fund’s portfolio securities and any ongoing arrangements to make available information about the fund’s portfolio securities. The policy requires that consideration always be given as to whether disclosure of information about a Portfolio’s portfolio holdings is in the best interests of a Portfolio’s shareholders, and that any conflicts of interest between the interests of the Portfolios’ shareholders and those of SBFM, the Portfolios’ distributors or their affiliates, be addressed in a manner that places the interests of Portfolios’ shareholders first. The policy provides that information regarding a Portfolio’s portfolio holdings may not be shared with non-CAM employees, with investors or potential investors (whether individual or institutional), or with third parties unless it is done for legitimate fund business purposes and in accordance with the policy.

      CAM’s policy generally provides for the release of details of securities positions once they are considered “stale.” Data is considered stale 25 calendar days following a Portfolio’s quarter-end. CAM believes that this passage of time prevents a third party from benefiting from an investment decision made by the fund that has not been fully reflected by the market.

      Under the policy, a Portfolio’s complete list of holdings (including the size of each position) may be made available to investors, potential investors, third parties and non-CAM employees with simultaneous public disclosure at least 25 days after calendar quarter-end. Typically, simultaneous public disclosure is achieved by the filing of Form N-Q or Form N-CSR in accordance with SEC rules, provided that such filings may not be made until 25 days following quarter-end and/or posting the information to a CAM or a Portfolio’s Internet site that is accessible by the public, or through public release by a third party vendor.

      The policy permits the release of limited portfolio holdings information that is not yet considered stale in a number of situations, including:

      1. A Portfolio’s top ten securities, current as of month-end, and the individual size of each such security position may be released at any time following month-end with simultaneous public disclosure.

      2. A Portfolio’s top ten securities positions (including the aggregate but not individual size of such positions) may be released at any time with simultaneous public disclosure.

      3. A list of securities (that may include fund holdings together with other securities) followed by a portfolio manager (without position sizes or identification of particular funds) may be disclosed to sell-side brokers at any time for the purpose of obtaining research and/or market information from such brokers.

27

      4. A trade in process may be discussed only with counterparties, potential counterparties and others involved in the transaction (i.e., brokers and custodians).

      5. A Portfolio’s sector weightings, performance attribution (e.g. analysis of a Portfolio’s out-performance or underperformance of its benchmark based on its portfolio holdings) and other summary and statistical information that does not include identification of specific portfolio holdings may be released, even if non-public, if such release is otherwise in accordance with the policy’s general principles.

      6. A Portfolio’s portfolio holdings may be released on an as-needed basis to its legal counsel, counsel to its trustees who are not “interested persons” (as defined in the 1940 Act) of the Fund or the manager (“independent trustees”), and its independent registered public accounting firm, in required regulatory filings or otherwise to governmental agencies and authorities.

      Under the policy, if information about a Portfolio’s portfolio holdings is released pursuant to an ongoing arrangement with any party, the fund must have a legitimate business purpose for the release of the information, and either the party receiving the information must be under a duty of confidentiality, or the release of non-public information must be subject to trading restrictions and confidential treatment to prohibit the entity from sharing with an unauthorized source or trading upon any non-public information provided. Neither a Portfolio, CAM nor any other affiliated party may receive compensation or any other consideration in connection with such arrangements. Ongoing arrangements to make available information about a Portfolio’s portfolio securities will be reviewed at least annually by the Board.

      The approval of the Fund’s Chief Compliance Officer, or designee, must be obtained before entering into any new ongoing arrangement or altering any existing ongoing arrangement to make available portfolio holdings information, or with respect to any exceptions to the policy. Any exceptions to the policy must be consistent with the purposes of the policy. Exceptions are considered on a case-by-case basis and are granted only after a thorough examination and consultation with CAM’s legal department, as necessary. Exceptions to the policies are reported to the Board at its next regularly scheduled meeting.

      Currently, the fund discloses its complete portfolio holdings approximately 25 days after calendar quarter-end on its website, www.leggmason.com/InvestorServices.

      Set forth below is a list, as of October 1, 2005, of those parties with whom CAM, on behalf of each fund, has authorized ongoing arrangements that include the release of portfolio holdings information in accordance with the policy, as well as the frequency of the release under such arrangements, and the length of the lag, if any, between the date of the information and the date on which the information is disclosed. The parties identified below as recipients are service providers, fund rating agencies, consultants and analysis.

Recipient	Frequency	Delay Before Dissemination
State Street Bank & Trust Co., (Fund Custodian and Accounting Agent)	Daily	None
Institutional Shareholders Services, (Proxy Voting Services)	As necessary	None
Bloomberg	Quarterly	25 days after quarter end
Lipper	Quarterly	25 days after quarter end
S&P	Quarterly	25 days after quarter end
Morningstar	Quarterly	25 days after quarter end
Vestek	Daily	None
Factset	Daily	None

28

      Portfolio holdings information for the fund may also be released from time to time pursuant to ongoing arrangements with the following parties:

Recipient	Frequency	Delay Before Dissemination
Baseline	Daily	None
Frank Russell	Monthly	1 day
Callan	Quarterly	25 days after quarter end
Mercer	Quarterly	25 days after quarter end
EVestment Alliance	Quarterly	25 days after quarter end
CRA RogersCasey	Quarterly	25 days after quarter end
Cambridge Associates	Quarterly	25 days after quarter end
Marco Consulting	Quarterly	25 days after quarter end
Wilshire	Quarterly	25 days after quarter end
Informa Investment Services (Efron)	Quarterly	25 days after quarter end
CheckFree (Mobius)	Quarterly	25 days after quarter end
Nelsons Information	Quarterly	25 days after quarter end
Investors Tools	Daily	None
Advent	Daily	None
BARRA	Daily	None
Plexus	Quarterly	Sent the 1-3 business day following the end of a quarter
Elkins/ McSherry	Quarterly (calendar)	Sent the first business day following the end of a quarter
Quantitative Services Group	Daily	None
AMBAC	Daily	None
Deutsche Bank	Monthly	Sent 6-8 business days following month end
Fitch	Monthly	Sent 6-8 business days following month end
Liberty Hampshire	Weekly and Month End	None
Sun Trust	Weekly and Month End	None
New England Pension Consultants	Quarterly	25 Days after quarter end
Evaluation Associates	Quarterly	25 days after quarter end
Watson Wyatt	Quarterly	25 days after quarter end
Moody’s	Weekly Tuesday Night	1 business day
S&P	Weekly Tuesday Night	1 business day

      With respect to each such arrangement, the fund has a legitimate business purpose for the release of information. The release of the information is subject to trading restrictions and/or confidential treatment to prohibit the entity from sharing with an unauthorized source or trading upon the information provided by CAM on behalf of the funds. Neither the funds, CAM nor any other affiliated party receives compensation or any other consideration in connection with such arrangements.

29

Investment Restrictions

      The investment restrictions numbered 1 through 7 have been adopted by the Fund with respect to the Portfolios as fundamental policies for the protection of shareholders. Under the 1940 Act, a Portfolio’s fundamental policy may not be changed without the vote of a “majority” of the outstanding voting securities of that Portfolio. “Majority” is defined in the 1940 Act as the lesser of (a) 67% or more of the shares present at a fund meeting, if the holders of more than 50% of the outstanding shares of that Portfolio are present or represented by proxy, or (b) more than 50% of the outstanding shares. A fundamental policy affecting a particular Portfolio may not be changed without the vote of a majority of the outstanding shares of that Portfolio. The remaining restrictions are non-fundamental policies and may be changed by vote of a majority of the Board at any time.

      The investment policies adopted by the Fund prohibit a Portfolio from:

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

      2. 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 33¹/3 % of the value of its total assets (including the amount borrowed), valued at the lesser of cost or market, less liabilities (not including the amount borrowed), is derived from such transactions.

      3. 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 1933 Act, 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 the business of investing in real estate (including interests in limited partnerships owning or otherwise engaging in the real estate business or the business of investing in real estate) and securities which are secured by real estate or interests therein; (b) holding or selling real estate received in connection with securities it holds or held; (c) trading in futures contracts and options on futures contracts (including options on currencies to the extent consistent with a Portfolio’s investment objective and policies); or (d) investing in real estate investment trust securities.

      5. 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.

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

      7. 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.

      8. Investing in oil, gas or other mineral exploration or development programs, except that the portfolios may invest in the securities of companies that invest in or sponsor these programs.

      9. Purchasing any securities on margin (except for such short-term credits as are necessary for the clearance of purchases and sales of portfolio securities). For purposes of this restriction, the deposit or payment by the Portfolio of underlying securities and other assets in escrow and collateral agreements

30

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.

      10. Purchasing, writing or selling puts, calls, straddles, spreads or combinations thereof, except as permitted under the Portfolio’s investment goals and policies.

      11. Purchasing restricted securities, illiquid securities or other securities that are not readily marketable if more than 10% (15% in the case of the Fundamental Value Portfolio, Aggressive Growth Fund, and Diversified Strategic Income Portfolio) of the total assets of the portfolio would be invested in such securities. However, with respect to the Diversified Strategic Income Portfolio this restriction will not apply to securities subject to Rule 144A under the 1933 Act if two or more dealers make a market in such securities.

      12. Investing more than 10% of its total assets in time deposits maturing in more than seven calendar days.

      13. Purchasing any security if as a result the Portfolio would then have more than 5% of its total assets invested in securities of companies (including predecessors) that have been in continuous operation for less than three years. (For purposes of this limitation, issuers include predecessors, sponsors, controlling persons, general partners, guarantors and originators of underlying assets.)

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

      15. Investing in warrants (except as permitted under the Portfolio’s investment goals and policies or other than warrants acquired by the portfolio as part of a unit or attached to securities at the time of purchase) if, as a result, the investments (valued at the lower of cost or market) would exceed 5% of the value of the Portfolio’s net assets or if, as a result, more than 2% of the Portfolio’s net assets would be invested in warrants not listed on a recognized U.S. or foreign exchange to the extent permitted by applicable state securities laws.

      The percentage limitations contained in the restrictions listed above apply at the time of purchases of securities.

      Holdings of the securities of the Portfolios regular brokers/dealers or of their parents that derive more than 15% of gross revenues from securities related activities as of December 31, 2005:

Diversified Strategic Income Portfolio

	Type of		Value of Any
	Security Owned		Securities Owned
	D=debt		at End of
Name of Regular Broker or Dealer or Parent (Issuer)	E=equity		Current Period
			(000’s omitted)
BANK OF AMERICA CORP.		D	$	606
THE BEAR STEARNS COS INC.		D	$	68

Growth & Income Portfolio

	Type of		Value of Any
	Security Owned		Securities Owned
	D=debt		at End of
Name of Regular Broker or Dealer or Parent (Issuer)	E=equity		Current Period
			(000’s omitted)
JPMORGAN CHASE & CO.		E	$	246
BANK OF AMERICA CORP.		E	$	224
MERRILL LYNCH & CO. INC.		E	$	204
THE GOLDMAN SACHS GROUP, INC.		E	$	194

31

Fundamental Value Portfolio

	Type of		Value of Any
	Security Owned		Securities Owned
	D=debt		at End of
Name of Regular Broker or Dealer or Parent (Issuer)	E=equity		Current Period
			(000’s omitted)
JPMORGAN CHASE & CO.		E	$	20,734
MERRILL LYNCH & CO., INC.		E	$	13,532
THE GOLDMAN SACHS GROUP, INC.		E	$	2,209

Aggressive Growth Portfolio

	Type of		Value of Any
	Security Owned		Securities Owned
	D=debt		at End of
Name of Regular Broker or Dealer or Parent (Issuer)	E=equity		Current Period
			(000’s omitted)
LEHMAN BROTHERS HOLDINGS INC.		E	$	3,147
MERRILL LYNCH & CO., INC.		E	$	2,831

Appreciation Portfolio

	Type of		Value of Any
	Security Owned		Securities Owned
	D=debt		at End of
Name of Regular Broker or Dealer or Parent (Issuer)	E=equity		Current Period
			(000’s omitted)
MERRILL LYNCH AND CO., INC.		E	$	12,151
THE BANK OF NEW YORK CO., INC.		E	$	4,809
THE GOLDMAN SACHS GROUP, INC.		E	$	3,448

Equity Index Portfolio

	Type of		Value of Any
	Security Owned		Securities Owned
	D=debt		at End of
Name of Regular Broker or Dealer or Parent (Issuer)	E=equity		Current Period
			(000’s omitted)
BANK OF AMERICA CORP.		E	$	27,560
JPMORGAN CHASE & CO.		E	$	20,717
MERRILL LYNCH & CO., INC.		E	$	9,315
MORGAN STANLEY		E	$	9,151
THE GOLDMAN SACHS GROUP, INC.		E	$	8,831
LEHMAN BROTHERS HOLDINGS INC.		E	$	5,185
THE BANK OF NEW YORK CO., INC.		E	$	3,682
THE BEAR STEARNS COS. INC.		E	$	1,927

32

Capital and Income Portfolio

	Type of		Value of Any
	Security Owned		Securities Owned
	D=debt		at End of
Name of Regular Broker or Dealer or Parent (Issuer)	E=equity		Current Period
			(000’s omitted)
THE BEAR STEARNS COS. INC.		D	$	280
BANK OF AMERICA CORP.		E	$	235
JPMORGAN CHASE & CO.		E	$	139
MERRILL LYNCH & CO., INC.		E	$	108
THE GOLDMAN SACHS GROUP, INC.		E	$	38
LEHMAN BROTHERS HOLDINGS INC.		E	$	38

Portfolio Turnover

      The Portfolios do not intend to seek profits through short-term trading. Nevertheless, the Portfolios will not consider portfolio turnover rate a limiting factor in making investment decisions.

      A Portfolio’s turnover rate is calculated by dividing the lesser of purchases or sales of its portfolio securities for the year by the monthly average value of the Portfolio’s securities. Securities or options with remaining maturities of one year or less on the date of acquisition are excluded from the calculation. Under certain market conditions, a Portfolio authorized to engage in transactions in options may experience increased portfolio turnover as a result of its investment strategies. For instance, the exercise of a substantial number of options written by a Portfolio (due to appreciation of the underlying security in the case of call options or depreciation of the underlying security in the case of put options) could result in a turnover rate in excess of 100%. A Portfolio turnover rate of 100% would occur if all of a Portfolio’s securities that are included in the computation of turnover were replaced once during a period of one year.

      For regulatory purposes, the portfolio turnover rate for the money market portfolio will be considered 0%.

      For the 2005 and 2004 fiscal years, the portfolio turnover rates for each Portfolio having operations during the stated periods were as follows:

Portfolio	12/31/05			12/31/04
Aggressive Growth Portfolio		0	%		4	%
Appreciation Portfolio		51	%		41	%
Capital and Income Portfolio*		187	%		0	%
Diversified Strategic Income Portfolio		83	%		57	%
Equity Index Portfolio		7	%		1	%
Growth & Income Portfolio		54	%		83	%
Fundamental Value Portfolio		34	%		31	%

*  The Portfolio commenced operations on May 3, 2005.

      Certain other practices that may be employed by a Portfolio also could result in high portfolio turnover. For example, portfolio securities may be sold in anticipation of a rise in interest rates (market decline) or purchased in anticipation of a decline in interest rates (market rise) and later sold. In addition, a security may be sold and another of comparable quality purchased at approximately the same time to take advantage of what an adviser believes to be a temporary disparity in the normal yield relationship between the two securities. These yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates, such as changes in the overall demand for, or supply of, various types of securities. Higher portfolio turnover rates can result in corresponding increases in brokerage commissions. Short-term gains realized from portfolio transactions are taxable to shareholders as ordinary income.

33

      Portfolio turnover rates may vary greatly from year to year as well as within a particular year and may be affected by cash requirements for redemptions of a Portfolio’s shares as well as by requirements that enable the Portfolio to receive favorable tax treatment.

PORTFOLIO MANAGER DISCLOSURE

Portfolio Managers

      The following tables set forth certain additional information with respect to the portfolio managers for the funds. Unless noted otherwise, all information is provided as of December 31, 2005.

Other Accounts Managed by Portfolio Managers

      The table below identifies, for the portfolio managers, the number of accounts (other than the Portfolio with respect to which information is provided) for which he or she has day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. For each category, the number of accounts and total assets in the accounts where fees are based on performance is also indicated.

	Portfolio	Registered Investment	Other Pooled Investment
	Manager(s)	Companies	Vehicles	Other Accounts
Appreciation Portfolio	Harry D. Cohen	4 Registered investment companies with $6.49 billion in total assets under management	1 Other pooled investment vehicles with $0.06 billion in assets under management	34,950 Other accounts with $6.27 billion in total assets under management
Aggressive Growth Portfolio	Richard A. Freeman	13 Registered investment companies with $12.37 billion in total assets under management	2 Other pooled investment vehicles with $0.34 billion in assets under management	125,829 Other accounts with $10.73 billion in total assets under management
Appreciation Portfolio	Scott Glasser	5 Registered investment companies with $7.84 billion in total assets under management	1 Other pooled investment vehicles with $0.06 billion in assets under management	34,280 Other accounts with $4.01 billion in total assets under management
Fundamental Value Portfolio	John G. Goode	21 Registered investment companies with $9.09 billion in total assets under management	2 Other pooled investment vehicles with $0.42 billion in assets under management	96,007 Other accounts with $13.19 billion in total assets under management
Growth & Income Portfolio	Kevin Caliendo	7 Registered investment companies with $4.32 billion in total assets under management	0 Other pooled investment vehicles with $0 billion in assets under management	0 Other accounts with $0 billion in total assets under management
Growth & Income Portfolio	Michael Kagan	4 Registered investment companies with $4.53 billion in total assets under management	2 Other pooled investment vehicles with $0.51 billion in assets under management	1 Other accounts with $0.02 billion in total assets under management
Equity Index Portfolio	Yu-Nien Charles Ko*	4 Registered investment companies with $1 billion in total assets under management	12 Other pooled investment vehicles with $0.76 billion in assets under management	163 Other accounts with $8.17 billion in total assets under management
Diversified Strategic Income Portfolio	S. Kenneth Leech	36 Registered investment companies with $23.66 billion in total assets under management	19 Other pooled investment vehicles with $19.80 billion in assets under management	740 Other accounts with $205.78 billion in total assets under management

*  One pooled investment vehicle, with assets of $40,824,704, and ten other accounts, with assets of $716,093,976, have advisory fees based on the performance of the account.

34

	Portfolio	Registered Investment	Other Pooled Investment
	Manager(s)	Companies	Vehicles	Other Accounts
Diversified Strategic Income Portfolio	Stephen A. Walsh	36 Registered investment companies with $23.66 billion in total assets under management	19 Other pooled investment vehicles with $19.80 billion in assets under management	740 Other accounts with $205.78 billion in total assets under management
Diversified Strategic Income Portfolio	Keith J. Gardner	0 Registered investment companies with $0 billion in total assets under management	2 Other pooled investment vehicles with $2.09 billion in assets under management	3 Other accounts with $0.21 billion in total assets under management
Diversified Strategic Income Portfolio	Michael C. Buchanan	3 Registered investment companies with $0.74 billion in total assets under management	2 Other pooled investment vehicles with $2.13 billion in assets under management	10 Other accounts with $1.41 billion in total assets under management
Diversified Strategic Income Portfolio	Mark Lindbloom	14 Registered investment companies with $6.0 billion in total assets under management	1 Other pooled investment vehicles with $0.2 billion in assets under management	11 Other accounts with $2.10 billion in total assets under management
Capital and Income Portfolio	Mark McAllister	17 Registered investment companies with $8.30 billion in total assets under management	2 Other pooled investment vehicles with $0.23 billion in assets under management	28,212 Other accounts with $4.76 billion in total assets under management
Capital and Income Portfolio	Michael Sedoy	2 Registered investment companies with $1.94 billion in total assets under management	0 Other pooled investment vehicles with $0 billion in assets under management	0 Other accounts with $0 billion in total assets under management
Capital and Income Portfolio	S. Kenneth Leech	36 registered investment companies with $23.66 billion in total assets under management	19 other pooled investment vehicles with $19.80 billion in total assets under management	740 other accounts vehicles with $205.78 billion in total assets under management
Capital and Income Portfolio	Stephen A. Walsh	36 registered investment companies with $23.66 billion in total assets under management	19 other pooled investment vehicles with $19.80 billion in total assets under management	740 other accounts vehicles with $205.78 billion in total assets under management
Capital and Income Portfolio	Mark Lindbloom	14 registered investment companies with $6.0 billion in total assets under management	1 other pooled investment vehicles with $0.2 billion in total assets under management	11 other accounts vehicles with $2.10 billion in total assets under management
Capital and Income Portfolio	Carl A. Eichstaedt	6 registered investment companies with $1.43 billion in total assets under management	0 other pooled investment vehicles with $0 billion in total assets under management	87 other accounts vehicles with $20.56 billion in total assets under management
Capital and Income Portfolio	Ronald A. Mass	1 registered investment companies with $0.17 billion in total assets under management	0 other pooled investment vehicles with $0.2 billion in total assets under management	9 other accounts vehicles with $4.85 billion in total assets under management
Equity Index Portfolio	Michael D. Soares*	4 Registered investment companies with $1 billion in total assets under management	12 Other pooled investment vehicles with $0.76 billion in assets under management	163 Other accounts with $8.17 billion in total assets under management

*  One pooled investment vehicle, with assets of $40,824,704, and ten other accounts, with assets of $716,093,976, have advisory fees based on the performance of the account.

35

Portfolio Manager Compensation

      CAM North America LLC, (“CAM”) investment professionals receive base salary and other employee benefits and are eligible to receive incentive compensation. Base salary is fixed and typically determined based on market factors and the skill and experience of individual investment personnel.

      CAM has implemented an investment management incentive and deferred compensation plan (the “Plan”) for its investment professionals, including the fund’s portfolio manager(s). Each investment professional works as a part of an investment team. The Plan is designed to align the objectives of CAM investment professionals with those of fund shareholders and other CAM clients. Under the Plan a “base incentive pool” is established for each team each year as percentage of CAM’s revenue attributable to the team (largely management and related fees generated by funds and other accounts). A team’s revenues are typically expected to increase or decrease depending on the effect that the team’s investment performance as well as inflows and outflows have on the level of assets in the investment products managed by the team. The “base incentive pool” of a team is reduced by base salaries paid to members of the team and employee benefits expenses attributable to the team.

      The investment team’s incentive pool is then adjusted to reflect its ranking among a “peer group” of non-CAM investment managers and the team’s pre-tax investment performance against the applicable product benchmark (e.g. a securities index and, with respect to a fund, the benchmark set forth in the fund’s prospectus to which the fund’s average annual total returns are compared or, if none, the benchmark set forth in the fund’s annual report). Longer-term (5-year) performance will be more heavily weighted than shorter-term (1-year) performance in the calculation of the performance adjustment factor. The incentive pool for a team may also be adjusted to reflect other factors (e.g., severance pay to departing members of the team, and discretionary allocations by the applicable CAM chief investment officer from one investment team to another). The incentive pool will be allocated by the applicable CAM chief investment officer to the team leader and, based on the recommendations of the team leader, to the other members of the team.

      Up to 20% of an investment professional’s annual incentive compensation is subject to deferral. Of that principal deferred award amount, 50% will accrue a return based on the hypothetical returns of the investment fund or product that is the primary focus of the investment professional’s business activities with the Firm, and 50% may be received in the form of Legg Mason restricted stock shares.

Batterymarch Portfolio Manager Compensation

      CAM has implemented an investment management incentive and deferred compensation plan for its investment professionals. However, CAM investment professionals who, like the Fund’s portfolio managers, are employed concurrently by CAM and also by another investment advisor affiliated with Legg Mason, may be compensated under that other investment advisor’s compensation program. The Fund’s portfolio managers, as employees of SBFM and Batterymarch Financial Management, Inc., are compensated under Batterymarch’s compensation program.

      Under the Batterymarch program, portfolio manager compensation includes a combination of fixed base salary, annual bonus and long-term incentive compensation, as well as a generous benefits package made available to all Batterymarch employees on a non-discretionary basis.

      The bonus and long term incentive compensation is discretionary compensation: the amount of such awards is determined on an annual basis following the completion of the firm’s fiscal year. The overall “pool” of discretionary compensation is based on the profitability of the firm for each fiscal year. Individual allocation to portfolio managers is based on several factors, including:

      • Short term and longer term pre-tax investment performance of the product that the portfolio manager works on. Short term performance is one year or less. Longer term performance is generally three to five year performance. Performance is evaluated on an aggregate product basis that the portfolio manager is responsible for and is not analyzed by any individual client portfolio, such as the Fund. The analysis of this performance is based on comparison to the MSCI World Index as well as a comparison to a group of peer managers;

36

      • Portfolio manager assistance is servicing clients; and

      • Portfolio manager contribution to new business development.

      Portfolio manager compensation is not tied to, nor increased or decreased as the result of, any performance fees that may be earned by Batterymarch. As noted above, compensation is not impacted by the investment performance of any one client account; all performance analysis is reviewed on an aggregate product basis. Portfolio managers do not receive a percentage of the revenue earned on any of Batterymarch’s client portfolios.

Western Asset Management Company’s Portfolio Manager Compensation

      Western Asset Management Company’s compensation system assigns each employee a total compensation “target” and a respective cap, which are derived from annual market surveys that benchmark each role with their job function and peer universe. This method is designed to reward employees with total compensation reflective of the external market value of their skills, experience, and ability to produce desired results. Standard compensation includes competitive base salaries, generous employee benefits, and a retirement plan.

Potential Conflicts of Interest

      Potential conflicts of interest may arise when the fund’s portfolio manager also has day-to-day management responsibilities with respect to one or more other funds or other accounts, as is the case for all the portfolio manager listed in the table above.

      The manager and the fund have adopted compliance policies and procedures that are designed to address various conflicts of interest that may arise for the manager and the individuals that it employs. For example, CAM seeks to minimize the effects of competing interests for the time and attention of portfolio managers by assigning portfolio managers to manage funds and accounts that share a similar investment style. CAM has also adopted trade allocation procedures that are designed to facilitate the fair allocation of limited investment opportunities among multiple funds and accounts. There is no guarantee, however, that the policies and procedures adopted by CAM and the fund will be able to detect and/or prevent every situation in which an actual or potential conflict may appear. These potential conflicts include:

      Allocation of Limited Time and Attention. A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. As a result, the portfolio manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those accounts as might be the case if he or she were to devote substantially more attention to the management of a single fund. The effects of this potential conflict may be more pronounced where funds and/or accounts overseen by a particular portfolio manager have different investment strategies.

      Allocation of Limited Investment Opportunities. If a portfolio manager identifies a limited investment opportunity that may be suitable for multiple funds and/or accounts, the opportunity may be allocated among these several funds or accounts, which may limit a fund’s ability to take full advantage of the investment opportunity.

      Pursuit of Differing Strategies. At times, a portfolio manager may determine that an investment opportunity may be appropriate for only some of the funds and/or accounts for which he or she exercises investment responsibility, or may decide that certain of the funds and/or accounts should take differing positions with respect to a particular security. In these cases, the portfolio manager may place separate transactions for one or more funds or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other funds and/or accounts.

      Selection of Brokers/ Dealers. Portfolio managers may be able to select or influence the selection of the brokers and dealers that are used to execute securities transactions for the funds and/or account that they supervise. In addition to executing trades, some brokers and dealers provide portfolio managers with brokerage

37

and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934), which may result in the payment of higher brokerage fees than might have otherwise be available. These services may be more beneficial to certain funds or accounts than to others. Although the payment of brokerage commissions is subject to the requirement that the portfolio manager determine in good faith that the commissions are reasonable in relation to the value of the brokerage and research services provided to the fund, a portfolio manager’s decision as to the selection of brokers and dealers could yield disproportionate costs and benefits among the funds and/or accounts that he or she manages.

      Variation in Compensation. A conflict of interest may arise where the financial or other benefits available to the portfolio manager differ among the funds and/or accounts that he or she manages. If the structure of the investment adviser’s management fee and/or the portfolio manager’s compensation differs among funds and/or accounts (such as where certain funds or accounts pay higher management fees or performance-based management fees), the portfolio manager might be motivated to help certain funds and/or accounts over others. The portfolio manager might be motivated to favor funds and/or accounts in which he or she has an interest or in which the investment advisor and/or its affiliates have interests. Similarly, the desire to maintain assets under management or to enhance the portfolio manager’s performance record or to derive other rewards, financial or otherwise, could influence the portfolio manager in affording preferential treatment to those funds and/or accounts that could most significantly benefit the portfolio manager.

      Related Business Opportunities. The advisers or their affiliates may provide more services (such as distribution or recordkeeping) for some types of funds or accounts than for others. In such cases, a portfolio manager may benefit, either directly or indirectly, by devoting disproportionate attention to the management of fund and/or accounts that provide greater overall returns to the investment manager and its affiliates.

      The adviser and the Portfolios have adopted compliance polices and procedures that are designed to address various conflicts of interest that may arise for the investment adviser and the individuals that it employs. For example, CAM seeks to minimize the effects of competing interests for the time and attention of portfolio managers by assigning portfolio managers to manage funds and accounts that share a similar investment style. CAM has also adopted trade allocation procedures that are designed to facilitate the fair allocation of limited investment opportunities among multiple Portfolios and accounts. There is no guarantee, however, that the policies and procedures adopted by CAM and the Portfolio will be able to detect and/or prevent every situation in which an actual or potential conflict may appear.

38

Portfolio Manager Securities Ownership

      The table below identifies ownership of Portfolio securities by the portfolio managers.

		Dollar Range of
Fund	Portfolio Manager(s)	Ownership of Securities
Appreciation Portfolio	Harry D. Cohen		None
Appreciation Portfolio	Scott Glasser		None
Aggressive Growth Portfolio	Richard A. Freeman		None
Fundamental Value Portfolio	John G. Goode		None
Growth & Income Portfolio	Michael Kagan		None
Growth & Income Portfolio	Kevin Caliendo		None
Equity Index Portfolio	Charles Ko		None
Equity Index Portfolio	Michael D. Soares		None
Diversified Strategic Income Portfolio	S. Kenneth Leech		None
Diversified Strategic Income Portfolio	Stephen A. Walsh		None
Diversified Strategic Income Portfolio	Keith J. Gardner		None
Diversified Strategic Income Portfolio	Michael C. Buchanan		None
Diversified Strategic Income Portfolio	Mark Lindbloom		None
Capital and Income Portfolio	Mark McAllister		None
Capital and Income Portfolio	Michael Sedoy		None
Capital and Income Portfolio	S. Kenneth Leech		None
Capital and Income Portfolio	Stephen A. Walsh		None
Capital and Income Portfolio	Mark Lindbloom		None
Capital and Income Portfolio	Carl A. Eichstaedt		None
Capital and Income Portfolio	Ronald A. Mass		None

Portfolio Transactions

      Most of the purchases and sales of securities for a Portfolio, whether effected on a securities exchange or over-the-counter, will be effected in the primary trading market for the securities. Decisions to buy and sell securities for a Portfolio are made by its adviser, which also is responsible for placing these transactions, subject to the overall review of the Board. With respect to the Diversified Strategic Income Portfolio and Capital and Income Portfolio, decisions to buy and sell U.S. securities for the Portfolio are made by the Portfolio’s adviser, which also is responsible for placing these transactions; however, with respect to the Diversified Strategic Income Portfolio, the responsibility to make investment decisions with respect to foreign securities and to place these transactions rests with CAM Ltd., the Portfolio’s sub-adviser. Although investment decisions for each Portfolio are made independently from those of the other accounts managed by its adviser, investments of the type the Portfolio may make also may be made by those other accounts. When a Portfolio and one or more other accounts managed by its adviser are prepared to invest in, or desire to dispose of, the same security, available investments or opportunities for sales will be allocated in a manner believed by the adviser to be equitable to each. In some cases, this procedure may adversely affect the price paid or received by a Portfolio or the size of the position obtained or disposed of by the Portfolio.

      Transactions on U.S. stock exchanges and some foreign stock exchanges involve the payment of negotiated brokerage commissions. On exchanges on which commissions are negotiated, the cost of transactions may vary among different brokers. Commissions generally are fixed on most foreign exchanges. There is generally no stated commission in the case of securities traded in U.S. or foreign over-the-counter markets, but the prices of those securities include undisclosed commissions or mark-ups. The cost of securities purchased from underwriters includes an underwriting commission or concession and the prices at which securities are purchased from and sold to dealers include a dealer’s mark-up or mark-down. U.S. government securities generally are purchased from underwriters or dealers, although certain newly issued

39

U.S. government securities may be purchased directly from the United States Treasury or from the issuing agency or instrumentality.

      The following tables set forth certain information regarding each Portfolio’s payment of brokerage commissions with the exception of the Diversified Strategic Income Portfolio, which did not pay any brokerage commissions during these time periods.

Fiscal Year Ended December 31, 2005

	Total Brokerage		Brokerage Commissions
Portfolio	Commissions Paid		Paid to CGMI
Appreciation Portfolio	$	896,165	$	17,360
Aggressive Growth Portfolio	$	10,774	$	38
Equity Index Portfolio	$	73,843	$	0
Growth & Income Portfolio	$	16,131	$	50
Fundamental Value Portfolio	$	1,104,378	$	28,303
Capital and Income Portfolio	$	26,316	$	164

				% of Aggregate Dollar
	% of Aggregate			Amount of Transactions
	Brokerage Commissions			Involving Commissions
Portfolio	Paid to CGMI			Paid to CGMI
Appreciation Portfolio		1.94	%		0.07	%
Aggressive Growth Portfolio		0.35	%		0.58	%
Equity Index Portfolio		0	%		0	%
Growth & Income Portfolio		0.31	%		0.16	%
Fundamental Value Portfolio		2.56	%		2.40	%
Capital and Income Portfolio		0.62	%		0.11	%

Fiscal Year Ended December 31, 2004

	Total Brokerage		Brokerage Commissions
Portfolio	Commissions Paid		Paid to CGMI
Appreciation Portfolio	$	761,520		15,983
Aggressive Growth Portfolio		17,967		500
Equity Index Portfolio		65,865		N/A
Growth & Income Portfolio		21,268		15
Fundamental Value Portfolio		1,074,955		29,790
Diversified Strategic Portfolio		250		N/A

				% of Aggregate Dollar
	% of Aggregate			Amount of Transactions
	Brokerage Commissions			Involving Commissions
Portfolio	Paid to CGMI			Paid to CGMI
Appreciation Portfolio		2.1	%		2.9	%
Aggressive Growth Portfolio		2.78	%		0.81	%
Equity Index Portfolio		N/A			N/A
Growth & Income Portfolio		0.07	%		0.06	%
Fundamental Value Portfolio		2.77	%		2.26	%
Diversified Strategic Portfolio		0	%		0	%

40

Fiscal Year Ended December 31, 2003

	Total Brokerage		Brokerage Commissions
Portfolio	Commissions Paid		Paid to CGMI
Appreciation Portfolio	$	911,525	$	36,516
Aggressive Growth Portfolio	$	8,905	$	0
Equity Index Portfolio	$	125,026	$	0
Growth & Income Portfolio	$	18,954	$	0
Fundamental Value Portfolio	$	851,574	$	8,435

				% of Aggregate Dollar
	% of Aggregate			Amount of Transactions
	Brokerage Commissions			Involving Commissions
Portfolio	Paid to CGMI			Paid to CGMI
Appreciation Portfolio		4.01	%		2.59	%
Aggressive Growth Portfolio		0	%		0	%
Equity Index Portfolio		0	%		0	%
Growth & Income Portfolio		0	%		0	%
Fundamental Value Portfolio		0.99	%		0.99	%

      In selecting brokers or dealers to execute securities transactions on behalf of a Portfolio, its adviser seeks the best overall terms available. In assessing the best overall terms available for any transaction, each adviser will consider the factors the adviser deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer and the reasonableness of the commission, if any, for the specific transaction and on a continuing basis. In addition, each advisory agreement between the fund and an adviser authorizes the adviser, in selecting brokers or dealers to execute a particular transaction and in evaluating the best overall terms available, to consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Portfolio, the other Portfolios and/or other accounts over which the adviser or its affiliates exercise investment discretion. The fees under the investment advisory agreements and the sub-investment advisory and/or administration agreements between the Fund and the advisers and the sub-adviser and/or administrator, respectively, are not reduced by reason of their receiving such brokerage and research services. The Board, in its discretion, may authorize the advisers to cause the Portfolios to pay a broker that provides such brokerage and research services a brokerage commission in excess of that which another broker might have charged for effecting the same transaction, in recognition of the value of such brokerage and research services. The Board periodically will review the commissions paid by the Portfolios to determine if the commissions paid over representative periods of time were reasonable in relation to the benefits inuring to the Portfolio.

      For the fiscal year ended December 31, 2005, the following table sets forth certain information regarding a Portfolio’s payment of brokerage commissions and brokerage transactions to brokers because of research services provided:

	Total Brokerage		Amount of Transactions
	Commissions Directed		Involving Commissions
Portfolio	for Research		Directed for Research
Growth and Income Portfolio	$	1,401	$	12,744,602
Appreciation Portfolio	$	124,448	$	78,791,382
Fundamental Value Portfolio	$	81,504	$	43,478,605
Aggressive Growth Portfolio	$	4	$	2,136
Capital and Income Portfolio	$	310	$	37,184,007

      To the extent consistent with applicable provisions of the 1940 Act and the rules and exemptions adopted by the SEC thereunder, the Board has determined that portfolio transactions for a Portfolio may be executed through CGMI and other affiliated broker-dealers if, in the judgment of its adviser, the use of such broker-

41

dealer is likely to result in price and execution at least as favorable as those of other qualified broker-dealers, and if, in the transaction, such broker-dealer charges the Portfolio a rate consistent with that charged to comparable unaffiliated customers in similar transactions. In addition, under rules adopted by the SEC, CGMI may directly execute transactions for a Portfolio on the floor of any national securities exchange, provided: (a) the Board of Trustees has expressly authorized CGMI to effect such transactions; and (b) CGMI annually advises the Fund of the aggregate compensation it earned on such transactions. Over-the-counter purchases and sales are transacted directly with principal market makers except in those cases in which better prices and executions may be obtained elsewhere.

      Effective December 1, 2005, CGMI is no longer an affiliated person of the fund under the 1940 Act. As a result, the fund is permitted to execute portfolio transactions with CGMI or an affiliate of CGMI as agent (but not as principal). Similarly, the fund is permitted to purchase securities in underwritings in which CGMI or an affiliate of CGMI is a member without the restrictions imposed by certain rules of the SEC. The manager’s use of CGMI or affiliates of CGMI as agent in portfolio transactions with the fund will be governed by the fund’s policy of seeking the best overall terms available.

42

MANAGEMENT OF THE FUND

      The executive officers of the Fund are employees of certain of the organizations that provide services to the fund. These organizations are as follows:

Name	Service
Smith Barney Fund Management LLC (“SBFM” or “manager” and “administrator”)	Investment manager to Capital and Income Portfolio, Fundamental Value Portfolio, Diversified Strategic Income Portfolio, Appreciation Portfolio and Administrator to the Equity Index Portfolio
Salomon Brothers Asset Management Inc (“SaBAM” or “manager”)	Investment manager to Aggressive Growth Portfolio and Growth & Income Portfolio
Citigroup Asset Management Limited (“CAM Ltd.” or “sub-adviser”)	Sub-investment adviser to Diversified Strategic Income Portfolio.
Travelers Investment Management Company (“TIMCO” or “adviser”)	Investment Adviser to Equity Index Portfolio
Citigroup Global Markets Inc. (“CGMI”)	Distributor
Legg Mason Investor Services LLC (“LMIS”)	Distributor
State Street Bank and Trust Company (“State Street”)	Custodian
PFPC Inc. (“transfer agent”)	Transfer Agent and Dividend Paying Agent

      These organizations and the functions they perform for the portfolios are discussed in the prospectuses and in this SAI.

43

Trustees and Officers of the Fund

      Overall responsibility for management and supervision of the Fund and the Portfolios rests with the Fund’s Board of Trustees. The Trustees approve all significant agreements between the Portfolio and the persons or companies that furnish services to the Fund and its Portfolios, including agreements with the advisers and/or sub-adviser and administrator of the Portfolios and with the Portfolios’ custodian, transfer agent and distributor. The day-to-day operations of the Portfolios are delegated to the advisers and/or sub-adviser and administrator of the Portfolios. The names of the Trustees, including each Trustee who is not an “interested person” of the Fund or an adviser or its affiliates, as defined in the 1940 Act (“Independent Trustees”) and executive officers of the Fund, together with information as to their principal business occupations during the past five years, are set forth below.

						Number of
						Portfolios
			Term of			in Fund
	Position(s)		Office* and			Complex		Other Directorships
Name, Address and	Held with		Length of		Principal Occupation(s)	Overseen		Held
Year of Birth	Fund		Time Served		During Past Five Years	by Trustee		by Trustee
INDEPENDENT TRUSTEES:
Dwight B. Crane Harvard Business School Soldiers Field Morgan Hall #375 Boston, MA 02163 Birth Year: 1937		Trustee		1995	Professor — Harvard Business School		47		N/A
Burt N. Dorsett The Stratford #702 5601 Turtle Bay Drive Naples, FL 34108 Birth Year: 1930		Trustee		1991	President — Dorsett McCabe Capital Management Inc. (1986-2004); Chief Investment Officer — Leeb Capital Management, Inc. (1999-2003)		24		N/A
Elliot S. Jaffe The Dress Barn Inc. Executive Office 30 Dunnigan Drive Suffern, NY 10901 Birth Year: 1926		Trustee		1991	Chairman — The Dress Barn Inc.		24		The Dress Barn Inc.
Stephen E. Kaufman Stephen E. Kaufman PC 277 Park Avenue 47th Floor New York, NY 10172 Birth Year: 1932		Trustee		1995	Attorney		37	Trustee, Consulting Group Capital Markets Funds
Cornelius C. Rose, Jr.  Meadowbrook Village Building 1, Apt. 6 West Lebanon, NH 03784 Birth Year: 1932		Trustee		1991	Chief Executive Officer — Performance Learning Systems		24		N/A
INTERESTED TRUSTEE:
R. Jay Gerken CAM 399 Park Avenue, 4th Floor New York, NY 10022 Birth Year: 1951	President and Chief Executive Officer			2002	Managing Director of CAM; President and Chief Executive Officer of SBFM, and Citi Fund Management Inc. (“CFM”); President and Chief Executive Officer of certain mutual funds associated with Legg Mason; formerly, Chairman of SBFM and CFM; formerly, Chairman, President and Chief Executive Officer of Travelers Investment Adviser, Inc.; Formerly, Portfolio Manager of Smith Barney Allocation Series Inc. (from 1996-2001)		169	Trustee, Consulting Group Capital Markets Funds

*  Each Trustee serves until his successor has been elected and qualified.

**  Mr. Gerken is an “interested” person of the Fund because he is an officer of SBFM and its affiliates.

44

		Term of Office*
Name, Address and	Position(s) Held	and Length of		Principal Occupation(s)
Year of Birth	with Fund	Time Served		During Past Five Years
OFFICERS:
Andrew B. Shoup CAM 125 Broad Street 10th Floor New York, NY 10004 Birth Year: 1956	Senior Vice President and Chief Administrative Officer		Since 2003	Director of CAM; Chief Administrative Officer of certain mutual funds associated with Legg Mason; Head of International Funds Administration of CAM from 2001 to 2003;
Robert I. Frenkel CAM 300 First Stamford Place 4th Floor Stamford, CT 06902 Birth Year: 1954	Secretary and Chief Legal Officer		Since 2003	Managing Director and General Counsel of Global Mutual Funds for CAM and its predecessor (since 1994); Secretary and Chief Legal Officer of certain mutual funds associated with Legg Mason; formerly, Secretary of CFM
Ted P. Becker CAM 399 Park Avenue New York, NY 10022 Birth Year: 1951	Chief Compliance Officer		Since 2006	Managing Director of Compliance at Legg Mason & Co., LLC, (2005-Present); Chief Compliance Officer with certain mutual funds associated with Legg Mason (since 2006); Managing Director of Compliance at Citigroup Asset Management (2002-2005). Prior to 2002, Managing Director— Internal Audit & Risk Review at Citigroup Inc.
John Chiota CAM 100 First Stamford Place, 5th Floor Stamford, CT 06902 Birth Year: 1968	Chief Anti-Money Laundering Compliance Officer		Since 2006	Vice President of CAM (since 2004); Chief Anti-Money Laundering Compliance Officer with certain mutual funds associated with Legg Mason (since 2006); prior to August 2004, Chief AML Compliance Officer with TD Waterhouse.
Kaprel Ozsolak CAM 125 Broad Street, 11th Floor New York, NY 10004 Birth Year: 1965	Treasurer and Chief Financial Officer		Since 2004	Director of CAM; Treasurer and Chief Financial Officer of certain mutual funds associated with Legg Mason
Harry D. Cohen CAM 399 Park Avenue New York, NY 10022 Birth Year: 1940	Vice President and Investment Officer		Since 1991	Managing Director of CAM; Chief Investment Officer of SBFM
Richard A. Freeman CAM 399 Park Avenue New York, NY 10022 Birth Year: 1953	Vice President and Investment Officer		Since 2000	Managing Director of CAM and Investment Officer of SBFM

*  Each officer serves until his or her respective successor has been elected and qualified.

45

		Term of Office*
Name, Address and	Position(s) Held	and Length of		Principal Occupation(s)
Year of Birth	with Fund	Time Served		During Past Five Years
Scott Glasser CAM 399 Park Avenue New York, NY 10022 Birth Year: 1966	Vice President and Investment Officer		Since 1996	Managing Director of CAM; Investment Officer of SBFM; Co-Director of Research for CAM North America (“CAM NA”)
John G. Goode CAM One Sansome Street, San Francisco, CA 94104 Birth Year: 1944	Vice President and Investment Officer		Since 1993	Managing Director of CAM; Chairman and Chief Investment Officer of Davis Skaggs Investment Management, a division of CAM NA; Investment Officer of SBFM
Martin Hanley CAM 399 Park Avenue New York, NY 10022 Birth Year: 1965	Vice President and Investment Officer		Since 2001	Managing Director of CAM; Investment Officer of SBFM
Michael Kagan CAM 399 Park Avenue New York, NY 10022 Birth Year: 1960	Vice President and Investment Officer		Since 2000	Managing Director of CAM; Investment Officer of SBAM; Co-Director of Research for CAM North America
Yu-Nien Charles Ko, CFA Batterymarch Financial Management, Inc. (“Batterymarch”) 200 Clarendon Street Boston, MA 02116 Birth Year: 1971	Vice President and Investment Officer		Since 2006	Investment Officer of TIMCO since 2006; Senior Portfolio Manager and Co-director of US Investment Team (since 2006); Portfolio Manager (2003-2005); Quantitative Analyst (2000-2003) at Batterymarch
Michael D. Soares Batterymarch 200 Clarendon Street Boston, MA 02116 Birth Year: 1969	Vice President and Investment Officer		Since 2006	Investment Officer of TIMCO since 2006; Portfolio Manager (since 2003); Quantitative Analyst (1998-2003) of Batterymarch
Kevin Caliendo CAM 399 Park Avenue New York, NY 10022 Birth Year: 1970	Vice President and Investment Officer		Since 2003	Managing Director of CAM; Investment Officer of SBAM
Mark J. McAllister CAM 399 Park Avenue, 7th Floor New York, NY 10022 Birth Year: 1962	Vice President and Investment Officer		Since 2005	Managing Director of CAM Investment Officer of SBFM
Michael Sedoy CAM 399 Park Avenue, 4th Floor New York, NY 10022 Birth Year: 1974	Vice President and Investment Officer		Since 2005	Investment Officer of SBFM Vice President of SBAM; prior to November 2002, utilities analyst for Alliance Capital Management

*  Each officer serves until his or her respective successor has been elected and qualified.

46

      For the calendar year ended December 31, 2005, the Trustees beneficially owned equity securities of the funds within the dollar ranges presented in the table below:

			Aggregate Dollar Range of Equity
	Dollar Range of		Securities in All Registered Investment
	Equity Securities Owned		Companies Overseen By Trustee in
Name of Trustee	in Each Series of the Fund		Family of Investment Companies
Independent Trustees
Dwight B. Crane		None	Over $	100,000
Burt N. Dorsett		None		None
Elliott S. Jaffe		None		None
Stephen E. Kaufman		None		None
Cornelius C. Rose, Jr.		None	Over $	100,000
Interested Trustee
R. Jay Gerken		None	Over $	100,000

      As of December 31, 2005, none of the Independent Trustees, or their immediate family members, owned beneficially or of record any securities in any adviser or principal distributors of the Fund, or in a person (other than a registered investment company) directly or indirectly controlling, controlled by, or under common control with any adviser or principal distributor of the Fund.

      The Fund has an Audit Committee and a Nominating Committee. The members of the Audit Committee and the Nominating Committee consist of all the independent trustees, namely Messrs. Crane, Dorsett, Jaffe, Kaufman and Rose.

      In accordance with its written charter adopted by the Board, the Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of each Portfolio. The Audit Committee oversees the scope of each Portfolio’s audits, each Portfolio’s accounting and financial reporting policies and practices and its internal controls. The Audit Committee approves, and recommends to the Board for its ratification, the selection, appointment, retention or termination of each Portfolio’s independent registered public accounting firm and approves the compensation of the independent registered public accounting firm. The Audit Committee also approves all audit and permissible non-audit services provided to each Portfolio by the independent registered public accounting firm and all permissible non-audit services provided by each Portfolio’s independent registered public accounting firm to SBFM and any affiliated service providers if the engagement relates directly to a Portfolio’s operations and financial reporting. During the most recent fiscal year, the Audit Committee met two times.

      The Nominating Committee is charged with the duty of making all nominations for Trustees to the Board. The Nominating Committee will consider nominees recommended by a Portfolio’s shareholders when a vacancy becomes available. Shareholders who wish to recommend a nominee should send nominations to the Fund’s Secretary. The Nominating Committee did not meet time during the Fund’s most recent fiscal year.

      The Fund also has a Pricing Committee composed of the Chairman of the Board and one independent trustee, which is charged with determining the fair value prices for securities when required. The Pricing Committee met six times during the Fund’s most recent fiscal year.

      No employee of CAM or any of its affiliates receives any compensation from the Trust for acting as a Trustee or officer of a portfolio. Each Independent Trustee receives an annual retainer of $50,000 for services as Director. Mr. Crane receives an additional annual fee of $10,000 for his services as lead Trustee. In addition, each Independent Trustee receives fees of $5,500 for each in-person and $100 for each telephonic meeting of the Board attended by the independent Trustee. The annual retainer and meeting fees are allocated among the funds for which each Independent Trustee serves on the basis of their average net assets. In addition, each Independent Trustee is reimbursed for expenses incurred in connection with attendance at Board meetings. For the fiscal year ended December 31, 2005, such expenses totaled $20,519.

47

      The following table shows the compensation paid by each portfolio during the fiscal year ended December 31, 2005 and other CAM Mutual Funds for the calendar year ended December 31, 2005 to each trustee during the Fund’s last fiscal year. The Fund does not pay retirement benefits to its trustees and officers.

Aggregate Compensation From Fund†

Independent Trustees	EI(1)		VG&I(2)		IHG(3)		MM(4)		ACV(5)
Dwight B. Crane	$	6,818	$	129	$	91	$	60	$	72
Burt N. Dorsett	$	4,731	$	69	$	14	$	10	$	17
Elliot S. Jaffe	$	5,165	$	68	$	25	$	20	$	29
Stephen E. Kaufman	$	5,582	$	80	$	35	$	30	$	39
Cornelius C. Rose, Jr.	$	5,994	$	73	$	25	$	30	$	30
Interested Trustee
R. Jay Gerken	$	0	$	0	$	0	$	0	$	0

Aggregate Compensation From Fund†

Independent Trustees	APP(6)		VEG(7)		FV(8)		DSIP(9)		SBVIE(10)		C&I(11)
Dwight B. Crane	$	3,679	$	279	$	3,670	$	482	$	67	$	96
Burt N. Dorsett	$	2,544	$	176	$	2,543	$	314	$	14	$	79
Elliot S. Jaffe	$	2,769	$	180	$	2,766	$	337	$	25	$	68
Stephen E. Kaufman	$	2,999	$	204	$	2,995	$	371	$	35	$	74
Cornelius C. Rose, Jr.	$	3,216	$	206	$	3,207	$	385	$	26	$	80
Interested Trustee
R. Jay Gerken	$	0	$	0	$	0	$	0	$	0	$	0

(1)	EI — Equity Index Portfolio
(2)	VG&I — Growth & Income Portfolio
(3)	IHG — Intermediate High Grade Portfolio; the Portfolio was liquidated on September 16, 2005.
(4)	MM — Salomon Brothers Variable Money Market Fund; On July 8, 2005, pursuant to a plan of reorganization, the Portfolio’s assets and certain liabilities were acquired by Smith Barney Money Market Portfolio, a series of Travelers Series Fund, Inc.
(5)	VACV — Salomon Brothers Variable All Cap Value Fund; On July 8, 2005, pursuant to a plan of reorganization, the Portfolio’s assets and certain liabilities were acquired by Fundamental Value Portfolio, a series of the Fund.
(6)	APP — Appreciation Portfolio
(7)	VEG — Aggressive Growth Portfolio
(8)	FV — Fundamental Value Portfolio
(9)	DSIP — Diversified Strategic Income Portfolio

(10)	VIE — Salomon Brothers Variable International Equity Fund; On July 8, 2005, pursuant to a plan of reorganization, the Portfolio’s assets and certain liabilities were acquired by Smith Barney International All Cap Growth Portfolio, a series of Travelers Series Fund, Inc.
(11)	C&I — Capital and Income Portfolio.

48

	Pension or				Number of
	Retirement		Compensation		Funds for
	Benefits Accrued		from Fund and		Which Trustee
	as Part of Fund		Fund Complex		Serves Within
Independent Trustees	Expenses		Paid to Trustees		Fund Complex
Dwight B. Crane(1)	$	0	$	233,300		46
Burt N. Dorsett	$	0	$	64,600		24
Elliot S. Jaffe	$	0	$	70,000		24
Stephen E. Kaufman	$	0	$	150,200		47
Cornelius C. Rose, Jr.	$	0	$	81,000		24
Interested Trustee
R. Jay Gerken	$	0		N/A		180

(1)  Designates the lead Trustee.

†  Pursuant to a deferred compensation plan, Burt N. Dorsett has elected to defer payment of the following amount of his compensation from the Fund: $2,112.

      At the end of the year in which they attain age 80, Trustees are required to change to emeritus status. Trustees emeritus are entitled to serve in emeritus status for a maximum of 10 years, during which time they are paid 50% of the annual retainer fee and meeting fees otherwise applicable to Trustees, together with reasonable out-of-pocket expenses for each meeting attended. Trustees emeritus may attend meetings but have no voting rights. During the Fund’s last fiscal year, aggregate compensation paid to trustees emeritus was $13,721.

      The Fund has adopted an unfunded, non-qualified deferred compensation plan (the “Plan”) which allows independent trustees to defer the receipt of all or a portion of the trustees fees earned until a later date specified by the independent trustees. The deferred fees earn a return based on notional investments selected by the independent trustees. The balance of the deferred fees payable may change depending upon the investment performance. Any gains or losses incurred in the deferred balances are reported in the statement of operations under “trustees’ fees.” Under the Plan, deferred fees are considered a general obligation of the Fund and any payments made pursuant to the Plan will be made from the Fund’s general assets. As of December 31, 2005, the Fund has accrued $18,149 as deferred compensation.

      As of April 17, 2006, the Trustees and officers as a group owned less than 1% of the outstanding common stock of the Fund. To the best knowledge of the Trustees, as of April 17, 2006, the following shareholders or “groups” (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) owned beneficially or of record more than 5% of the shares of the following Portfolios:

Shareholder	Shares Held		Percent Ownership
Equity Index Portfolio — Class I
Travelers Life & Annuity Company*		28,851,874.607		61.7827
Attn: Shareholder Accounting 6MS PO Box 990027 Hartford, CT 06199
Travelers Insurance Company*		17,675,007.700		37.8488
Attn: Shareholder Accounting 6MS PO Box 990027 Hartford, CT 06199

49

Shareholder	Shares Held		Percent Ownership
Equity Index Portfolio — Class II
Travelers Insurance Company*		4,657,477.187		62.3074
Attn: Shareholder Accounting 6MS PO Box 990027 Hartford, CT 06199
Travelers Life & Annuity Company*		2,695,823.315		36.0645
Attn: Shareholder Accounting 6MS PO Box 990027 Hartford, CT 06199
Capital and Income Portfolio
Travelers Life & Annuity Company*		2,636,863.028		57.6545
Attn: Shareholder Accounting 6MS PO Box 990027 Hartford, CT 06199
Travelers Insurance Company*		1,842,894.074		40.2945
Attn: Shareholder Accounting 6MS PO Box 990027 Hartford, CT 06199
Fundamental Value Portfolio
Travelers Life & Annuity Company*		27,180,581.594		64.0832
Attn: Shareholder Accounting 6MS PO Box 990027 Hartford, CT 06199
Travelers Insurance Company*		14,602,612.767		34.4283
Attn: Shareholder Accounting 6MS PO Box 990027 Hartford, CT 06199

*  Each Portfolio believes that these entities are not the beneficial owners of shares held of record by them.

Investment Managers, Sub-Investment Adviser and Administrator

      SBFM serves as manager to Variable Appreciation Portfolio, Variable Capital and Income Portfolio, Variable Diversified Strategic Income Portfolio and Variable Fundamental Value Portfolio pursuant to an investment management agreement (the “Management Agreement”). Each agreement was most recently approved by the Board of Trustees, including a majority of the Independent Trustees, on August 1, 2005 and by each Portfolio’s shareholders on November 15, 2005. The Management Agreements became effective on December 1, 2005 as a result of the sale of substantially all of Citigroup’s asset management business to Legg Mason. SBFM is an indirect wholly-owned subsidiary of Legg Mason. Prior to December 1, 2005, SBFM was an indirect wholly-owned subsidiary of Citigroup. CAM Ltd serves as sub-adviser to Variable Diversified Strategic Income Portfolio pursuant to a Sub-Advisory Agreement.

      SaBAM serves as manager to Variable Aggressive Growth Portfolio and Variable Growth & Income Portfolio. SaBAM is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and is located at 399 Park Avenue, New York, New York 10022. SaBAM was organized as a Delaware corporation in 1987. SaBAM is also an indirect wholly-owned subsidiary of Legg Mason. As of December 31, 2005, SaBAM rendered investment advice to investment companies that had aggregate assets under management of approximately $79 billion.

      TIMCO serves as investment adviser to the Variable Equity Index Portfolio. TIMCO is an indirect wholly-owned subsidiary of Legg Mason. TIMCO is registered as an investment adviser with the SEC under

50

the Advisers Act and is located at 100 First Stamford Place, Stamford, Connecticut 06902. TIMCO was organized as a Connecticut corporation in 1967. As of December 31, 2005, TIMCO rendered investment advice to investment companies that had aggregate assets under management in excess of $4 billion.

      CAM Ltd, sub-adviser to Variable Diversified Strategic Income Portfolio, also is an indirect wholly-owned subsidiary of Legg Mason. CAM Ltd. is registered as an investment adviser with the SEC under the Advisers Act and is located at Citigroup Centre, Canada Square, Canary Wharf, London, England E14 SLB. CAM Ltd. was organized as a corporation in England and Wales. As of December 31, 2005, CAM Ltd. rendered investment advice to investment companies that had aggregate assets under management in excess of $23 billion.

      SBFM (through its predecessor entities) has been in the investment counseling business since 1968 and renders investment management services to a wide variety of individual, institutional and investment company clients that had aggregate assets under management as of December 31, 2005 of approximately $106 billion. Legg Mason, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202, is a financial services holding company. As of December 31, 2005, Legg Mason’s asset management operation had aggregate assets under management of approximately $850 billion.

      Under each Management Agreement, and subject to the supervision and direction of the Board, the manager manages each Portfolio in accordance with its stated investment objective and policies, makes investment decisions for the Portfolio and places orders to purchase and sell securities. The manager also performs administrative and management services necessary for the operation of each Portfolio, such as (i) supervising the overall administration of the Portfolio, including negotiation of contracts and fees with and the monitoring of performance and billings of the Fund’s transfer agent, shareholder servicing agents, custodian and other independent contractors or agents; (ii) providing certain compliance, fund accounting, regulatory reporting, and tax reporting services; (iii) preparing or participating in the preparation of Board materials, registration statements, proxy statements and reports and other communications to shareholders; (iv) maintaining the Fund’s existence, and (v) maintaining the registration and qualification of the Fund’s shares under federal and state laws.

      The Management Agreements have an initial term of two years and will continue in effect with respect to each Portfolio from year to year thereafter provided such continuance is specifically approved at least annually (a) by the Fund’s Board or by a majority of the outstanding voting securities of the Portfolio (as defined in the 1940 Act), and in either event, by a majority of the Independent Trustees with such Independent Trustees casting votes in person at a meeting called for such purpose. The Portfolio or SBFM may terminate each Management Agreement on 60 days’ written notice without penalty. Each Management Agreement will terminate automatically in the event of assignment (as defined in the 1940 Act).

      Each Portfolio bears expenses incurred in its operations, including: taxes, interest, brokerage fees and commissions, if any; fees of independent trustees; SEC fees and state Blue Sky qualification fees; charges of custodians; transfer and dividend disbursing agent fees, certain insurance premiums; outside auditing and legal expenses; costs of maintaining corporate existence; costs of investor services (including allocated telephone and personnel expenses); costs of preparing and printing of prospectuses for regulatory purposes and for distribution to existing shareholders; costs of shareholders’ reports and shareholder meetings; and meetings of the officers or Board. Each Portfolio’s prospectus contains more information about the expenses of the Portfolio.

      Prior to October 1, 2005 and December 1, 2005 (as indicated below), the Portfolios paid their respective advisers an investment advisory fee calculated at an annual rate of the Portfolio’s average daily net assets. These fees were calculated daily and paid monthly as follows:

Diversified Strategic Income Portfolio (prior to 10/1/05) 0.45 %

51

      The Portfolios paid their respective advisers according to the following breakpoint schedule for each Portfolio, as follows:

	Investment
	Advisory			Administration
Average Daily Net Assets	Fee Rate			Fee Rate
Appreciation Portfolio (prior to 12/1/05)
Up to $250 million		0.550	%		0.200	%
Next $250 million		0.513			0.187
Next $500 million		0.476			0.174
Next $1 billion		0.439			0.161
Next $1 billion		0.402			0.148
Over $3 billion		0.365			0.135
Fundamental Value Portfolio (prior to 12/1/05)
Up to $1.5 billion		0.550	%		0.200	%
Next $0.5 billion		0.500			0.200
Next $0.5 billion		0.490			0.160
Next $1 billion		0.460			0.140
Over $3.5 billion		0.380			0.120

          Growth & Income Portfolio (prior to 12/1/05)

	Advisory Fee
Average Net Assets	Rate
First $1 billion		0.450	%
Next $1 billion		0.425
Next $1 billion		0.400
Next $1 billion		0.375
Over $4 billion		0.350

          Aggressive Growth Portfolio (prior to 10/1/05)

	Advisory Fee
Average Net Assets	Rate
First $5 billion		0.600	%
Next $2.5 billion		0.575
Next $2.5 billion		0.550
Over $10 billion		0.500

      CAM Ltd., as sub-adviser to the Diversified Strategic Income Portfolio is paid a fee by SBFM at a rate of 0.15.

      Effective October 1, 2005 and December 1, 2005, as indicated below, the Portfolios pay their respective advisers an investment advisory fee calculated at an annual rate of the portfolio’s average daily net assets. These fees are calculated daily and paid monthly as follows:

Capital and Income Portfolio (Effective prior to and after 12/1/05)	0.75	%
Equity Index Portfolio (Effective prior to and after 12/1/05)	0.25	%

52

      The Portfolios pay their respective advisers according to the following breakpoint schedule for each Portfolio, as follows:

	Investment
	Management
Average Daily Net Assets	Fee Rate
Appreciation Portfolio (Effective 12/1/05)
Up to $250 million		0.750	%
Next $250 million		0.700
Next $500 million		0.650
Next $1 billion		0.600
Next $1 billion		0.550
Over $3 billion		0.500
Fundamental Value Portfolio (Effective 12/1/05)
Up to $1.5 billion		0.750	%
Next $0.5 billion		0.700
Next $0.5 billion		0.650
Next $1 billion		0.600
Over $3.5 billion		0.500

          Growth & Income Portfolio (Effective 12/1/05)

	Investment
	Management
Average Net Assets	Fee Rate
First $1 billion		0.650	%
Next $1 billion		0.600
Next $1 billion		0.550
Next $1 billion		0.500
Over $4 billion		0.450

          Aggressive Growth Portfolio (Effective 12/1/05)

	Investment
	Management
Average Net Assets	Fee Rate
First $1 billion		0.750	%
Next $1 billion		0.725
Next $3 billion		0.700
Next $5 billion		0.675
Over $10 billion		0.650

          Diversified Strategic Income Portfolio (Effective 12/1/05)

	Investment
	Management
Average Net Assets	Fee Rate
First $1 billion		0.650	%
Next $1 billion		0.625
Next $3 billion		0.600
Next $5 billion		0.575
Over $10 billion		0.550

      CAM Ltd., as sub-adviser to the Diversified Strategic Income Portfolio is paid a fee by SBFM.

53

      Each adviser and the sub-adviser pay the salaries of all officers and employees who are employed by both it and the Fund, maintains office facilities for the Fund and bears all expenses in connection with the performance of their respective services under their advisory agreements or the sub-advisory agreement with the Fund.

      The Portfolios paid or incurred the following investment advisory fees for the fiscal years ended December 31, 2005, 2004 and 2003 to their respective adviser:

Portfolio	Adviser		12/31/05		12/31/04		12/31/03
Appreciation Portfolio		SBFM	$	4,628,015	$	4,147,336	$	3,347,145
Capital and Income Portfolio*		SBFM		130,054		N/A		N/A
Diversified Strategic Income Portfolio		SBFM		443,690		437,192		35,827
Aggressive Growth Portfolio		SaBAM		312,648		188,355		70,617
Equity Index Portfolio		TIMCO		4,125,841		3,679,362		276,677
Growth & Income Portfolio		SaBAM		52,282		47,422		35,080
Fundamental Value Portfolio		SBFM		4,970,588		4,417,856		3,085,522

*  The Capital and Income Portfolio commenced operations on May 3, 2005. The manager waived $24,707 for the fiscal year ended December 31, 2005.

Administrator

      SBFM serves as administrator to Equity Index Portfolio, pursuant to a separate written agreement with each Portfolio (the “Administration Agreement”). The Administration Agreement was approved by the Board, including a majority of the independent trustees.

      As administrator, SBFM pays the salaries of all officers and employees who are employed by both it and the Fund; maintains office facilities for the Fund; furnishes the Fund with statistical and research data, clerical help, accounting, data processing, bookkeeping, internal auditing and legal services and certain other services required by the Fund; prepares reports to the Fund’s shareholders and prepares tax returns, reports to and filings with the SEC and state blue sky authorities. SBFM bears all expenses in connection with the performance of its services.

      Prior to December 1, 2005, SBFM, as administrator of the Portfolios, was paid a fee at the annual percentage of 0.20% of the value of each Portfolio’s average net assets, except with respect to the Equity Index Portfolio, for which it is still paid a fee at an annual percentage of 0.06% of the value of the Portfolio’s average net assets.

      The Portfolios incurred the following administration fees for the years ended December 31, 2005, 2004 and 2003:

Portfolio	Administrator		12/31/05		12/31/04		12/31/03
Appreciation Portfolio		SBFM	$	1,492,534	$	1,509,728	$	1,217,144
Capital and Income Portfolio*		SBFM		N/A		N/A		N/A
Diversified Strategic Income Portfolio		SBFM		175,198		194,307		171,626
Aggressive Growth Portfolio		SBFM		86,456		55,964		18,831
Equity Index Portfolio		SBFM		990,202		883,047		653,422
Growth & Income Portfolio		SBFM		20,461		21,077		15,591
Fundamental Value Portfolio		SBFM		1,598,433		1,606,493		1,217,144

*  Capital and Income Portfolio commenced operations on April 30, 2005.

54

      Distribution Arrangements for the Equity Index Portfolio, Aggressive Growth Portfolio and Growth &
Income Portfolio

      The fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act for the Class II shares of the Equity Index Portfolio, Aggressive Growth Portfolio and Growth & Income Portfolio (the “Plan”). Pursuant to the Plan, each Portfolio pays CGMI (for remittance to a Participating Insurance Company) for various costs incurred or paid by such company in connection with the distribution of Class II shares of each portfolio. Depending on the Participating Insurance Company’s corporate structure and applicable state law, CGMI may remit payments to the Participating Insurance Company’s affiliated broker-dealer or other affiliated company rather than the Participating Insurance Company itself.

      The Plan provides that the Trust, on behalf of each Portfolio, shall pay CGMI a fee of up to 0.25% of the average daily net assets of the portfolio attributable to the Class II shares. Under the terms of the Plan, the Fund is authorized to make payments quarterly to CGMI for remittance to a Participating Insurance Company, in order to pay or reimburse such Participating Insurance Company for distribution expenses incurred or paid by such Participating Insurance Company.

      The total distribution fees paid by Class II shares of Equity Index Portfolio for the fiscal years ended December 31, 2005, 2004 and 2003, were $578,430, $460,311 and $258,554, respectively. The total distribution fees paid by Class II Shares of Aggressive Growth Portfolio for the fiscal year ended December 31, 2005 was $59,904. The Class II Shares of the Aggressive Growth Portfolio and Growth & Income Portfolio commenced operations on August 30, 2003.

      For the fiscal year ended December 31, 2005, CGMI incurred distribution expenses for the following: advertising, printing and mailing prospectuses, support services and overhead expenses to Smith Barney Financial Advisors and accruals for interest on the excess of CGMI expenses incurred in the distribution of the Equity Index Portfolio Class II and Aggressive Growth Portfolio shares over the distribution fees received by CGMI set out in the following table:

	Financial
	Advisor		Branch		Advertising		Printing		Total
	Compensation		Expenses		Expenses		Expenses		Expenses
Aggressive Growth Portfolio	$	0	$	0	$	43,589	$	0	$	43,589
Equity Index Portfolio	$	146,984	$	0	$	232,381	$	0	$	379,365

      For the period from December 1, 2005 through December 31, 2005, LMIS incurred the following distribution expenses for the fund. Distribution expenses included compensation of Service Agents, printing costs of prospectuses and marketing materials.

			Marketing		Printing
			&		of		Branch		Service
Fund			Advertising		Prospectuses		Expenses		Agents
Aggressive Growth Portfolio	$	10,763	$	0	$	0	$	0	$	10,763
Equity Index Portfolio	$	2,277	$	0	$	0	$	145,110	$	147,387

      Expenses payable pursuant to the Plan may include, but are not necessarily limited to: (a) the printing and mailing of fund prospectuses, statements of additional information, any supplements thereto and shareholder reports for existing and prospective Contract owners; (b) those relating to the development, preparation, printing and mailing of fund advertisements, sales literature and other promotional materials describing and/or relating to the fund and including materials intended for use within the Participating Insurance Company, or for broker-dealer only use or retail use; (c) holding seminars and sales meetings designed to promote the distribution of fund shares; (d) obtaining information and providing explanations to Contract owners regarding Portfolio investment objectives and policies and other information about the Fund and its Portfolios, including the performance of the Portfolios; (e) training sales personnel regarding the Portfolio; (f) compensating sales personnel in connection with the allocation of cash values and premiums of the Contracts to the Fund; (g) personal service and/or maintenance of Contract owner accounts with respect

55

to Fund shares attributable to such accounts; and (h) financing any other activity that the Board of Trustees determines is primarily intended to result in the sale of shares.

Expenses

      In addition to amounts payable under the Management, Administration Agreement and the Distribution Plans, the fund is responsible for its own expenses, including, among other things, the costs of securities transactions, the compensation of independent directors, government fees, taxes, accounting and legal fees, expenses of communication with shareholders, interest expense, and insurance premiums. The Portfolio’s prospectus contains more information about the expenses of the Portfolio.

Code of Ethics

      Pursuant to Rule 17j-1 under the 1940 Act, the Fund, its advisers, sub-adviser 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 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 codes of ethics of the Fund, its advisers, sub-adviser and distributor are on file with the SEC.

Proxy Voting Guidelines and Procedures

      The Board of Trustees has approved delegating proxy voting discretion of each Portfolio to the respective adviser and/or subadviser believing that the adviser and/or subadviser should be responsible for voting because it is a matter relating to the investment decision-making process.

      Attached as Appendix A and Appendix B is the summary of the guidelines and procedures that the respective adviser uses to determine how to vote proxies relating to portfolio securities, including the procedures that the adviser uses when a vote presents a conflict between the interests of Portfolio shareholders, on the one hand, and those of the adviser or any affiliated person of the Portfolio or the adviser, on the other.

      Non-equity securities, such as debt obligations and money market instruments are not usually considered to be voting securities, and proxy voting, if any, is typically limited to the solicitation of consents to changes in or waivers of features of debt securities, or plans of reorganization involving the issuer of the security. In the rare event that proxies are solicited with respect to any of these securities, the adviser would vote the proxy in accordance with the principals set forth in the its proxy voting policies and procedure, including the procedures used when a vote presents a conflict between the interests of Portfolio shareholders, on the one hand, and those of the manager or any affiliated person of the Portfolio, the adviser, on the other.

      This summary of the guidelines gives a general indication as to how the adviser will vote proxies relating to portfolio securities on each issue listed. However, the guidelines do not address all potential voting issues or the intricacies that may surround individual proxy votes. For that reason, there may be instances in which votes may vary from the guidelines presented. Notwithstanding the foregoing, the adviser always endeavors to vote proxies relating to portfolio securities in accordance with the Portfolio’s investment objectives.

      Information on how the Portfolio voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the policies and procedures that a Portfolio uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the fund’s website at http://LeggMason.com/InvestorServices and (3) on the SEC’s website at http://www.sec.gov.

Independent Registered Public Accounting Firm

      KPMG LLP independent registered public accounting firm, located at 345 Park Avenue, New York, New York 10154, have been selected as the Fund’s independent registered public accounting firm to audit

56

report on each Portfolio’s financial statements and financial highlights for the fiscal year ending December 31, 2006.

Counsel

      Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York 10019, serves as counsel to the Fund and each Portfolio.

      Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038 serves as counsel to the Independent Trustees.

PURCHASE AND REDEMPTION OF SHARES

Purchase of Shares

      The Fund offers its shares of beneficial interest on a continuous basis. Shares can be acquired only by buying a contract from a life insurance company (the “Contract”) designated by the Fund and directing the allocation of part or all of the net purchase payment to one or more of ten subaccounts, each of which invests in a Portfolio as permitted under the Contract prospectus (the “Subaccount”). Investors should read this SAI and the Portfolio’s prospectus dated May 1, 2006 along with the Contract prospectus.

      Share certificates for a Portfolio will no longer be issued. If you currently hold shares of a Portfolio, such certificates will continue to be honored.

Sales Charges and Surrender Charges

      The Fund does not assess any sales charge, either when it sells or when it redeems shares of a Portfolio. Surrender charges may be assessed under the Contract, as described in the Contract prospectus. Mortality and expense risk fees and other charges are also described in that prospectus. Shares of the Fund are currently offered exclusively to Contract owners.

      On January 15, 1999, the existing shares of the Equity Index Portfolio were redesignated as Class I shares. On August 30, 2002, the existing shares of the Aggressive Growth Portfolio and Growth & Income Portfolio were redesignated as Class I shares. Each Portfolio created a separate class of shares designated as Class II shares. Class II shares are sold without an initial sales charge, but are subject to an annual distribution fee of 0.25% of the daily net assets of the Class. Surrender charges that may be assessed under the Contract are described in the Contract prospectus.

Dividends and Distributions

      Net Investment Income. Dividends and distributions will be automatically reinvested, without a sales charge, in the shareholder’s account at net asset value in additional shares of the Portfolio that paid the dividend or distribution, unless the shareholder instructs the Portfolio to pay all dividends and distributions in cash. Net investment income, including dividends on stocks and interest on bonds or other securities the Portfolio holds, is distributed to the shareholders of the Portfolios as follows:

•  annually for the Appreciation Portfolio, Capital and Income Portfolio, Diversified Strategic Income Portfolio, Aggressive Growth Portfolio, Equity Index Portfolio, Growth & Income Portfolio and Fundamental Value Portfolio.

      Capital Gains. Distributions of any net realized capital gains of the Portfolios will be paid annually shortly after the close of the fiscal year in which they are earned.

57

Taxes

General

      The following is a summary of certain material U.S. federal income tax considerations related to the Portfolios and their shareholders. This summary does not address all of the potential federal income tax consequences that may be applicable to the Portfolios or to their shareholders. Each prospective shareholder is urged to consult his own tax adviser with respect to the specific federal, state, local and foreign tax consequences of investing in the Portfolios. The summary is based on the laws in effect on the date of this SAI and existing judicial and administrative interpretations thereof, all of which are subject to change, possibly with retroactive effect.

      Each Portfolio will be treated as a separate taxpayer for federal income tax purposes with the result that: (a) each Portfolio must qualify separately as a regulated investment company; and (b) the amounts of investment income and capital gains earned will be determined on a Portfolio-by-Portfolio (rather than on a Fund-wide) basis.

Regulated Investment Company Status

      The Fund intends that each Portfolio will continue to qualify separately each year as a “regulated investment company” under Subchapter M of the Code. A qualified Portfolio will not be liable for federal income taxes to the extent its taxable net investment income and net realized capital gains are distributed to its shareholders, provided each Portfolio distributes at least 90% of its net investment income and any excess of its net short-term capital gain over its net long-term capital loss each year.

      On December 31, 2005, the unused capital loss carryovers, by Portfolio, were approximately as follows: Appreciation Portfolio, $8,989,439, Fundamental Value Portfolio, $958,340, Equity Index Portfolio, $7,879,130, Growth & Income Portfolio, $625,649, Aggressive Growth Portfolio, $579,590 and Diversified Strategic Income Portfolio, $7,111,968. For federal income tax purposes, these amounts are available to be applied against future capital gains of the Portfolio that has the carryovers, if any, that are realized prior to the expiration of the applicable carryover. The carryovers expire as follows:

	December 31,
Fund	2005		2006		2007		2008		2009		2010		2011
	(In thousands)
Equity Index Portfolio		—		—		—	$	—	$	—	$	7,879		—
Diversified Strategic Income Portfolio		—		—		—	$	449	$	4,544	$	2,119		—
Appreciation Portfolio		—		—		—		—		—	$	1,677	$	7,312
Fundamental Value Portfolio		—		—		—		—	$	767	$	192		—
Growth & Income Portfolio		—		—		—		—		—		—	$	626
Aggressive Growth Portfolio		—		—		—		—		—	$	578		—

      For federal income tax purposes each Portfolio intends to accrue dividend income 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.

      At least annually, each Portfolio intends to declare and make distributions of substantially all of its taxable income and net taxable capital gains to its shareowners. 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.

      If, in any taxable year, a Portfolio fails to qualify as a regulated investment company under the Code or fails to meet the distribution requirement, it would be taxed in the same manner as an ordinary corporation and distributions to its shareholders would not be deductible by the Portfolio in computing its taxable income.

58

If a Portfolio fails to qualify as a regulated investment company in any year, it must pay out its earnings and profits accumulated in that year in order to qualify again as a regulated investment company. In addition, if a Portfolio failed to quality as a regulated investment company for a period greater than one taxable year, it may be required to recognize any net built-in gains (the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized if it had been liquidated) with respect to certain of its assets in order to qualify as a regulated investment company in a subsequent year.

Segregated Asset Account

      The Fund 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 may not invest more than certain specified percentages of its assets in the securities of any one, two, three or four issuers. However, certain increases are made to the percentage limitations to the extent of investments in United States Treasury obligations. For these purposes, all obligations of the United States Treasury and each agency or instrumentality of the Federal Government 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 or life insurance contracts allocating any amount of premiums to such Subaccount will not qualify as annuities or life insurance contracts for federal income tax purposes and the holders of such annuities or life insurance contracts would be taxed on their respective shares of the income and gains earned by the Subaccount during the period of disqualification.

      The fund 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. In particular, the ability of the Money Market and Intermediate High Grade Portfolios to invest in U.S. government securities other than direct United States Treasury obligations may be materially limited by these diversification requirements.

Organization of the Fund

      The Fund was organized as a business trust under the laws of the Commonwealth of Massachusetts pursuant to the Trust Agreement. The Fund commenced operations on October 16, 1991, under the name Shearson Series Fund. On July 30, 1993, October 14, 1994 and July 24, 1997, the Fund changed its name to Smith Barney Shearson Series Fund, Smith Barney Series Fund, and Greenwich Street Series Fund, respectively. On May 1, 2006, the Fund changed its name to Legg Mason Partners Variable Portfolios II.

      In the interest of economy and convenience, certificates representing shares in the Fund are not physically issued. The transfer agent maintains a record of each shareholder’s ownership of Fund shares. Shares do not have cumulative voting rights, which means that holders of more than 50% of the shares voting for the election of Trustees can elect all of the Trustees. Shares are transferable but have no preemptive, conversion or subscription rights. Annuity owners generally vote by Portfolio, except with respect to the election of Trustees and the selection of independent public accountants. The variable account will vote the shares of the Fund held by the variable account at regular and special meetings of the shareholders of the various portfolios in accordance with instructions received from the owners of a variable annuity contract or a certificate evidencing interest in a Contract, offered by certain insurance companies designated by the Fund, having a voting interest in the relevant subaccount (the “Subaccount”). For a discussion of the rights of Contract owners concerning the voting of shares, please refer to the Contract prospectus.

      The Fund offers shares of beneficial interest of separate series with a par value of $.001 per share. Shares of ten series have been authorized, which represent the interests in the seven Portfolios described in the prospectus and this SAI. When matters are submitted for shareholder vote, shareholders of each Portfolio will have one vote for each full share owned and proportionate, fractional votes for fractional shares held.

59

      The participating life insurance company sends a semi-annual report and an audited annual report to each owner of a Contract, each of which includes a list of the investment securities held by the Portfolios at the end of the period covered. Contract owners may make inquiries regarding the Fund and its Portfolios, including the current performance of the Portfolios, to a representative of a participating life insurance company or their Service Agent.

      There will 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. Under the 1940 Act, shareholders of record of no less than two-thirds of the outstanding shares of the Fund may remove a Trustee through a declaration in writing or by vote cast in person or by proxy at a meeting called for that purpose.

      Massachusetts law provides that shareholders could, under certain circumstances, be held personally liable for the obligations of the Fund. However, the Trust Agreement disclaims shareholder liability for acts or obligations of the Fund and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Fund or a Trustee. The Trust Agreement provides for indemnification from the Fund’s property for all losses and expenses of any shareholder held personally liable for the obligations of the Fund. Thus, the risk of a Contract owner incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund would be unable to meet its obligations, a possibility that the Fund’s management believes is remote. Upon payment of any liability incurred by the Fund, the shareholder paying the liability will be entitled to reimbursement from the general assets of the Fund. The Trustees intend to conduct the operations of the Fund in such a way so as to avoid, as far as possible, ultimate liability of the shareholders for liabilities of the Fund.

Custodian and Transfer Agent

      State Street Bank and Trust Company, located at 225 Franklin Street, Boston, Massachusetts 02110, serves as custodian for each Portfolio. The fund has entered into a Custodian and a Fund Accounting Agreement with State Street, pursuant to which custodial and fund accounting services, respectively, are provided for each Portfolio. Among other things, State Street calculates the daily net asset value for each Portfolio. Securities may be held for a Portfolio by a sub-custodian bank approved by the Fund’s Trustees.

      PFPC, located at P.O. Box 9699, Providence, RI 02940-9699, serves as the Fund’s transfer agent. Under the transfer agency agreement, the transfer agent maintains the shareholder account records for the Fund, handles certain communications between shareholders and the Fund and distributes dividends and distributions payable by the Fund. For these services, the transfer agent receives a monthly fee computed on the basis of the number of shareholder accounts it maintains for the each Portfolio of the Fund during the month, and is reimbursed for out-of-pocket expenses.

Additional Information

      Annual and Semi-Annual Reports. The Fund sends its shareholders a semi-annual report and an audited annual report, which include listings of investment securities held by each Portfolio at the end of the period covered. In an effort to reduce the Funds’ printing and mailing costs, the Fund consolidates the mailing of its semi-annual and annual reports by household. This consolidation means that a household having multiple accounts with the identical address of record will receive a single copy of each report. In addition, each Portfolio also consolidates the mailing of its prospectus so that a shareholder having multiple accounts will receive a single prospectus annually.

      Shareholders who do not want this consolidation to apply to their accounts should contact their Service Agent or the transfer agent.

      Licensing Agreement. Under a licensing agreement between Citigroup and Legg Mason, the names of the Fund and Portfolios, the names of any classes of shares of the Portfolios, and the names of the Portfolios’ manager, subadviser, as well as all logos, trademarks and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason and by the funds. Citi Marks include, but are not limited to, “Smith Barney,” “Citi,” and “Citigroup Asset Management.” Legg Mason and its affiliates, as well

60

as the manager, are not affiliated with Citigroup. All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement.

Legal Matters

      Beginning in June 2004, class action lawsuits alleging violations of the federal securities laws were filed against CGMI, SBFM and SBAM (collectively, 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 CGMI 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 CGMI 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, CAM believes the Funds have significant defenses to such allegations, which the Funds intend to vigorously assert in responding to the Complaint.

      It is possible that additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief could be filed against the Defendants in the future.

      As of the date above, CAM 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.

      Recent Developments. On May 31, 2005, the SEC issued an order in connection with the settlement of an administrative proceeding against SBFM and CGMI relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).

      The SEC order finds that SBFM and CGMI willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGMI knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that CAM, the Citigroup business unit that, at the time, included each fund’s manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGMI. The order also finds that SBFM and CGMI willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGMI do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

      The SEC censured SBFM and CGMI and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of

61

$80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan prepared and submitted for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.

      The order required SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGMI would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Company’s Board selected a new transfer agent for the Fund. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

      At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.

      On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason.

      Additional Developments. The funds have received information concerning SBFM as follows:

      On September 16, 2005, the staff of the SEC informed SBFM and SBAM that the staff is considering recommending that the SEC institute administrative proceedings against SBFM and SBAM for alleged violations of Section 19(a) and 34(b) of the 1940 Act (and related Rule 19a-1). The notification is a result of an industry wide inspection by the SEC and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM.

      Although there can be no assurance, SBFM believes that there matters are not likely to have a material adverse effect on the funds or its ability to perform investment management services relating to the funds.

*****

      Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGMI and SBFM (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC described above. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the investment manager for the Smith Barney family of funds, rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses. On October 5, 2005, a motion to consolidate the five actions and subsequently-filed, related action was filed. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future.

      As of the date of this SAI, SBFM believes that 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 SBFM and its affiliates to continue to render services to the Funds under their respective contracts.

Financial Statements

      The Fund’s annual reports for the fiscal year ended December 31, 2005 are incorporated herein by reference in its entirety. The annual reports were filed on March 13, 2006, Accession Numbers 0000950123-06-3025 and 0000950123-06-3011.

62

APPENDIX A

Proxy Voting Policies and Procedures of SBFM, SaBAM and TIMCO

      The following is a brief overview of the Proxy Voting Policies and Procedures (the “Policies”) that CAM has adopted to seek to ensure that CAM votes proxies relating to equity securities in the best interest of clients.

      CAM votes proxies for each client account with respect to which it has been authorized to vote proxies. In voting proxies, CAM is guided by general fiduciary principles and seeks to act prudently and solely in the best interest of clients. CAM attempts to consider all factors that could affect the value of the investment and will vote proxies in the manner that it believes will be consistent with efforts to maximize shareholder values. CAM may utilize an external service provider to provide it with information and/or a recommendation with regard to proxy votes. However, the CAM adviser (business unit) continues to retain responsibility for the proxy vote.

      In the case of a proxy issue for which there is a stated position in the Policies, CAM generally votes in accordance with such stated position. In the case of a proxy issue for which there is a list of factors set forth in the Policies that CAM considers in voting on such issue, CAM votes on a case-by-case basis in accordance with the general principles set forth above and considering such enumerated factors. In the case of a proxy issue for which there is no stated position or list of factors that CAM considers in voting on such issue, CAM votes on a case-by-case basis in accordance with the general principles set forth above. Issues for which there is a stated position set forth in the Policies or for which there is a list of factors set forth in the Policies that CAM considers in voting on such issues fall into a variety of categories, including election of directors, ratification of auditors, proxy and tender offer defenses, capital structure issues, executive and director compensation, mergers and corporate restructurings, and social and environmental issues. The stated position on an issue set forth in the Policies can always be superseded, subject to the duty to act solely in the best interest of the beneficial owners of accounts, by the investment management professionals responsible for the account whose shares are being voted. Issues applicable to a particular industry may cause CAM to abandon a policy that would have otherwise applied to issuers generally. As a result of the independent investment advisory services provided by distinct CAM business units, there may be occasions when different business units or different portfolio managers within the same business unit vote differently on the same issue. A CAM business unit or investment team (e.g. CAM’s Social Awareness Investment team) may adopt proxy voting policies that supplement these policies and procedures. In addition, in the case of Taft-Hartley clients, CAM will comply with a client direction to vote proxies in accordance with Institutional Shareholder Services’ (ISS) PVS Voting Guidelines, which ISS represents to be fully consistent with AFL-CIO guidelines.

¹  Citigroup Asset Management comprises CAM North America, LLC, Salomon Brothers Asset Management Inc, Smith Barney Fund Management LLC, and other affiliated investment advisory firms. On December 1, 2005, Citigroup Inc. (“Citigroup”) sold substantially all of its worldwide asset management business, Citigroup Asset Management, to Legg Mason, Inc. (“Legg Mason”). As part of this transaction, CAM North America, LLC, Salomon Brothers Asset Management Inc and Smith Barney Fund Management LLC became wholly-owned subsidiaries of Legg Mason. Under a licensing agreement between Citigroup and Legg Mason, the names of CAM North America, LLC, Salomon Brothers Asset Management Inc, Smith Barney Fund Management LLC and their affiliated advisory entities, as well as all logos, trademarks, and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason. Citi Marks include, but are not limited to, “Citigroup Asset Management,” “Salomon Brothers Asset Management” and “CAM”. All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement. Legg Mason and its subsidiaries, including CAM North America, LLC, Salomon Brothers Asset Management Inc, and Smith Barney Fund Management LLC are not affiliated with Citigroup.

A-1

      In furtherance of CAM’s goal to vote proxies in the best interest of clients, CAM follows procedures designed to identify and address material conflicts that may arise between CAM’s interest and those of its clients before voting proxies on behalf of such clients. To seek to identify conflicts of interest, CAM periodically notifies CAM employees in writing that they are under an obligation (i) to be aware of the potential for conflicts of interest on the part of CAM with respect to voting proxies on behalf of client accounts both as a result of their personal relationships and due to special circumstances that may arise during the conduct of CAM’s business, and (ii) to bring conflicts of interest of which they become aware to the attention of CAM’s compliance personnel. CAM also maintains and considers a list of significant CAM relationships that could present a conflict of interest for CAM in voting proxies. CAM is also sensitive to the fact that a significant, publicized relationship between an issuer and a non-CAM Legg Mason affiliate might appear to the public to influence the manner in which CAM decides to vote a proxy with respect to such issuer. Absent special circumstances or a significant, publicized non-CAM Legg Mason affiliate relationship that CAM for prudential reasons treats as a potential conflict of interest because such relationship might appear to the public to influence the manner in which CAM decides to vote a proxy, CAM generally takes the position that relationships between a non-CAM Legg Mason affiliate and an issuer (e.g. investment management relationship between an issuer and a non-CAM Legg Mason affiliate) do not present a conflict of interest for CAM in voting proxies with respect to such issuer. Such position is based on the fact that CAM if operated as an independent business unit from other Legg Mason business units as well as on the existence of information barriers between CAM and certain other Legg Mason business units.

      CAM maintains a Proxy Voting Committee to review and address conflicts of interest brought to its attention by CAM compliance personnel. A proxy issue that will be voted in accordance with a stated CAM position on such issue or in accordance with the recommendation of an independent third party is not brought to the attention of the Proxy Voting Committee for a conflict of interest review because CAM’s position is that to the extent a conflict of interest issue exists, it is resolved by voting in accordance with a pre-determined policy or in accordance with the recommendation of an independent third party. With respect to a conflict of interest brought to its attention, the Proxy Voting Committee first determines whether such conflict is likely to influence, or appear to influence, CAM’s decision-making in voting proxies. If it is determined by the Proxy Voting Committee that a conflict of interest is not material, CAM may vote proxies notwithstanding the existence of the conflict.

      If it is determined by the Proxy Voting Committee that a conflict of interest is material, the Proxy Voting Committee is responsible for determining an appropriate method to resolve such conflict of interest before the proxy affected by the conflict of interest is voted. Such determination is based on the particular facts and circumstances, including the importance of the proxy issue and the nature of the conflict of interest.

A-2

APPENDIX B

CITIGROUP ASSET MANAGEMENT¹ (CAM)

LONDON, ENGLAND

Citigroup Centre, Canada Square, Canary Wharf,

London E14 5LB

PROXY VOTING POLICY

REVISED JULY 2003

Accounts for which CAM Votes Proxies

      Citigroup Asset Management London (CAM) votes proxies for each institutional client that has (i) specifically mandated it to vote securities included under a fully discretionary investment management agreement, (ii) United States Registered Investment Company (mutual fund) for which CAM acts as adviser or sub-adviser; and for (iii) each ERISA account where the agreement is either silent as to voting or positively requires the investment manager to vote unless the client specifically reserves the responsibility to vote proxies to the plan trustee or other named fiduciary.

General Guidelines

      In voting proxies, CAM is guided by general fiduciary principles. CAM is to act prudently in the best interests of the beneficial owners of the accounts it manages, and for the exclusive purpose of maintaining or increasing shareholder value. CAM considers relevant factors that could affect the value of the investment and will vote proxies in the manner that it believes will be consistent with efforts to benefit, protect or maximize shareholder value in the particular circumstances.

      CAM does take certain independent advisory services on proxy voting issues. As a result of independent investment or business views, provided by distinct business units, there may be occasions when different business units or portfolios managers within the same business unit vote differently on the same issue.

      CAM has to place reliance on the clients’ custodians as legal owner of securities to notify CAM when a vote is required on a security. Some custodians have delegated this to a third party proxy voting service. CAM is not able to vote proxies direct but will notify the clients’ custodians or the third party vendors of proxy voting decisions to be executed on CAM’s client portfolios.

How CAM Votes

      Generally, CAM divides proxies into non-controversial, controversial, or extraordinary matters. It is CAM’s general policy on non-controversial matters, absent a particular reason, to vote with management’s recommendations. Non-controversial matters are deemed to include, but are not limited to, voting on non-contested directors, company auditors, audited accounts, company fiscal year and annual meeting date proposals.

      For controversial or extraordinary matters, CAM votes on a case-by-case basis. Controversial or extraordinary matters are deemed to include, but are not limited to, voting on proposals of mergers and/or acquisitions, restructuring/recapitalization, and proposals requesting more detailed disclosure of employee compensation, especially if the company does not have a majority outside board, poison pills proposals, take over measures, and dilution of shareholder value.

      For proxies which include social, environmental, or political issues, CAM will normally support management absent a particular reason, provided that this course also supports or benefits shareholders value. If supporting management does not also support or benefit shareholder value, then CAM will vote against management or abstain. CAM does not restrict the type of product or business that companies pursue (such as defense related) nor does CAM seek to impose restrictions by exercising voting rights with whom and where they do business (US Government, South Africa) unless there is a specific prohibition or restriction in

B-1

the Investment Guidelines laid down by the client or a prohibition by operation of law or regulations or unless the items appear unusual or significant.

      The decision maker in CAM on perceived controversial issues will be the Portfolio Manager and/or Analyst. Above all, a vote will be directed in the manner that is believed to best support or benefit shareholder value.

Conflicts of Interest

      In furtherance of CAM’s goal to vote proxies in the best interests of clients, CAM follows procedures designed to identify and address material conflicts that may arise between CAM’s interests and those of its clients before voting proxies on behalf of such clients.

                  1) Procedures for Identifying Conflicts of Interest

      CAM relies on the following to seek to identify conflicts of interest with respect to proxy voting:

      A. CAM employees are under an obligation (i) to be aware of the potential for conflicts of interest on the part of CAM with respect to voting proxies on behalf of client accounts both as a result of their personal relationships and due to special circumstances that may arise during the conduct of CAM’s business, and (ii) to bring conflicts of interest of which they become aware to the attention of CAM Compliance.

      B. As a general matter, CAM takes the position that non-CAM relationships between Citigroup and an issuer (e.g. investment banking or banking) do not present a conflict of interest for CAM in voting proxies with respect of such issuer. Such position is based on the fact that CAM is operated as an independent business unit from other Citigroup business units as well as on the existence of information barriers between CAM and certain other Citigroup business units. Special circumstances, such as contact between CAM and non-CAM personnel, may cause CAM to consider whether non-CAM relationships between Citigroup and an issuer present a conflict of interest for CAM with respect to such issuer. As noted above, CAM employees are under an obligation to be aware of the potential for conflicts of interest in voting proxies and to bring such conflicts of interest, including conflicts of interest which may arise because of such special circumstances (such as an attempt by a Citigroup business unit or Citigroup officer or employee to influence proxy voting by CAM) to the attention of CAM Compliance. Also, CAM is sensitive to the fact that a significant, publicized relationship between an issuer and a non-CAM affiliate might appear to the public to influence the manner in which CAM decides to vote a proxy with respect to such issuer. CAM compliance maintains and makes available to proxy voting personnel an up to date list of issuers with which a Citigroup entity has had a significant, publicized relationship within the past twelve months. Such list is compiled by monitoring major news publications and without any communication between CAM and other Citigroup business units. For prudential reasons, CAM treats such significant, publicized relationships as creating a potential conflict of interest for CAM in voting proxies.

      C. Based on information furnished by CAM employees or maintained by CAM Compliance pursuant to procedures described above, CAM Compliance shall maintain an up to date list of issuers with respect to which CAM has a potential conflict of interest in voting proxies on behalf of client accounts. CAM shall not vote proxies relating to issuers on such list on behalf of client accounts until it has been determined that the conflict of interest is not material or a method for resolving such conflict of interest has been agreed upon and implemented, as described below. An exception applies with respect to a proxy issue that will be voted in accordance with a stated CAM position on such issue.

      Such issues generally are not brought for the specific resolution of the conflict because CAM’s position is that any conflict of interest issues are resolved by voting in accordance with a pre-determined policy.

B-2

              2) Procedures for Assessing Materiality of Conflicts of Interest and for Addressing Material Conflicts of Interest

      A. CAM shall maintain a Proxy Forum to review and address conflicts of interest brought to its attention. The Proxy Forum shall be comprised of such CAM personnel as are designated from time to time by CAM’s European Management Committee, CAM’s General Counsel and CAM’s Chief Compliance Officer.

      B. All conflicts of interest identified pursuant to the procedures outlined above must be brought to the attention of the Proxy Forum by CAM Compliance for resolution. As noted above, a proxy issue that will be voted in accordance with a stated CAM position on such issue generally is not brought to the attention of the Proxy Forum for a conflict of interests review because CAM’s position is that any conflict of interest issues are resolved by voting in accordance with pre-determined policy.

      C. The Proxy Forum shall determine whether a conflict of interest is material. A conflict of interest will be considered material to the extent that it is determined that such conflict is likely to influence, or appear to influence, CAM’s decision-making in voting the proxy. All materiality determinations will be based on an assessment of the particular facts and circumstances.

      D. If it is determined by the Proxy Forum that a conflict of interest is not material, CAM may vote proxies notwithstanding the existence of the conflict.

      E. If it is determined by the Proxy Forum that a conflict of interest is material, the Proxy Forum shall determine an appropriate method to resolve such a conflict of interest before the proxy affected by the conflict of interest is voted. Such determination shall be based on the particular facts and circumstances, including the importance of the proxy issue, the nature of the conflict of interest, etc. Such methods may include:

      i. disclosing the conflict to clients and obtaining their consent before voting;

      ii. suggesting to clients that they engage another party to vote the proxy on their behalf;

      iii. engaging a third party to recommend a vote with respect to the proxy based on application of the policies set forth herein, including, in case of issues that CAM votes on a case by case basis, application of the factors set forth herein that CAM considers in voting on such issues, and following such third party’s recommendations;

      iv. in the case of a conflict of interest resulting from a particular employee’s personal relationships, removing such an employee from the decision-making process with respect to such proxy vote; or

      v. such other method as is deemed appropriate given the particular facts and circumstances, including the importance of the proxy issue, the nature of the conflict of interest, etc.

Record Keeping and Oversight

      CAM shall maintain the following records relating to proxy voting:

•  a copy of these policies and procedures;

•  a copy of each proxy form (as voted);

•  a copy of each proxy solicitation (including proxy statements) and related materials with regard to each vote;

•  documentation relating to the identification and resolution of conflicts of interest;

•  any documents created by CAM that were material to a proxy voting decision or that memoralized the basis for that decision; and

•  a copy of each written client request for information on how CAM voted proxies on behalf of the client, and a copy of any written response by CAM to any (written or oral) client request for information on how CAM voted proxies on behalf of the requesting client.

      Such records shall be maintained and preserved in an easily accessible place for a period of not less than five years from the end of the fiscal year during which the last entry was made on such record, the first two years in an appropriate office of the CAM adviser.

B-3

APPENDIX C

RATINGS ON DEBT OBLIGATIONS

Bond (and Notes) Ratings

Moody’s Investors Service, Inc.

      Aaa — Bonds that are rated “Aaa” are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edged.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

      Aa — Bonds that are rated “Aa” are judged to be of high quality by all standards. Together with the “Aaa” group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in “Aaa” securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long term risks appear somewhat larger than in “Aaa” securities.

      A — Bonds that are rated “A” possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present that suggest a susceptibility to impairment sometime in the future.

      Baa — Bonds that are rated “Baa” are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

      Ba — Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.

      B — Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.

      Caa — Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

      Ca — Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

      C — Bonds which are rated C are the lowest class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

      Note: The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.

Standard & Poor’s

      AAA — Debt rated “AAA” has the highest rating assigned by Standard & Poor’s. Capacity to pay interest and repay principal is extremely strong.

      AA — Debt rated “AA” has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree.

C-1

      A — Debt rated “A” has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.

      BBB — Debt rated “BBB” is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories.

      BB, B, CCC, CC, C — Debt rated ‘BB’, ‘B’, ‘CCC’, ‘CC’ or ‘C’ is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. ‘BB’ indicates the lowest degree of speculation and ‘C’ the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.

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

      Provisional Ratings: The letter “p” indicates that the rating is provisional. A provisional rating assumes the successful completion of the project being financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk of default upon failure of, such completion. The investor should exercise judgment with respect to such likelihood and risk.

      L — The letter “L” indicates that the rating pertains to the principal amount of those bonds where the underlying deposit collateral is fully insured by the Federal Savings & Loan Insurance Corp. or the Federal Deposit Insurance Corp.

      † — Continuance of the rating is contingent upon S&P’s receipt of closing documentation confirming investments and cash flow.

      * — Continuance of the rating is contingent upon S&P’s receipt of an executed copy of the escrow agreement.

      NR — Indicates no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.

Fitch Ratings, Inc.

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

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

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

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

      BB — Bonds rated BB by Fitch carry the possibility of credit risk developing, particularly as the result of adverse economic change over time. Business or financial alternatives may, however, be available to allow

C-2

financial commitments to be met. Securities rated in this category are not considered by Fitch to be investment grade.

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

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

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

Commercial Paper Ratings

Moody’s Investors Service, Inc.

      Issuers rated “Prime-1” (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment will normally be evidenced by the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structures with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial changes and high internal cash generation; well-established access to a range of financial markets and assured sources of alternate liquidity.

      Issuers rated “Prime-2” (or related supporting institutions) have strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.

Standard & Poor’s

      A-1 — This designation indicates that the degree of safety regarding timely payment is either overwhelming or very strong. Those issuers determined to possess overwhelming safety characteristics will be denoted with a plus (+) sign designation.

      A-2 — Capacity for timely payment on issues with this designation is strong. However, the relative degree of safety is not as high as for issues designated A-1.

     Fitch Ratings, Inc.

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

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

      Fitch’s short-term ratings are as follows:

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

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

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

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

C-3

EX-99.17.F

EXPERIENCE Greenwich Street Series Fund
Annual Report

Diversified Strategic Income Portfolio

Equity Index Portfolio

Salomon Brothers Variable Growth &
Income Fund

Salomon Brothers Variable Aggressive
Growth Fund

  ANNUAL REPORT

DECEMBER 31, 2005

 INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE 

Greenwich Street Series Fund

Annual Report • December 31, 2005

What’s

Inside

Letter from the Chairman		I
Diversified Strategic Income Portfolio:
	Manager Overview	1
	Fund at a Glance	9
	Fund Performance	10
	Historical Performance	11
Equity Index Portfolio:
	Manager Overview	12
	Fund at a Glance	15
	Fund Performance	16
	Historical Performance	17
Salomon Brothers Variable Growth & Income Fund:
	Manager Overview	18
	Fund at a Glance	21
	Fund Performance	22
	Historical Performance	23
Salomon Brothers Variable Aggressive Growth Fund:
	Manager Overview	24
	Fund at a Glance	27
	Fund Performance	28
	Historical Performance	29
Fund Expenses		30
Schedules of Investments		32
Statements of Assets and Liabilities		76
Statements of Operations		77
Statements of Changes in Net Assets		78
Financial Highlights		82
Notes to Financial Statements		88
Report of Independent Registered Public Accounting Firm		105
Board Approval of Management and Subadvisory Agreements		106
Additional Information		117
Additional Shareholder Information		123
Important Tax Information		125

Under a licensing agreement between Citigroup and Legg Mason, the names of funds, the names of any classes of shares of funds, and the names of investment advisers of funds, as well as all logos, trademarks and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason. Citi Marks include, but are not limited to, “Smith Barney,” “Salomon Brothers,” “Citi” and “Citigroup Asset Management”. Legg Mason and its affiliates, as well as the Funds’ investment adviser, are not affiliated with Citigroup.

All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement.

Letter from the Chairman

R. Jay Gerken, CFA

Chairman, President and

Chief Executive Officer

Dear Shareholder,

Despite numerous obstacles, including rising short-term interest rates, surging oil prices, a destructive hurricane season, and geopolitical issues, the U.S. economy continued to expand at a healthy pace during the reporting period. After a 3.8% advance in the first quarter of 2005, gross domestic product (“GDP”)ⁱ growth was 3.3% during the second quarter and 4.1% in the third quarter. While fourth quarter figures have not yet been released, another slight gain is anticipated.

   Given the strength of the economy and inflationary pressures, the Federal Reserve Board (“Fed”)ⁱⁱ continued to raise interest rates throughout the period. After raising rates five times from June 2004 through December 2004, the Fed increased its target for the federal funds rateⁱⁱⁱ in 0.25% increments eight additional times over the reporting period. This represents the longest sustained Fed tightening cycle since the 1970s. All told, the Fed’s thirteen rate hikes have brought the target for the federal funds rate from 1.00% to 4.25%. After the end of the Funds’ reporting period, at its January meeting, the Fed once again raised its target for the federal funds rate by 0.25% to 4.50%.

   For the one-year period ended December 31, 2005, the U.S. stock market generated positive results, with the S&P 500 Index^iv returning 4.91%. While corporate profits remained strong during the year, they were often overshadowed by rising interest rates and higher oil prices.

   Looking at the fiscal year as a whole, mid-cap stocks outperformed their large- and small-cap counterparts, with the Russell Midcap^v, Russell 1000^vi, and Russell 2000^vii Indexes returning 12.65%, 6.27%, and 4.55%, respectively. From an investment style perspective, value stocks outperformed growth stocks for the sixth consecutive calendar year, with the Russell 3000 Value^viii and Russell 3000 Growth^ix Indexes returning 6.85% and 5.17%, respectively, in 2005.

Greenwich Street Series Fund      I

   Within this environment, the Funds performed as follows:¹

Performance Snapshot as of December 31, 2005 (unaudited)

	6 Months		12 Months
Diversified Strategic Income Portfolio		0.61%		2.56%
Lehman Brothers U.S. Aggregate Bond Index		-0.08%		2.43%
Lipper Variable General Bond Funds Category Average		0.64%		2.03%
Equity Index Portfolio — Class I Shares		5.56%		4.52%
Equity Index Portfolio — Class II Shares		5.42%		4.25%
S&P 500 Index		5.76%		4.91%
Lipper Variable S&P 500 Index Objective Funds Category Average		5.56%		4.52%
Salomon Brothers Variable Growth & Income Fund		5.56%		3.63%
S&P 500 Index		5.76%		4.91%
Russell 1000 Index		6.15%		6.27%
Lipper Variable Large-Cap Core Funds Category Average		6.56%		5.77%
Salomon Brothers Variable Aggressive Growth Fund — Class I Shares		12.92%		9.89%
Salomon Brothers Variable Aggressive Growth Fund — Class II Shares		12.75%		9.64%
Russell 3000 Growth Index		7.19%		5.17%
Lipper Variable Multi-Cap Growth Funds Category Average		11.23%		10.80%

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.citigroupam.com.

Fund returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the deduction of all Fund expenses.

Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the period ended December 31, 2005 and include the reinvestment of all distributions, including returns of capital, if any. Returns were calculated among the 50 funds for the 6-month period and among the 50 funds for the 12-month period in the variable general bond funds category. Returns were calculated among the 55 funds for the 6-month period and among the 55 funds for the 12-month period in the variable S&P 500 Index objective funds category. Returns were calculated among the 223 funds for the 6-month period and among the 220 funds for the 12-month period in the variable large-cap core funds category. Returns were calculated among the 119 funds for the 6-month period and among the 115 funds for the 12-month period in the variable multi-cap growth funds category.

¹  The Funds are underlying investment options of various variable annuity and variable life insurance products. The Funds’ performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Funds. Past performance is no guarantee of future results.

II     Greenwich Street Series Fund

  Please read on for a more detailed look at prevailing economic and market conditions during the Funds’ fiscal year and to learn how these conditions have affected Fund performance.

Special Shareholder Notices

On or about May 1, 2006, the Greenwich Street Series Fund will be renamed Legg Mason Partners Variable Portfolios II.

Diversified Strategic Income Portfolio

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management (“CAM”), to Legg Mason, Inc. (“Legg Mason”). As a result, the Fund’s investment adviser (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused the Fund’s existing investment advisory contract and sub-advisory contract to terminate. The Fund’s shareholders previously approved a new investment management contract between the Fund and the Manager and a new sub-advisory contract, which became effective on December 1, 2005.

Equity Index Portfolio

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management (“CAM”), to Legg Mason, Inc. (“Legg Mason”). As a result, the Fund’s investment adviser (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused the Fund’s existing investment advisory contract to terminate. The Fund’s shareholders previously approved a new investment management contract between the Fund and the Manager, which became effective on December 1, 2005.

Salomon Brothers Variable Growth & Income Fund

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management (“CAM”), to Legg Mason, Inc. (“Legg Mason”). As a result, the Fund’s investment adviser (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused the Fund’s existing investment advisory contract to terminate. The Fund’s

Greenwich Street Series Fund      III

shareholders previously approved a new investment management contract between the Fund and the Manager, which became effective on December 1, 2005.

Salomon Brothers Variable Aggressive Growth Fund

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management (“CAM”), to Legg Mason, Inc. (“Legg Mason”). As a result, the Fund’s investment adviser (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused the Fund’s existing investment advisory contract to terminate. The Fund’s shareholders previously approved a new investment management contract between the Fund and the Manager, which became effective on December 1, 2005.

Information About Your Funds

As you may be aware, several issues in the mutual fund industry have recently come under the scrutiny of federal and state regulators. The Funds’ Managers and Adviser and some of its affiliates have received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the Funds’ response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The Funds have been informed that the Managers and Adviser and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.

   Important information concerning the Funds and their Managers and Adviser with regard to recent regulatory developments is contained in the Notes to Financial Statements included in this report.

IV     Greenwich Street Series Fund

   As always, thank you for your confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.

Sincerely,

R. Jay Gerken, CFA

Chairman, President and Chief Executive Officer

February 2, 2006

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

i	Gross domestic product is a market value of goods and services produced by labor and property in a given country.
ii	The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.
iii	The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.
iv	The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.
v	The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index whose average market capitalization was approximately $4.7 billion as of 6/24/05.
vi	The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.
vii	The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
viii	The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.)
ix	The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

Greenwich Street Series Fund      V

(This page intentionally left blank.)

Manager Overview

Diversified Strategic Income Portfolio

Special Shareholder Notices

Effective October 1, 2005, the administration fee which is calculated daily and payable monthly, was reduced from 0.20% of the Fund’s average daily net assets to a fee calculated in accordance with the following breakpoint schedule:

Funds’ Fee Rate	Advisory		Administration
Average Daily Net Assets	Fee Rate		Fee Rate		Total
First $1 billion		0.450%		0.200%		0.650%
Next $1 billion		0.450%		0.175%		0.625%
Next $3 billion		0.450%		0.150%		0.600%
Next $5 billion		0.450%		0.125%		0.575%
Over $10 billion		0.450%		0.100%		0.550%

   Effective February 1, 2006, Detlev Schlichter and Andres Sanchez-Balcazar, investment officers of Citigroup Asset Management Limited (the “sub-adviser”), the sub-adviser for investments in non-U.S. dollar denominated securities of non-U.S. issuers and currency transactions, assumed portfolio management responsibility for the Diversified Strategic Income Portfolio’s investments in these areas.

   Mr. Schlichter and Mr. Sanchez-Balcazar are each a portfolio manager of Western Asset Management Company Limited (“Western Asset”), which, like the sub-adviser and Smith Barney Fund Management LLC, the Fund’s investment manager, is a subsidiary of Legg Mason, Inc. Mr. Schlichter joined Western Asset in 2001 and has 16 years of investment experience. Mr. Sanchez-Balcazar joined Western Asset in 2005 and has nine years of investment experience.

   Effective February 10, 2006, Smith Barney Fund Management LLC (the “manager”), the Fund’s investment manager has appointed the following individuals as portfolio managers of the Fund: S. Kenneth Leech, Stephen A. Walsh, Carl L. Eichstaedt, Edward A. Moody and Mark Lindbloom.

   Each of the new portfolio managers is a portfolio manager of Western Asset Management Company (“Western Asset”), which, like the manager, is a subsidiary of Legg Mason, Inc.

   The Fund will be managed by a team of portfolio managers, sector specialists and other investment professionals. The portfolio managers’ focus is on portfolio structure, including sector allocation, duration weighting and term structure decisions.

   Mr. Leech, Mr Walsh and Mr. Eichstaedt have been employed as portfolio managers for Western Asset for the past five years. Mr. Lindbloom joined Western Asset in 2006.

   On or about May 1, 2006, the Diversified Strategic Income Portfolio will be renamed the Legg Mason Partners Variable Diversified Strategic Income Portfolio.

Greenwich Street Series Fund 2005 Annual Report      1

Q. What were the overall market conditions during the Fund’s reporting period?

A.  Due to the Fund’s allocations across investment grade, high yield and emerging markets debt, please find three separate market overviews for the period included below.

Investment Grade Market Review

During the 12 months ended December 31, 2005, the markets were primarily driven by Federal Reserve Board (“Fed”)ⁱ activity, employment and inflation data and rising energy costs, exacerbated by the devastating impact of Hurricane Katrina on the U.S. Gulf Coast. The Fed’s eight “measured” 25-basis-pointⁱⁱ hikes during the period brought the federal fundsⁱⁱⁱ rate from 2.25% to 4.25% by period end. These measured, consecutive rate hikes exerted upward pressure on short-term bond yields, driving 2-year yields up about 134 basis points during the 12 months. However, in what Fed Chairman Alan Greenspan termed a “conundrum,” yields on the long bond stayed low during the period, declining 29 basis points over the 12 months. This sharp rise in short yields and decline in longer yields resulted in the extensive yield curve flattening seen throughout the period and, near year end, a brief yield curve inversion as 2-year U.S. Treasury yields broke above 10-year yields on stronger-than-expected housing starts.

   As the market fully expected each 25-basis-point hike in the federal funds rate during the period — thanks to the Fed’s well-telegraphed intentions to raise rates at a measured pace — investors spent much of the period dissecting language from the Fed for clues on its assessment of the U.S. economy and the pace of rate hikes. The Fed reiterated throughout much of the year that it would increase rates “at a pace that is likely to be measured,” noting that core inflation remained low through the year and long-term inflation expectations were “contained”. However, higher energy costs, exacerbated by the supply disruption following Hurricanes Katrina and Rita, augmented already building inflationary pressure. Although the Fed maintained its “measured” language until the very end of the quarter due to continued strong economic growth and manageable inflation, in an important departure from previous accompanying statements, the Federal Open Market Committee (“FOMC”)^iv removed its characterization of monetary policy as “accommodative” in its December statement, as well as the signal phrase “at a pace that is likely to be measured”, a key indicator of future rate hikes. The overall tone of the December statement also indicated that monetary policy decisions will become more data dependent as the Fed shifts from its focus on reaching neutral to limiting pricing pressures. The nomination of Ben Bernanke in October as Fed Chairman, Alan Greenspan’s replacement also affected markets, leaving open the question of future policy direction, as Mr. Bernanke’s specific focus and leadership skills are, in part, unknown.

   Economic growth remained remarkably resilient during the annual period, particularly in light of the volatility seen in employment indicators and mixed industrial production, retail sales and consumer sentiment during Spring 2005 and in the aftermath of Fall 2005’s Hurricanes Katrina and Rita. Although the pace of improvement remained uneven month to month, the U.S. labor market trended broadly positive during the annual period, continuing the upswing in employment that began in early 2004. Unemployment fell through the majority of the period, declining from 5.4% in December 2004 to 4.9% in

2     Greenwich Street Series Fund 2005 Annual Report

December 2005. While September 2005 saw a 0.2% month-over-month uptick in unemployment to 5.1% as the dislocation in the Gulf region flowed through, the unemployment rate shifted back down the fourth quarter. An exceedingly strong housing market also underlined economic growth during the year, continuing its upward charge through the period despite some softening by year end.

   Industrial production and retail sales remained broadly positive through most of the period, despite the volatility in the auto sector as General Motors and Ford were successively downgraded by three major statistical credit rating agencies to below investment grade in Spring 2005. While auto sales dragged headline retail numbers by period end, as reductions in auto production hit the market and the highly successful automotive dealer incentive packages offered through the summer came to an end, overall retail sales (ex-autos) remained reasonably stable. Industrial production declined in September on the impact of the hurricanes but rebounded sharply in October, resuming the strong upswing seen through the majority of the annual period. Consumer confidence, which plummeted through the Fall, ended the year up slightly at 103.6 versus December 2004’s 102.3 reading as gasoline prices fell in the fourth quarter.

   Despite the resilience of the U.S. economy during the period, slowing global growth, broadly rising inflation and higher oil prices undoubtedly restrained economic activity during the 12 months. U.S. gross domestic product (“GDP”)^v growth declined year-over-year to 3.8% growth in first quarter 2005 (from first quarter 2004’s 4.5% pace) and 3.4% growth in second quarter 2005 (from second quarter 2004’s 3.5%). While economic growth rebounded into the third quarter, gaining 4.1% on an annualized basis, the recovery was at least partially fueled by the massive fiscal stimulus injected into the Gulf region in the wake of the hurricanes. Therefore, although growth remained strong throughout the period, fears of potential slowing, combined with increasing inflation, drove markets. Oil prices, which breached $70 per barrel in late August before drifting back down to the mid-$60s, also cast a pall on growth and consumer spending expectations.

   While inflationary pressures from sustained high commodity prices began to creep into the economy, particularly near the end of the year, continued strong growth and limited wage pressures kept long-term inflation expectations relatively “contained” through 2005. Core inflation rates, in particular, remained at moderate levels, with core Consumer Price Index (“CPI”)^vi inflation consistently registering below expectations through early Fall despite growing inflationary pressure. Inflation fears tapered off slightly during the last two months of the quarter as energy costs came off their September highs, with headline inflation even surprising on the downside in December. However, despite the apparently moderate pace of inflation through 2005, the Fed remained extremely vigilant, as some inflation pressures began to seep into producer prices and U.S. economic growth continued at its surprisingly strong pace. Consistently high energy prices also began to push up core CPI inflation by December end, stopping its downward month-to-month drift to end the year with a 0.2% month-over-month increase in December, near the upper end of the Fed’s comfort range.

Greenwich Street Series Fund 2005 Annual Report      3

U.S. High Yield Market Review

The high yield market returned 2.08% for the calendar year ending December 31, 2005, as represented by the Citigroup High Yield Market Index.^vii Although high yield debt markets ended 2004 on a positive note after an extended end-of-year rally, markets turned generally down through Spring 2005 as rising oil prices, weak equity markets and isolated hawkish comments from the Fed regarding inflation unsettled markets. The steady stream of negative auto sector headlines also contributed to the negative tone, as reduced earnings, production cuts and downgrades to high yield status hit both General Motors and Ford Motor Co., causing spreads to widen dramatically within the auto sector and across fixed income credit markets.

   Markets began to recover in mid-May as technicals strengthened and economic news turned generally positive. S&P and Fitch’s long-anticipated downgrades of Ford and GM to non-investment grade in early May improved the market’s tone, as the rating agencies’ actions removed some of the uncertainty in the market surrounding the credits’ ultimate resting places, allowing both high yield and investment grade investors to shore up their positions. Improving technicals, better overall demand and the relative absence of further negative headlines continued to buoy markets through June and July, despite a stronger new issue calendar in June and renewed outflows from high yield mutual funds. Resurgent investor risk appetites on the back of strong U.S. economic news and positive 2Q earnings announcements also contributed to positive performance, allowing markets to outperform despite the July 7th terrorist bombings in London (and the July 21st reprise) and weaker consumer sentiment.

   However, markets again turned down in the last few months of the year amid volatility in the auto sector, stronger inflation, continued high energy prices and fears of a potentially slowing economy in the aftermath of Hurricanes Katrina and Rita. In addition, rising interest rates, with the Fed executing its thirteenth consecutive rate hike (8 times in 2005) to 4.25% at the December FOMC meeting, and worsening investor sentiment on the back of increased risk aversion largely offset the surprisingly resilient economic data seen post-Hurricanes. Technicals weakened during 2005 versus the prior few years as the market entered redemption mode in light of the rising rate environment. While total new supply was significantly lighter versus calendar year 2004, with only $103.6 billion coming to market in 2005 versus $142.4 billion in 2004, overall demand also declined. For the year ending December 31, 2005, high yield mutual funds reported outflows of approximately $11.48 billion (according to AMG Data Services).

   Finally, while high yield fundamentals remain generally positive (i.e., strong corporate balance sheets, generally high cash levels), third quarter 2005’s high profile airline bankruptcies pushed annual high yield default rates closer to historical averages, at 3.73% by principal amount.^viii Increased leveraged buyout activity and stock buybacks also releveraged some corporate balance sheets and put pressure on the market.

   Spreads widened 17 basis points during 2005 to close at 359 basis points over U.S. Treasuries. Based on the 7.99% yield^ix of the Citigroup High Yield Market Index as of December 31, 2005, high-yield bonds continued to offer competitive yields relative to U.S. Treasury notes.^x However, high-yield issues are subject to additional risks, such as the

4     Greenwich Street Series Fund 2005 Annual Report

increased possibility of default because of their lower credit quality, and yields and prices will fluctuate.

Emerging Markets Debt Review

Emerging markets debt returned 10.73% for the calendar year ending December 31, 2005, as represented by the JPMorgan Emerging Markets Bond Index Global.^xi We believe strong country fundamentals, resurgent commodity prices (particularly in metals, agriculture and oil) and positive market technicals offset the downward pressure exerted by eight “measured” increases in the federal funds rate throughout 2005 and credit contagion from the Auto sector during the volatile Spring of 2005. Continued progress on political and economic reform in many emerging countries, commodity price strength and the generally positive macro environment supported broad credit quality improvements across emerging markets during the year.

   Emerging debt trended positive during the first three months of the annual period despite concerns over the path of U.S. interest rates, risks of higher inflation and new bond issuance weighing on the market. However, indications of potentially more aggressive tightening (50-basis-point increments) from the Fed and increasingly prominent inflation worries led the market down in March, broadly in line with the U.S. Treasury market. Markets remained under pressure in early April as the overspill from volatile credit markets, with the highly visible troubles in the Auto sector, worsened technicals.

   Nevertheless, markets turned again by mid-April and followed a generally upward trajectory through the remainder of the year as U.S. Treasury market volatility declined, the U.S. equity market recovered and country fundamentals remained broadly supportive. October proved the only negative month of performance in the second half of the annual period, declining as investors became increasingly risk averse on heightened inflation and growth concerns and the negative tone in U.S. equity markets.

   Spreads tightened 110 basis points during 2005, closing at 237 basis points over U.S. Treasuries. (Of note, sovereign spreads tightened 67 basis points alone during the month of June 2005 due primarily to index rebalancing with the conclusion of the Argentine bond exchange.)

   The outlook for the emerging debt markets is impacted by the strong performance and large degree of spread tightening the market has experienced over the past few years. With spreads at approximately 250 basis points over U.S. Treasuries the scope for substantial additional tightening seems limited. Nonetheless, we do not anticipate the degree of political and economic volatility that could lead to substantial spread widening in 2006.

Performance Update1

For the 12 months ended December 31, 2005, the Diversified Strategic Income Portfolio returned 2.56%. In comparison, the Fund’s unmanaged benchmark, the Lehman Brothers

1  The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

Greenwich Street Series Fund 2005 Annual Report      5

U.S. Aggregate Bond Index^xii returned 2.43% and its Lipper Variable General Bond Funds Category Average(2) increased 2.03% over the same period.

Q.  What were the most significant factors affecting Fund performance?
What were the leading contributors to performance?

A.The portfolio’s allocation to higher-yielding bonds, specifically emerging markets debt, once again proved beneficial to portfolio performance during the annual period, as emerging debt was the best performer among broad fixed income asset classes during the year, according to the Lehman family of indices.

What were the leading detractors from performance?

A.Although we outperformed our benchmark, our underweight exposure to agencies slightly detracted from performance in the investment grade section of the portfolio, as agencies outperformed U.S. Treasuries and mortgage-backed securities during the 12 months.

Q.  Were there any significant changes to the Fund during the reporting period?

A. Despite the strong performance seen throughout the year, we reduced our overall exposure to emerging markets debt by period end on a relative valuation basis as spreads reached all time tights on persistent strong technicals and fundamentals. We reallocated assets into mortgage-backed securities and U.S. Treasuries in the latter half of the annual period as both markets underwent significant selloffs during the third and fourth quarter before recovering value near period end.

We maintained our neutral duration position versus the benchmark during the annual period. (Duration is a measure of a portfolio’s price sensitivity to interest rate movements. A shorter duration helps cushion price declines in the event of rising rates.) We believe this neutral stance will benefit the portfolio as the Fed nears the end of its current rate tightening cycle, which should allow possible yield advantage during a period of expected low volatility. We also slightly extended our yield curve positioning versus the benchmark from the beginning of the period. We plan to maintain our current allocation to emerging markets debt and high yield in an effort to provide diversification and achieve greater total return than a pure U.S. investment grade portfolio alone.

2  Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended December 31, 2005, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 50 funds in the Fund’s Lipper category, and excluding sales charges.

6     Greenwich Street Series Fund 2005 Annual Report

   Thank you for your investment in the Diversified Strategic Income Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.

Sincerely,

Peter J. Wilby	Beth A. Semmel
Vice President and Investment Officer	Vice President and Investment Officer
Roger M. Lavan	David M. Zahn
Vice President and Investment Officer	Vice President and Investment Officer
Olivier Asselin
Vice President and Investment Officer

February 2, 2006

Greenwich Street Series Fund 2005 Annual Report      7

   The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of December 31, 2005 were: Mortgage-Backed Securities (49.7%), Repurchase Agreement (46.6%), Corporate Bonds and Notes (20.7%), U.S. Government Obligations (19.7%) and Sovereign Bonds (5.1%). The Fund’s portfolio composition is subject to change at any time.

RISKS: Foreign securities are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. These risks are magnified in emerging or developing markets. High yield bonds are subject to additional risks such as the increased risk of default and greater volatility because of the lower credit quality of the issues. The Fund may invest in derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses and have a potentially large impact on fund performance. As interest rates rise, bond prices fall, reducing the value of the Fund’s share price. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ii	A basis point is one one-hundredth (1/100 or 0.01) of one percent.
iii	The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.
iv	The FOMC is a policy-making body of the Federal Reserve System responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.
v	Gross domestic product is a market value of goods and services produced by labor and property in a given country.
vi	The Consumer Price Index measures the average change in U.S. consumer prices over time in a fixed market basket of goods and services determined by the U.S. Bureau of Labor Statistics.

vii	The Citigroup High Yield Market Index is a broad-based unmanaged index of high yield securities.
viii	Source: Altman High Yield Bond Default ad Return Report, November 2, 2005.

ix	As measured by the yield on the Citigroup High Yield Market Index as of the period’s close.
x	Yields are subject to change and will fluctuate.
xi	JPMorgan Emerging Markets Bond Index Global (“EMBI Global”) tracks total returns for U.S. dollar denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds, and local market instruments. Countries covered are Algeria, Argentina, Brazil, Bulgaria, Chile, China, Colombia, Cote d’Ivoire, Croatia, Ecuador, Greece, Hungary, Lebanon, Malaysia, Mexico, Morocco, Nigeria, Panama, Peru, the Philippines, Poland, Russia, South Africa, South Korea, Thailand, Turkey and Venezuela.

^xii The Lehman Brothers U.S. Aggregate Bond Index is a broad-based bond index comprised of Government, Corporate, Mortgage and Asset-backed issues, rated investment grade or higher, and having at least one year to maturity.

8     Greenwich Street Series Fund 2005 Annual Report

Fund at a Glance (unaudited)

Diversified Strategic Income Portfolio

Investment Breakdown

*  Position represents less than 0.1%.

Greenwich Street Series Fund 2005 Annual Report      9

Fund Performance
Diversified Strategic Income Portfolio

Average Annual Total Returns⁽¹⁾ (unaudited)

Twelve Months Ended 12/31/05	2.56	%
Five Years Ended 12/31/05	5.76
Ten Years Ended 12/31/05	5.87
Inception* through 12/31/05	6.08

Cumulative Total Return⁽¹⁾ (unaudited)

12/31/95 through 12/31/05 76.97 %

(1)

Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

*

Inception date is October 16, 1991.

10     Greenwich Street Series Fund 2005 Annual Report

Historical Performance (unaudited)

Diversified Strategic Income Portfolio

Value of $10,000 Invested in the Diversified Strategic Income Portfolio vs. Lehman Brothers U.S. Aggregate Bond Index vs. Blended Index (December 1995 - December 2005)

The chart above compares the growth in value of a hypothetical $10,000 investment in Diversified Strategic Income Portfolio on December 31, 1995 through December 31, 2005, with that of a similar investment in the Lehman Brothers U.S. Aggregate Bond Index and the Blended Index. Figures for the Lehman Brothers U.S. Aggregate Bond Index, an unmanaged index, are composed of the Lehman Brothers Intermediate Government/ Corporate Bond Index and the Mortgage-Backed Securities Index and include treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The Merrill Lynch GNMA Master Index is a market capitalization weighted index of securities backed by mortgage pools of the Government National Mortgage Association (“GNMA”). The Merrill Lynch Global Bond Index is a broad-based index consisting of fixed-rate, coupon-bearing bonds with an outstanding par greater than or equal to $25 million and a maturity range greater than or equal to one year. This index includes BBB-rated bonds and some bonds that are not rated by the major U.S. rating agencies. The Merrill Lynch High-Yield Master II Index is a market capitalization-weighted index of all domestic and Yankee High-Yield Bonds. Issues included in the index have maturities of at least one year and have a credit rating lower than BBB-Baa3, but are not in default.

Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The graph does not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

Greenwich Street Series Fund 2005 Annual Report      11

Manager Overview

Equity Index Portfolio

Special Shareholder Notices

Effective February 1, 2006, Charles Ko and Michael D. Soares, investment officers of TIMCO Asset Management, Inc., the Fund’s investment advisor (the “advisor”), will assume portfolio management responsibility for the Equity Index Portfolio. Mr. Ko and Mr. Soares are each a portfolio manager of Batterymarch Financial Management, Inc. (“Batterymarch”), which, like the manager, is a subsidiary of Legg Mason, Inc.

   Mr. Ko joined Batterymarch in 2000 and has seven years investment experience. Mr. Soares joined Batterymarch in 1996 and has 11 years of investment experience.

   On or about May 1, 2006, the Equity Index Portfolio will be renamed the Legg Mason Partners Variable Equity Index Portfolio.

Q.  What were the overall market conditions during the Fund’s reporting period?

A.  With oil prices receding from their peaks, the financial markets have turned to other worries, especially the housing market and inflation. The Federal Reserve Board (“Fed”)ⁱ has indicated to investors that it will do what is necessary to prevent an acceleration of inflation, which could stifle sustainable economic growth. Currently, the economy is expanding at a healthy pace. In our opinion, with the exception of a wider trade deficit, recent economic data on consumer demand, industrial production, and housing strongly support a sustainable economic growth environment.

A positive sign for sustainable economic growth came from the industrial sector. For the fourth quarter in a row, operating cash flow exceeded what companies spent on capital goods and inventories. The capability of corporations to increase capital spending is substantial, as the expenditures could be more than accommodated by internal funds. Although cash flow has been strong, the corporate sector is making little demand on the capital markets. After spending most of the past few years as the weakest part of the economy, the industrial sector has made a transition to a strong expansion path. Rising demand has provided a potent stimulus for industrial activity. While production has still not recovered to its previous peak level, the upward trend appears to be encouraging.

Performance Update(1)

For the 12 months ended December 31, 2005, Class I shares of the Equity Index Portfolio returned 4.52%. The Fund underperformed its unmanaged benchmark, the S&P 500 Indexⁱⁱ,

1  The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

12     Greenwich Street Series Fund 2005 Annual Report

which returned 4.91% for the same period. The Fund’s Lipper Variable S&P 500 Index Objective Funds Category Average(2) increased 4.52%.

Q.  What were the most significant factors affecting Fund performance?

A.  Our performance analysis indicated that the energy and financials sectors contributed the most to performance. Conversely, the telecommunication services and consumer discretionary sectors were the biggest detractors from performance.

What were the leading contributors to performance?

A. In the energy sector, our holdings in Exxon Mobil Corp., ConocoPhillips, and Schlumberger Ltd. contributed to performance. Similarly, in the financials sector, our positions in Citigroup Inc., Lehman Brothers Holdings Inc., and Goldman Sachs Group Inc. also added to the overall result.

What were the leading detractors from performance?

A. In the telecommunication services sector, our holdings in Verizon Communications Inc., Sprint Nextel Corp., and CenturyTel Inc. hurt us. Similarly, we were negatively impacted by positions in eBay Inc., Comcast Corp., and Ford Motor Co.

Q.  Were there any significant changes to the Fund during the reporting period?

A.  There were no significant changes made to the Fund in the past year.

   Thank you for your investment in the Equity Index Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.

Sincerely,

The TIMCO Asset Management Inc. Portfolio Management Team

February 2, 2006

2  Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended December 31, 2005, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 55 funds in the Fund’s Lipper category, and excluding sales charges.

Greenwich Street Series Fund 2005 Annual Report      13

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of December 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: General Electric Co. (3.3%), Exxon Mobil Corp. (3.1%), Citigroup Inc. (2.2%), Microsoft Corp. (2.1%), Procter & Gamble Co. (1.7%), Bank of America Corp. (1.6%), Johnson & Johnson (1.6%), American International Group Inc. (1.6%), Pfizer Inc. (1.5%) and Altria Group Inc. (1.4%). Please refer to pages 49 through 65 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of December 31, 2005 were: Financials (21.3%), Information Technology (15.1%), Health Care (13.3%), Industrials (11.4%) and Consumer Discretionary (10.8%). The Fund’s portfolio composition is subject to change at any time.

RISKS: Derivatives, such as options and futures, can be illiquid and harder to value, especially in declining markets. A small investment in certain derivatives may have a potentially large impact on the fund’s performance. Derivatives can disproportionately increase losses, as stated in the prospectus. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱ The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

14     Greenwich Street Series Fund 2005 Annual Report

Fund at a Glance (unaudited)

Equity Index Portfolio

Investment Breakdown

*  Position represents less than 0.1%.

Greenwich Street Series Fund 2005 Annual Report      15

Fund Performance
Equity Index Portfolio

Average Annual Total Returns⁽¹⁾ (unaudited)

	Class I			Class II
Twelve Months Ended 12/31/05		4.52	%		4.25	%
Five Years Ended 12/31/05		0.24			(0.03	)
Ten Years Ended 12/31/05		8.66			N/A
Inception* through 12/31/05		9.99			0.47

Cumulative Total Returns⁽¹⁾ (unaudited)

Class I (12/31/95 through 12/31/05)	129.36	%
Class II (Inception* through 12/31/05)	3.22

(1)

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

*

Inception dates for Class I and II shares are October 16, 1991 and March 22, 1999, respectively.

16     Greenwich Street Series Fund 2005 Annual Report

Historical Performance (unaudited)
Equity Index Portfolio

Value of $10,000 Invested in the Equity Index (Class I Shares) vs. S&P 500 Index (December 1995 - December 2005)

The chart above compares the growth in value of a hypothetical $10,000 investment in Equity Index Portfolio (Class I shares) on December 31, 1995 through December 31, 2005, with that of a similar investment in the S&P 500 Index. The S&P 500 Index is an unmanaged index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and over-the-counter markets. The performance of the Fund’s other class may be greater or less than the Class I share’s performance indicated on this chart, depending on whether greater or lesser sales charges and fees were incurred by shareholders investing in the other class.

Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The graph does not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

Greenwich Street Series Fund 2005 Annual Report      17

Manager Overview

Salomon Brothers Variable Growth & Income Fund

Special Shareholder Notice

On or about May 1, 2006, the Salomon Brothers Variable Growth & Income Fund will be renamed the Legg Mason Partners Variable Growth & Income Fund.

Q.  What were the overall market conditions during the Fund’s reporting period?

A. The market was led by the energy related (energy and utilities) and the defensive (health care and financials) sectors. Oil and natural gas prices during the period hit all time highs in late August 2005. Supply/demand fundamentals have been tight for energy for the past twenty-four months, but hit a peak in August from the damage done to Gulf of Mexico production facilities by Hurricanes Katrina and Rita. Energy fundamentals appear balanced to us, with strong demand growth in China and India offset by lower gasoline demand in the U.S. due to higher prices. The U.S. Federal Reserve Board (“Fed”)ⁱ raised interest rates 0.25% at each of the last thirteen meetings. We believe that it is likely that the Fed is likely to continue increasing rates until we hit historical normal levels of real interest rates. That would entail further increases into 2006. After the end of the Fund’s reporting period, at its January meeting, the Fed once again raised its target for the federal funds rateⁱⁱ by 0.25% to 4.50%. Defensive stocks outperformed due to fears that higher oil prices and interest rates would slow economic growth.

   The Chinese government partly floated its currency vs. the dollar and the Yen starting in late July. Gold prices began to rise coincident with the first floating of the Yuan.

   General Motors faced two crises in 2005, first the downgrading of its credit rating to below investment grade and second the bankruptcy of Delphi Automotive, its largest parts supplier and onetime spin off. Currently, the debt markets are pricing in a 30% probability of GM’s own bankruptcy within eighteen months. General Motors and Ford are struggling with high costs, declining market shares and a mix shift away from high profit SUV’s. The portfolio has avoided and will continue to avoid any auto related exposure.

Performance Update(1)

For the 12 months ended December 31, 2005, the Salomon Brothers Variable Growth & Income Fund returned 3.63%. In comparison, the Fund’s unmanaged benchmarks, the S&P 500 Indexⁱⁱⁱ and the Russell 1000 Index^iv, returned 4.91% and 6.27%, respectively, for the same period. The Fund’s Lipper Variable Large-Cap Core Funds Category Average(2) increased 5.77%.

1  The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

2  Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended December 31, 2005, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 220 funds in the Fund’s Lipper category, and excluding sales charges.

18     Greenwich Street Series Fund 2005 Annual Report

Q.  What were the most significant factors affecting Fund performance?

A.  The Fund had strong performance in the health care sector. Returns were helped by over-weights in HMO’s and generic drug stocks, and an underweight in large capitalization pharmaceuticals. We believe that cost pressures and a large number of drugs coming off patent will help HMO and generic drug company earnings and hurt the earnings of the traditional pharmaceutical companies. The consumer discretionary sector returns were helped by positions in Best Buy Co. Inc. and JC Penney Co. Inc., and the absence of any auto related stocks.

The Fund was hurt by poor stock picking in the information technology sector. Information technology appears to be seeing a changing of the guard, and the Fund owned too many of the old guard and not enough of the new. Positions in IBM and Dell Inc. detracted from performance.

What were the leading contributors to performance?

A. The biggest contributors to performance were Boeing Co., Nexen Inc. and Coventry Health Care Inc. The best performing sectors were health care, consumer discretionary and industrials. Boeing was helped by terrific orders of the new 787 plane, which trounced rival Airbus’ A350. Nexen had excellent success in oil exploration and development projects. Coventry delivered better than expected cost savings, and saw favorable medical cost trends. The Fund continued to maintain positions in these securities at the end of the period.

What were the leading detractors from performance?

A. The stocks that most hurt performance were OSI Pharmaceuticals, Dell Inc. and Nortel Networks Corp. The worst performing sectors were information technology, consumer staples and utilities. OSI had unfavorable tests of its Tarceva drug, and made, what was in the eyes of Wall Street, a poor acquisition of Eyetech. Dell saw weaker than expected sales. Sales growth at Nortel was insufficient to create earnings leverage. The Fund sold its positions in OSI Pharmaceuticals and Nortel Networks during the period and continued to maintain a position in Dell.

Q.  Were there any significant changes to the Fund during the reporting period?

A.  The portfolio is higher growth and higher quality than it was coming into 2005. U.S. corporate operating margins are now the highest since the late 1960’s. We believe that companies who derive their growth from revenues (typically growth stocks) will show higher earnings per share growth than companies who derive their earnings growth from operating margin expansion (typically value stocks). Many companies with strong franchises, balance sheets and returns, such as Microsoft, Walmart and Ecolab, which historically have looked expensive to us, now appear to us to trade at attractive levels.

Greenwich Street Series Fund 2005 Annual Report      19

   Thank you for your investment in the Salomon Brothers Variable Growth & Income Fund. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.

Sincerely,

Michael A. Kagan	Kevin Caliendo
Portfolio Management Team Leader	Vice President and Investment Officer

January 20, 2006

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of December 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: General Electric Co. (3.8%), Microsoft Corp. (3.7%), Boeing Co. (3.1%), Barrick Gold Corp. (2.6%), Wells Fargo & Co. (2.6%), Wal-Mart Stores Inc. (2.5%), Exxon Mobil Corp. (2.4%), Sprint Nextel Corp. (2.3%), JPMorgan Chase & Co. (2.2%) and Total SA, Sponsored ADR (2.1%). Please refer to pages 66 through 70 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of December 31, 2005 were: Financials (20.2%), Information Technology (15.6%), Industrials (11.6%), Health Care (11.3%) and Consumer Staples (10.9%). The Fund’s portfolio composition is subject to change at any time.

RISKS: High-yield bonds are subject to additional risks such as the increased risk of default and greater volatility because of the lower credit quality of the issues. The Fund may invest in derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on fund performance. Investments in small and medium capitalization companies may involve a higher degree of risk and volatility than investments in larger, more established companies. Investments in foreign securities are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ii	The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.
iii	The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.
iv	The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.

20     Greenwich Street Series Fund 2005 Annual Report

Fund at a Glance (unaudited)

Salomon Brothers Variable Growth & Income Fund

Investment Breakdown

Greenwich Street Series Fund 2005 Annual Report      21

Fund Performance
Salomon Brothers Variable Growth & Income Fund

Average Annual Total Returns⁽¹⁾ (unaudited)

Twelve Months Ended 12/31/05	3.63	%
Five Years Ended 12/31/05	(0.54	)
Ten Years Ended 12/31/05	6.37
Inception* through 12/31/05	7.55

Cumulative Total Return⁽¹⁾ (unaudited)

12/31/95 through 12/31/05 85.52 %

⁽¹⁾ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

* Inception date is October 16, 1991.

22     Greenwich Street Series Fund 2005 Annual Report

Historical Performance (unaudited)
Salomon Brothers Variable Growth & Income Fund

Value of $10,000 Invested in the Salomon Brothers Variable Growth & Income Fund (Class I Shares) vs. Lipper Variable Large-Cap Core Funds Category Average and S&P 500 Index and Russell 1000 Index (December 1995 - December 2005)

The chart above compares the growth in value of a hypothetical $10,000 investment in Salomon Brothers Variable Growth & Income Fund Class I Shares on December 31, 1995 through December 31, 2005, with that of a similar investment in the Lipper Variable Large-Cap Core Funds Category Average, S&P 500 Index and Russell 1000 Index. The S&P 500 Index is an unmanaged index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and over-the-counter markets. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.

The Lipper Variable Large-Cap Core Funds Category Average is composed of 220 large-cap funds as of December 31, 2005, which underlie variable annuities.

Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The graph does not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

Greenwich Street Series Fund 2005 Annual Report      23

Manager Overview

Salomon Brothers Variable Aggressive Growth Fund
Special Shareholder Notice

Effective October 1, 2005, the advisory fee schedule was replaced with the fee schedule described below and the administration fee was reduced from 0.20% of the Fund’s average daily net assets to a fee in accordance with the fee schedule described below:

Fund’s Fee Rate	Advisory		Administration
Average Daily Net Assets	Fee Rate		Fee Rate		Total
First $1 billion		0.600%		0.150%		0.750%
Next $1 billion		0.600%		0.125%		0.725%
Next $3 billion		0.600%		0.100%		0.700%
Next $5 billion		0.600%		0.075%		0.675%
Next $10 billion		0.600%		0.050%		0.650%

On or about May 1, 2006, the Salomon Brothers Variable Aggressive Growth Fund will be renamed the Legg Mason Partners Variable Aggressive Growth Fund.

Q. What were the overall market conditions during the Fund’s reporting period?

A.  After a lackluster start to 2005, we saw the market’s mood switch dramatically in April, as investors reached levels of pessimism we had not seen for sometime. These rarely seen extreme levels of bearish sentiment often foreshadow a market recovery and we viewed the shift as a very positive sign for the markets. Following the April lows, the market experienced a healthy rally in the second quarter, but gave back a portion of those gains as investors grew increasingly negative again. By the end of the third quarter, another wave of troubling headlines including the Gulf Coast hurricanes and continued rising short-term interest rates contributed to investor unease. However, we remained bullish. Again, the market rallied strongly in late October and continued on an upswing as several major equity indices reached or neared multi-year highs before they started to plateau to close out the year.

Performance Update¹

For the 12 months ended December 31, 2005, Class I shares of the Salomon Brothers Variable Aggressive Growth Fund returned 9.89%. These shares outperformed the Fund’s unmanaged benchmark, the Russell 3000 Growth Indexⁱ, which returned 5.17% for the

¹ The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

24     Greenwich Street Series Fund 2005 Annual Report

same period. The Fund’s Lipper Variable Multi-Cap Growth Funds Category Average(2) increased 10.80%.

Q. What were the most significant factors affecting Fund performance?

A.  Energy stocks were clearly the biggest winners for the past year, buoyed by crude oil’s temporary spike to over $70 per barrel in the wake of Hurricane Katrina. The Fund’s overweight position in energy, with a focus on oil production services and equipment stocks, was the leading contributor to performance for the period. An underweight position in the information technology sector and the Fund’s overweight position in the financials sector also contributed significantly to performance for the year. The Fund’s overweight position in health care, with a concentration in biotechnology and biopharmaceuticals, along with a significant holding in the managed care industry, also had positive returns. However, positions in the consumer discretionary sector, especially cable TV holdings, and in the industrials sector detracted from performance for the period. In relation to the benchmark index, both stock selection and sector allocation contributed positively to Fund performance for the year, with sector allocation accounting for the majority of outperformance.

What were the leading contributors to performance?

A. The greatest contributors to performance for the period included positions in Anadarko Petroleum Corp., Weatherford International Ltd. and Grant Prideco Inc. in energy, Lehman Brothers Holdings Inc. in financials, and UnitedHealth Group Inc. in health care. All five top contributors were still held by the Fund at the close of the year.

What were the leading detractors from performance?

A. The greatest detractors from performance for the period included positions in Biogen Idec Inc. and ImClone Systems Inc. in health care, Comcast Corp. and Time Warner Inc. in consumer discretionary, and Tyco International Ltd. in industrials. All five top detractors were still held by the Fund at the close of the year.

Q. Were there any significant changes to the Fund during the reporting period?

A.  While the Fund did experience a historically consistent level of portfolio turnover during the past year, the managers did not make any significant alterations to the portfolio or its sector allocation.

2  Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended December 31, 2005, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 115 funds in the Fund’s Lipper category, and excluding sales charges.

Greenwich Street Series Fund 2005 Annual Report      25

   Thank you for your investment in the Salomon Brothers Variable Aggressive Growth Fund. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on seeking to achieve the Fund’s investment goals.

Sincerely,

Richard A. Freeman

Lead Portfolio Manager — Salomon Brothers Asset Management Inc.

January 27, 2006

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of December 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: Lehman Brothers Holdings Inc. (5.1%), UnitedHealth Group Inc. (5.1%), Anadarko Petroleum Corp. (5.0%), Forest Laboratories Inc. (4.8%), Amgen Inc. (4.7%), Merrill Lynch & Co. Inc. (4.6%), Genzyme Corp. (4.6%), Weatherford International Ltd. (4.4%), Time Warner Inc. (4.1%) and Biogen Idec Inc. (4.1%). Please refer to pages 71 through 74 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of December 31, 2005 were: Health Care (33.6%), Consumer Discretionary (14.7%), Information Technology (14.1%), Energy (11.9%) and Financials (10.7%). The Fund’s portfolio’s composition is subject to change at any time.

RISKS: Investments in small- and medium-capitalization companies may involve a higher degree of risk and volatility than investments in larger, more established companies. Derivatives, such as options and futures, can be illiquid and harder to value, especially in declining markets. A small investment in certain derivatives may have a potentially large impact on the fund’s performance. Derivatives can disproportionately increase losses, as stated in the prospectus. Foreign securities are subject to certain risks of overseas investing including currency fluctuations, and changes in political and economic conditions, which could result in significant market fluctuations. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

26     Greenwich Street Series Fund 2005 Annual Report

Fund at a Glance (unaudited)

Salomon Brothers Variable Aggressive Growth Fund

Investment Breakdown

Greenwich Street Series Fund 2005 Annual Report      27

Fund Performance

Salomon Brothers Variable Aggressive Growth Fund

Average Annual Total Returns⁽¹⁾ (unaudited)

	Class I			Class II
Twelve Months Ended 12/31/05		9.89	%		9.64	%
Five Years Ended 12/31/05		1.38			N/A
Ten Years Ended 12/31/05		18.65			N/A
Inception* through 12/31/05		18.30			15.89

Cumulative Total Returns⁽¹⁾ (unaudited)

Class I (12/31/95 through 12/31/05)	452.87	%
Class II (Inception* through 12/31/05)	47.57

⁽¹⁾ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

* Inception dates for Class I and II shares are December 3, 1993 and May 12, 2003, respectively.

28     Greenwich Street Series Fund 2005 Annual Report

Historical Performance (unaudited)

Salomon Brothers Variable Aggressive Growth Fund

Value of $10,000 Invested in the Salomon Brothers Variable Aggressive Growth Fund (Class I Shares) vs. Nasdaq Composite Index and Russell 3000 Growth Index
(December 1995 - December 2005)

The chart above compares the growth in value of a hypothetical $10,000 investment in Salomon Brothers Variable Aggressive Growth Fund Class I Shares on December 31, 1995 through December 31, 2005, with that of a similar investment in the Nasdaq Composite Index (“Nasdaq”) and Russell 3000 Growth Index. The Nasdaq is a market capitalization price-only index that tracks the performance of domestic common stocks traded on the regular NASDAQ market as well as foreign common stocks and ADRs traded on the National Market System. Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Prior to February 10, 2000, the Fund was managed by an advisor not affiliated with the current advisor. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

Greenwich Street Series Fund 2005 Annual Report      29

Fund Expenses (unaudited)

Example

As a shareholder of the Funds, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

   This example is based on an investment of $1,000 invested on July 1, 2005 and held for the six months ended December 31, 2005.

Actual Expenses

The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

Based on Actual Total Return⁽¹⁾

					Beginning		Ending		Annualized			Expenses
		Actual Total			Account		Account		Expense			Paid During
		Return(2)			Value		Value		Ratio			the Period(3)
Diversified Strategic Income Portfolio			0.61	%	$	1,000.00	$	1,006.10		0.76	%	$	3.84
Equity Index Portfolio
	Class I		5.56			1,000.00		1,055.60		0.35			1.81
	Class II		5.42			1,000.00		1,054.20		0.60			3.11
Salomon Brothers Variable
	Growth & Income Fund
	Class I		5.56			1,000.00		1,055.60		1.22			6.32
Salomon Brothers Variable
Aggressive Growth Fund
	Class I		12.92			1,000.00		1,129.20		0.91			4.88
	Class II		12.75			1,000.00		1,127.50		1.16			6.22

(1)	For the six months ended December 31, 2005.
(2)	Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.
(3)	Expenses (net of voluntary fee waiver and/or expense reimbursements) are equal to each Funds’ or class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

30     Greenwich Street Series Fund 2005 Annual Report

Fund Expenses (unaudited) (continued)

Hypothetical Example for Comparison Purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

   Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

Based on Hypothetical Total Return⁽¹⁾

		Hypothetical			Beginning		Ending		Annualized			Expenses
		Annualized			Account		Account		Expense			Paid During
		Total Return			Value		Value		Ratio			the Period(2)
Diversified Strategic Income Portfolio			5.00	%	$	1,000.00	$	1,021.37		0.76	%	$	3.87
Equity Index Portfolio
	Class I		5.00			1,000.00		1,023.44		0.35			1.79
	Class II		5.00			1,000.00		1,022.18		0.60			3.06
Salomon Brothers Variable
	Growth & Income Fund
	Class I		5.00			1,000.00		1,019.05		1.22			6.21
Salomon Brothers Variable
Aggressive Growth Fund
	Class I		5.00			1,000.00		1,020.62		0.91			4.63
	Class II		5.00			1,000.00		1,019.36		1.16			5.90

(1)	For the six months ended December 31, 2005.
(2)	Expenses (net of voluntary fee waiver and/or expense reimbursements) are equal to each Funds’ or class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

Greenwich Street Series Fund 2005 Annual Report      31

Schedule of Investments (December 31, 2005)

 DIVERSIFIED STRATEGIC INCOME PORTFOLIO

Face
Amount		Rating‡	Security	Value
CORPORATE BONDS & NOTES — 20.7%
Aerospace & Defense — 0.3%
			L-3 Communications Corp., Senior Subordinated Notes:
$	25,000	BB+	7.625% due 6/15/12	$	26,437
	125,000	BB+	6.375% due 10/15/15 (a)		125,312
	150,000	BB-	Sequa Corp., Senior Notes, Series B, 8.875% due 4/1/08		157,125
			Total Aerospace & Defense		308,874
Airlines — 0.2%
			Continental Airlines Inc., Pass-Through Certificates:
	19,776	B+	Series 2000-2, Class C, 8.312% due 4/2/11		17,705
	100,000	B	Series 2001-2, Class D, 7.568% due 12/1/06		98,594
			United Airlines Inc., Pass-Through Certificates:
	23,260	NR	Series 2000-1, Class B, 8.030% due 7/1/11 (b)		16,992
	49,094	Caa1 (i)	Series 2000-2, Class B, 7.811% due 10/1/09 (b)		42,766
	45,000	NR	Series 2001-1, Class C, 6.831% due 9/1/08 (b)		31,899
			Total Airlines		207,956
Auto Components — 0.2%
	25,000	B	Arvin Capital I, Capital Securities, 9.500% due 2/1/27		25,250
	25,000	B-	Rexnord Corp., Senior Subordinated Notes, 10.125% due 12/15/12		27,000
	134,000	BB-	TRW Automotive Inc., Senior Subordinated Notes, 9.375% due 2/15/13		145,725
			Total Auto Components		197,975
Automobiles — 0.7%
	300,000	BBB	DaimlerChrysler North America Holding Corp., 4.050% due 6/4/08		292,214
			Ford Motor Co.:
			Debentures:
	50,000	BB+	6.625% due 10/1/28		32,500
	25,000	BB+	8.900% due 1/15/32		18,437
	250,000	BB+	Notes, 7.450% due 7/16/31		171,250
			General Motors Corp., Senior Debentures:
	15,000	B	8.250% due 7/15/23		9,713
	145,000	B	8.375% due 7/15/33		96,425
			Total Automobiles		620,539
Beverages — 0.0%
	40,000	B+	Cott Beverages USA Inc., Senior Subordinated Notes, 8.000% due 12/15/11		41,200

See Notes to Financial Statements.

32     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security		Value
Building Products — 0.1%
			Associated Materials Inc.:
$	50,000	CCC+		Senior Discount Notes, step bond to yield 9.399% due 3/1/14	$	24,750
	20,000	CCC+	Senior Subordinated Notes, 9.750% due 4/15/12			19,400
			Total Building Products			44,150
Capital Markets — 0.1%
	65,000	B-	BCP Crystal U.S. Holdings Corp., Senior Subordinated Notes, 9.625% due 6/15/14			72,638
Chemicals — 1.1%
	50,000	BB-	Arco Chemical Co., Debentures, 9.800% due 2/1/20			56,375
	25,000	B-	Borden U.S. Finance Corp./ Nova Scotia Finance ULC, Second Priority Senior Secured Notes, 9.000% due 7/15/14 (a)			24,875
	25,000	BBB-	FMC Corp., Senior Debentures, 7.750% due 7/1/11			27,044
	35,000	B	Huntsman International LLC, Senior Notes, 9.875% due 3/1/09			37,100
	50,000	BB-	ISP Chemco Inc., Senior Subordinated Notes, Series B, 10.250% due 7/1/11			53,500
	75,000	B+	ISP Holdings Inc., Senior Secured Notes, Series B, 10.625% due 12/15/09			79,125
	105,000	BB-	Lyondell Chemical Co., Senior Secured Notes, 11.125% due 7/15/12			117,994
	85,000	BBB-	Methanex Corp., Senior Notes, 8.750% due 8/15/12			94,987
	50,000	B-	OM Group Inc., Senior Subordinated Notes, 9.250% due 12/15/11			49,125
	75,000	B-	Resolution Performance Products LLC, Senior Subordinated Notes, 13.500% due 11/15/10			79,688
	200,000	CCC+	Rhodia SA, Senior Notes, 7.625% due 6/1/10			202,000
	114,000	BB-	Westlake Chemical Corp., Senior Notes, 8.750% due 7/15/11			122,550
			Total Chemicals			944,363
Commercial Banks — 1.2%
	550,000	A+	Bank of America Corp., Subordinated Notes, 7.400% due 1/15/11			606,478
	350,000	A-	Standard Chartered Bank PLC, Subordinated Notes, 8.000% due 5/30/31 (a)			453,067
			Total Commercial Banks			1,059,545

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      33

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security	Value
Commercial Services & Supplies — 0.5%
$	50,000	CCC+	Allied Security Escrow Corp., Senior Subordinated Notes, 11.375% due 7/15/11	$	48,452
			Allied Waste North America Inc., Senior Secured Notes, Series B:
	115,000	BB-	8.500% due 12/1/08		121,325
	50,000	B+	7.375% due 4/15/14		48,875
	75,000	CCC+	Brand Services Inc., Senior Notes, 12.000% due 10/15/12		79,125
	25,000	B-	Cardtronics Inc., Senior Subordinated Notes, 9.250% due 8/15/13 (a)		25,000
	75,000	B+	Cenveo Corp., Senior Notes, 9.625% due 3/15/12		81,375
	25,000	BB-	Corrections Corporation of America, Senior Subordinated Notes, 6.250% due 3/15/13		24,875
			Total Commercial Services & Supplies		429,027
Communications Equipment — 0.1%
	75,000	B-	Nortel Networks Corp., Notes, 6.875% due 9/1/23		67,500
Computers & Peripherals — 0.0%
	25,000	B-	SunGard Data Systems Inc., Senior Notes, 9.125% due 8/15/13 (a)		26,000
Containers & Packaging — 0.7%
	75,000	B-	Berry Plastics Corp., Senior Subordinated Notes, 10.750% due 7/15/12		81,000
	75,000	B-	Graphic Packaging International Corp., Senior Subordinated Notes, 9.500% due 8/15/13		72,000
	150,000	B-	JSG Funding PLC, Senior Notes, 9.625% due 10/1/12		150,750
	155,000	BB-	Owens-Brockway Glass Container Inc., Senior Secured Notes, 8.875% due 2/15/09		162,556
	25,000	B	Plastipak Holdings Inc., Senior Notes, 8.500% due 12/15/15 (a)		25,375
			Pliant Corp.:
	15,000	C	Senior Secured Second Lien Notes, 11.125% due 9/1/09 (b)		13,425
	10,000	C	Senior Subordinated Notes, 13.000% due 6/1/10 (b)		2,000
	25,000	CCC-	Radnor Holdings Corp., Senior Notes, 11.000% due 3/15/10		20,375
	100,000	CCC+	Stone Container Finance Co. of Canada II, Senior Notes, 7.375% due 7/15/14		91,500
	35,000	C	Tekni-Plex Inc., Senior Subordinated Notes, Series B, 12.750% due 6/15/10		19,250
			Total Containers & Packaging		638,231

See Notes to Financial Statements.

34     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security		Value
Diversified Consumer Services — 0.3%
			Service Corp. International:
$	55,000	BB	Debentures, 7.875% due 2/1/13		$	57,887
	195,000	BB	Senior Notes, 6.500% due 3/15/08			197,925
			Total Diversified Consumer Services			255,812
Diversified Financial Services — 1.1%
			Alamosa Delaware Inc.:
	44,000	CCC+		Senior Discount Notes, step bond to yield 11.437% due 7/31/09		48,345
	54,000	CCC+	Senior Notes, 11.000% due 7/31/10			61,155
	20,000	BB-	Case Credit Corp., Notes, 6.750% due 10/21/07			20,300
	300,000	A-	EnCana Holdings Finance Corp., 5.800% due 5/1/14			313,225
			Ford Motor Credit Co., Notes:
	15,000	BB+	6.625% due 6/16/08			13,613
	25,000	BB+	7.875% due 6/15/10			22,518
			General Motors Acceptance Corp., Notes:
	20,000	BB	7.250% due 3/2/11			18,402
	275,000	BB	6.875% due 9/15/11			251,071
	150,000	BB	6.750% due 12/1/14			135,160
	40,000	B-	Nell AF SARL, Senior Notes, 8.375% due 8/15/15 (a)			39,800
	75,000	B-	Sensus Metering Systems Inc., Senior Subordinated Notes, 8.625% due 12/15/13			66,750
	50,000	CCC+	Vanguard Health Holdings Co. I LLC, Senior Discount Notes, step bond to yield 9.384% due 10/1/15			36,750
			Total Diversified Financial Services			1,027,089
Diversified Telecommunication Services — 0.5%
	50,000	D	GT Group Telecom Inc., Senior Discount Notes, step bond to yield 15.233% due 2/1/10 (b)(c)(d)			0
	25,000	B+	Intelsat Bermuda Ltd., Senior Notes, 8.695% due 1/15/12 (a)(e)			25,531
	75,000	B	Intelsat Ltd., Senior Discount Notes, step bond to yield 9.207% due 2/1/15 (a)			49,687
	10,000	B+	MCI Inc., Senior Notes, 8.735% due 5/1/14			11,088
	50,000	B-	Northern Telecom Capital Corp., Notes, 7.875% due 6/15/26			48,625
	16,000	B+	PanAmSat Corp., 9.000% due 8/15/14			16,840
			Qwest Communications International Inc., Senior Notes:
	75,000	B	7.500% due 2/15/14			77,437
	90,000	B	7.500% due 2/15/14 (a)			92,925
			Qwest Corp.:
	10,000	BB	7.500% due 6/15/23			9,988
	135,000	BB	Debentures, 6.875% due 9/15/33			127,575
			Total Diversified Telecommunication Services			459,696

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      35

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security	Value
Electric Utilities — 0.6%
			Edison Mission Energy, Senior Notes:
$	100,000	B+	10.000% due 8/15/08	$	110,000
	25,000	B+	7.730% due 6/15/09		25,938
	25,000	B+	9.875% due 4/15/11		29,281
	25,000	B-	Inergy L.P./ Inergy Finance Corp., 6.875% due 12/15/14		22,875
	90,000	B	Orion Power Holdings Inc., Senior Notes, 12.000% due 5/1/10		102,150
			Reliant Energy Inc., Senior Secured Notes:
	25,000	B+	9.250% due 7/15/10		25,125
	125,000	B+	9.500% due 7/15/13		125,937
	75,000	B	Texas Genco LLC/ Texas Genco Financing Corp., Senior Notes, 6.875% due 12/15/14 (a)		81,563
			Total Electric Utilities		522,869
Electronic Equipment & Instruments — 0.2%
			Muzak LLC/ Muzak Finance Corp.:
	135,000	CCC-	Senior Notes, 10.000% due 2/15/09		118,462
	50,000	CCC-	Senior Subordinated Notes, 9.875% due 3/15/09		27,813
			Total Electronic Equipment & Instruments		146,275
Energy Equipment & Services — 0.0%
	22,000	B-	Dresser-Rand Group Inc., Senior Subordinated Notes, 7.625% due 11/1/14 (a)		22,770
Food & Staples Retailing  — 0.3%
	75,000	B-	Jean Coutu Group Inc., Senior Subordinated Notes, 8.500% due 8/1/14		69,000
	200,000	BBB-	Safeway Inc., Senior Debentures, 7.250% due 2/1/31		216,462
			Total Food & Staples Retailing		285,462
Food Products — 0.6%
	45,000	BB-	Dean Foods Co., Senior Notes, 6.900% due 10/15/17		45,900
	25,000	B-	Doane Pet Care Co., Senior Subordinated Notes, 10.625% due 11/15/15 (a)		26,187
	75,000	B+	Dole Food Co. Inc., Senior Notes, 7.250% due 6/15/10		73,125
	355,000	BBB+	Kraft Foods Inc., Senior Notes, 5.625% due 11/1/11		364,679
			Total Food Products		509,891
Health Care Providers & Services — 0.9%
	25,000	B	Community Health Systems Inc., Senior Subordinated Notes, 6.500% due 12/15/12		24,469
	25,000	B	DaVita Inc., Senior Notes, 6.625% due 3/15/13		25,563
	50,000	B+	Extendicare Health Services Inc., Senior Subordinated Notes, 9.500% due 7/1/10		53,312
	140,000	BB+	HCA Inc., Debentures, 8.360% due 4/15/24		153,342

See Notes to Financial Statements.

36     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security	Value
Health Care Providers & Services — 0.9% (continued)
$	50,000	B-	IASIS Healthcare LLC/ IASIS Capital Corp., Senior Subordinated Notes, 8.750% due 6/15/14	$	52,750
	50,000	CCC+	InSight Health Services Corp., Senior Subordinated Notes, Series B, 9.875% due 11/1/11		38,000
	50,000	B-	Psychiatric Solutions Inc., Senior Subordinated Notes, 7.750% due 7/15/15		51,875
			Tenet Healthcare Corp., Senior Notes:
	75,000	B	7.375% due 2/1/13		69,562
	25,000	B	9.875% due 7/1/14		25,438
	300,000	BBB+	WellPoint Health Networks Inc., Notes, 6.375% due 1/15/12		319,057
			Total Health Care Providers & Services		813,368
Hotels, Restaurants & Leisure — 1.2%
	40,000	CCC+	AMC Entertainment Inc., Senior Subordinated Notes, 9.500% due 2/1/11		39,550
	75,000	B+	Boyd Gaming Corp., Senior Subordinated Notes, 6.750% due 4/15/14		74,812
	75,000	BB+	Caesars Entertainment Inc., Senior Subordinated Notes, 8.875% due 9/15/08		81,281
	25,000	B-	Carrols Corp. Senior Subordinated Notes, 9.000% due 1/15/13		24,438
	25,000	B-	Equinox Holdings Inc., Senior Notes, 9.000% due 12/15/09		26,844
	75,000	B-	Gaylord Entertainment Co., Senior Notes, 6.750% due 11/15/14		73,875
	75,000	B-	Herbst Gaming Inc., Senior Subordinated Notes, 7.000% due 11/15/14		75,000
	75,000	CCC-	Icon Health & Fitness Inc., Senior Subordinated Notes, 11.250% due 4/1/12		63,187
	50,000	B	Las Vegas Sands Corp., Senior Notes, 6.375% due 2/15/15		48,375
	25,000	B-	Leslie’s Poolmart, Senior Notes, 7.750% due 2/1/13		25,187
			MGM MIRAGE Inc.:
	125,000	BB	Senior Notes, 6.750% due 9/1/12		127,344
	30,000	B+	Senior Subordinated Debentures, 7.625% due 7/15/13		31,275
	80,000	B+	Senior Subordinated Notes, Series B, 10.250% due 8/1/07		85,700
	50,000	B+	Mohegan Tribal Gaming Authority, Senior Subordinated Notes, 6.875% due 2/15/15		50,625
	75,000	B	Penn National Gaming Inc., Senior Subordinated Notes, 6.875% due 12/1/11		76,125
	75,000	B-	Pinnacle Entertainment Inc., Senior Subordinated Notes, 8.750% due 10/1/13		80,250

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      37

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security		Value
Hotels, Restaurants & Leisure — 1.2% (continued)
$	25,000	B+	Scientific Games Corp., Senior Subordinated Notes, 6.250% due 12/15/12		$	24,719
	50,000	B+	Turning Stone Casino Resort Enterprise, Senior Notes, 9.125% due 12/15/10 (a)			51,750
			Total Hotels, Restaurants & Leisure			1,060,337
Household Durables — 0.4%
	19,000	CCC-	Applica Inc., Senior Subordinated Notes, 10.000% due 7/31/08			18,525
	50,000	CC	Home Interiors & Gifts Inc., Senior Subordinated Notes, 10.125% due 6/1/08			35,250
	70,000	BB-	Schuler Homes Inc., Senior Subordinated Notes, 10.500% due 7/15/11			75,600
	50,000	B-	Sealy Mattress Co., Senior Subordinated Notes, 8.250% due 6/15/14			51,750
	35,000	B+	Standard Pacific Corp., Senior Subordinated Notes, 9.250% due 4/15/12			36,181
	98,000	B	Tempur-Pedic Inc./ Tempur Production USA Inc., Senior Subordinated Notes, 10.250% due 8/15/10			106,453
			Total Household Durables			323,759
Independent Power Producers & Energy Traders — 0.6%
	55,000	B-	AES Corp., Senior Notes, 9.500% due 6/1/09			59,675
	100,000	D	Calpine Corp., Second Priority Senior Secured Notes, 8.500% due 7/15/10 (a)(b)			82,500
			Dynegy Holdings Inc.:
	125,000	B-		Second Priority Senior Secured Notes, 10.650% due 7/15/08 (a)(e)		132,656
			Senior Debentures:
	125,000	CCC+	7.125% due 5/15/18			111,875
	30,000	CCC+	7.625% due 10/15/26			26,850
	50,000	B-	Mirant North America LLC, Senior Notes, 7.375% due 12/31/13 (a)			50,813
	64,000	B	NRG Energy Inc., Second Priority Senior Secured Notes, 8.000% due 12/15/13			71,680
			Total Independent Power Producers & Energy Traders			536,049
Industrial Conglomerates — 0.1%
	50,000	NR	Aqua-Chem Inc., Senior Subordinated Notes, 11.250% due 7/1/08 (c)			42,000
	50,000	B	Koppers Inc., Senior Notes, 9.875% due 10/15/13			54,500
			Total Industrial Conglomerates			96,500

See Notes to Financial Statements.

38     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security		Value
Insurance — 0.1%
$	65,000	BB	Markel Capital Trust I, Capital Securities, Series B, 8.710% due 1/1/46		$	69,967
IT Services — 0.2%
	200,000	B	Iron Mountain Inc., Senior Subordinated Notes, 8.625% due 4/1/13			209,500
Machinery — 0.1%
	100,000	B-	Mueller Holdings Inc., Discount Notes, step bond to yield 12.068% due 4/15/14			75,750
	30,000	B+	NMHG Holding Co., Senior Notes, 10.000% due 5/15/09			32,100
	30,000	CCC+	Wolverine Tube Inc., Senior Notes, 10.500% due 4/1/09			23,400
			Total Machinery			131,250
Media — 3.0%
	125,000	B	Advanstar Communications Inc., Senior Secured Notes, 10.750% due 8/15/10			137,656
	65,000	B+	Cablevision Systems Corp., Senior Notes, Series B, 8.716% due 4/1/09 (e)			65,975
	50,000	B	Cadmus Communications Corp., Senior Subordinated Notes, 8.375% due 6/15/14			51,625
	188,212	B-	CanWest Media Inc., Senior Subordinated Notes, 8.000% due 9/15/12			193,153
			Charter Communications Holdings LLC:
	175,000	CCC-		Senior Accreting Notes, step bond to yield 18.099% due 5/15/14 (a)		98,000
	189,000	CCC-	Senior Secured Notes, 11.000% due 10/1/15 (a)			159,705
	245,000	BBB+	Comcast Cable Communications Holdings Inc., Notes, 8.375% due 3/15/13			283,974
			CSC Holdings Inc., Senior Notes:
	50,000	B+	7.000% due 4/15/12 (a)			47,500
	30,000	B+	Series B, 7.625% due 4/1/11			30,000
	65,000	B	Dex Media East LLC/ Dex Media East Finance Co., Senior Notes, Series B, 12.125% due 11/15/12			76,375
	100,000	B	Dex Media West LLC/ Dex Media Finance Co., Senior Notes, Series B, 8.500% due 8/15/10			105,250
	81,000	BB-	DIRECTV Holdings LLC/ DIRECTV Financing Co. Inc., Senior Notes, 8.375% due 3/15/13			87,480
	150,000	BB-	EchoStar DBS Corp., Senior Notes, 6.625% due 10/1/14			144,562

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      39

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security	Value
Media — 3.0% (continued)
$	100,000	B-	Houghton Mifflin Co., Senior Discount Notes, step bond to yield 11.492% due 10/15/13	$	79,000
	130,000	CCC+	Insight Communications Co. Inc., Senior Discount Notes, step bond to yield 12.269% due 2/15/11		136,500
	40,000	B	Lamar Media Corp. Senior Subordinated Notes, 6.625% due 8/15/15		40,350
	175,000	B-	LodgeNet Entertainment Corp., Senior Subordinated Debentures, 9.500% due 6/15/13		191,187
	175,000	B	Mediacom LLC/ Mediacom Capital Corp., Senior Notes, 9.500% due 1/15/13		171,719
	100,000	B+	R.H. Donnelley Finance Corp. I, Senior Subordinated Notes, 10.875% due 12/15/12 (a)		113,250
	25,000	B+	R.H. Donnelley Inc., Senior Subordinated Notes, 10.875% due 12/15/12		28,313
	25,000	B	Rainbow National Services LLC, Senior Subordinated Debentures, 10.375% due 9/1/14 (a)		28,125
	75,000	B	Sinclair Broadcast Group Inc., Senior Subordinated Notes, 8.750% due 12/15/11		79,312
	250,000	BBB+	Time Warner Inc., Senior Notes, 7.625% due 4/15/31		279,237
	33,000	B+	Yell Finance BV, Senior Discount Notes, step bond to yield 12.263% due 8/1/11		34,073
			Total Media		2,662,321
Metals & Mining — 0.3%
	75,000	B+	Aleris International Inc., Senior Secured Notes, 10.375% due 10/15/10		82,312
	75,000	B	Novelis Inc., Senior Notes, 7.500% due 2/15/15 (a)		70,313
	75,000	BBB	Phelps Dodge Corp., Senior Notes, 8.750% due 6/1/11		86,331
			Total Metals & Mining		238,956
Multi-Utilities — 0.3%
	45,000	BB+	Avista Corp., Senior Notes, 9.750% due 6/1/08		49,343
	200,000	BBB	Dominion Resources Inc., Senior Notes, 6.300% due 3/15/33		204,156
			Total Multi-Utilities		253,499
Multiline Retail — 0.0%
	25,000	B-	Neiman Marcus Group Inc., Senior Subordinated Notes, 10.375% due 10/15/15 (a)		25,531
Oil, Gas & Consumable Fuels — 2.0%
			Chesapeake Energy Corp., Senior Notes:
	100,000	BB	6.625% due 1/15/16		101,750
	50,000	BB	6.250% due 1/15/18		49,250
	88,000	B+	Cimarex Energy Co., Senior Notes, 9.600% due 3/15/12		95,920

See Notes to Financial Statements.

40     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security	Value
Oil, Gas & Consumable Fuels — 2.0% (continued)
			El Paso Corp., Medium-Term Notes:
$	50,000	B-	7.375% due 12/15/12	$	50,500
	350,000	B-	7.800% due 8/1/31		350,875
	75,000	B	EXCO Resources Inc., Senior Notes, 7.250% due 1/15/11		76,500
	175,000	BB	Gaz Capital SA, 8.625% due 4/28/34		222,250
	25,000	BB-	Massey Energy Co., Senior Notes, 6.625% due 11/15/10		25,531
	35,000	BB-	SESI LLC, Senior Notes, 8.875% due 5/15/11		36,838
	75,000	B-	Stone Energy Corp., Senior Subordinated Notes, 6.750% due 12/15/14		71,438
	105,000	B	Swift Energy Co., Senior Subordinated Notes, 9.375% due 5/1/12		113,400
	275,000	BBB-	Valero Energy Corp., Notes, 4.750% due 6/15/13		267,331
			Vintage Petroleum Inc.:
	50,000	BB-	Senior Notes, 8.250% due 5/1/12		53,875
	25,000	B	Senior Subordinated Notes, 7.875% due 5/15/11		26,250
			Williams Cos. Inc.:
	150,000	B+	Notes, 7.125% due 9/1/11		156,562
	125,000	B+	Senior Notes, 7.625% due 7/15/19		134,687
			Total Oil, Gas & Consumable Fuels		1,832,957
Paper & Forest Products — 0.2%
	50,000	BB-	Appleton Papers Inc., Senior Notes, 8.125% due 6/15/11		48,875
	75,000	B+	Bowater Canada Finance Corp., Notes, 7.950% due 11/15/11		73,125
			Buckeye Technologies Inc.:
	25,000	B+	Senior Notes, 8.500% due 10/1/13		25,125
	23,000	B	Senior Subordinated Notes, 9.250% due 9/15/08		23,115
	25,000	B+	Domtar Inc., Notes, 7.125% due 8/15/15		21,438
			Total Paper & Forest Products		191,678
Personal Products — 0.0%
	50,000	CCC+	DEL Laboratories Inc., Senior Subordinated Notes, 8.000% due 2/1/12		39,750
Pharmaceuticals — 0.1%
	75,000	BB-	Valeant Pharmaceuticals International, Senior Notes, 7.000% due 12/15/11		74,063

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      41

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security	Value
Real Estate — 0.9%
$	275,000	BBB	Boston Properties LP, Senior Notes, 6.250% due 1/15/13	$	288,899
	130,000	BB-	Host Marriott LP, Senior Notes, Series I, 9.500% due 1/15/07		135,200
	300,000	BBB-	iStar Financial Inc., Senior Notes, 5.150% due 3/1/12		290,913
	75,000	CCC+	MeriStar Hospitality Operating Partnership LP/ MeriStar Hospitality Finance Corp., Senior Notes, 10.500% due 6/15/09		79,406
			Total Real Estate		794,418
Semiconductors & Semiconductor Equipment — 0.2%
			Amkor Technology Inc.:
	125,000	CCC+	Senior Notes, 7.125% due 3/15/11		110,625
	60,000	CCC	Senior Subordinated Notes, 10.500% due 5/1/09		55,500
			Total Semiconductors & Semiconductor Equipment		166,125
Textiles, Apparel & Luxury Goods — 0.2%
	75,000	B-	Levi Strauss & Co., Senior Notes, 9.750% due 1/15/15		78,375
	125,000	B-	Simmons Co., Senior Discount Notes, step bond to yield 9.955% due 12/15/14 (a)		68,125
			Total Textiles, Apparel & Luxury Goods		146,500
Thrifts & Mortgage Finance — 0.1%
	100,000	CCC-	Ocwen Capital Trust I, Capital Securities, 10.875% due 8/1/27		106,000
Wireless Telecommunication Services — 1.0%
	50,600	CCC	AirGate PCS Inc., Senior Secured Subordinated Notes, 9.375% due 9/1/09		53,130
	225,000	A	New Cingular Wireless Services Inc., Senior Notes, 8.750% due 3/1/31		298,972
	125,000	A-	Nextel Communications Inc., Senior Notes, Series D, 7.375% due 8/1/15		132,018
	49,000	B-	SBA Communications Corp., Senior Notes, 8.500% due 12/1/12		54,635
	250,000	A-	Sprint Capital Corp., Notes, 8.375% due 3/15/12		290,098
	50,000	B-	UbiquiTel Operating Co., Senior Notes, 9.875% due 3/1/11		55,625
			Total Wireless Telecommunication Services		884,478
			TOTAL CORPORATE BONDS & NOTES (Cost — $18,344,159)		18,544,868

See Notes to Financial Statements.

42     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security	Value
ASSET-BACKED SECURITIES — 1.8%
Credit Card — 0.5%
$	42,854	B	First Consumers Master Trust, Series 2001-A, Class A, 4.679% due 9/15/08 (e)	$	42,611
	423,000	BBB	Metris Master Trust, Series 2001-2, Class B, 5.450% due 11/20/09 (e)		423,907
			Total Credit Card		466,518
Home Equity — 1.3%
	200,000	A	Ameriquest Mortgage Securities Inc., Series 2004-R11, Class M5, 5.579% due 11/25/34 (e)		203,533
			Bear Stearns Asset-Backed Securities NIM Trust:
	599	BBB	Series 2003-HE1N, Class N1, 6.500% due 1/25/34 (a)		599
	27,457	BBB	Series 2004-FR1N, Class A1, 5.000% due 5/25/34 (a)		27,343
	40,004	BBB	Series 2004-HE6N, Class A1, 5.250% due 8/25/34 (a)		39,858
			Countrywide Asset-Backed Certificates:
	270,000	AA	Series 2004-05, Class M4, 5.629% due 6/25/34 (e)		273,992
	37,138	BBB	Series 2004-05N, Class N1, 5.500% due 10/25/35 (a)		37,036
			Novastar Home Equity Loan:
	90,000	A	Series 2003-04, Class M2, 6.004% due 2/25/34 (e)		91,581
	200,000	A+	Series 2004-01, Class M4, 5.354% due 6/25/34 (e)		200,901
			Sail Net Interest Margin Notes:
	10,224	BBB	Series 2003-003, Class A, 7.750% due 4/27/33 (a)		10,189
	24,617	BBB+	Series 2004-004A, Class A, 5.000% due 4/27/34 (a)		24,603
	55,270	BBB	Series 2004-11A, Class A2, 4.750% due 1/27/35 (a)		54,988
	60,441	BB+	Series 2004-11A, Class B, 7.500% due 1/27/35 (a)		59,337
	74,865	BBB-	Series 2004-BN2A, Class A, 5.000% due 12/27/34 (a)		74,741
			Total Home Equity		1,098,701
			TOTAL ASSET-BACKED SECURITIES (Cost — $1,510,124)		1,565,219
MORTGAGE-BACKED SECURITIES — 49.7%
FHLMC — 21.7%
			Federal Home Loan Mortgage Corp. (FHLMC) Gold:
	142,309		7.000% due 2/1/15-5/1/16		147,707
	198,133		6.500% due 9/1/31		203,520
	15,100,000		5.000% due 1/12/36 (f)(g)		14,618,688
	2,000,000		5.500% due 1/12/36 (f)(g)		1,981,876
	2,500,000		6.000% due 1/12/36 (f)(g)		2,525,000
			Total FHLMC		19,476,791

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      43

Schedule of Investments (December 31, 2005) (continued)

Face
Amount		Rating‡	Security	Value
FNMA — 27.5%
			Federal National Mortgage Association (FNMA):
$	775,769		6.500% due 3/1/16-3/1/32	$	797,874
	1,387,787		6.000% due 8/1/16-4/1/32		1,406,273
	164,423		5.500% due 12/1/16		165,680
	3,000,000		4.000% due 1/12/21 (f)(g)		2,865,000
	63,138		7.500% due 2/1/30-7/1/31		66,169
	648,299		7.000% due 5/1/30-4/1/32		676,827
	2,600,000		4.500% due 1/12/36 (f)(g)		2,448,875
	1,500,000		5.000% due 1/12/36 (f)(g)		1,453,593
	9,250,000		5.500% due 1/12/36 (f)(g)		9,160,386
	5,500,000		6.000% due 1/12/36 (f)(g)		5,551,562
			Total FNMA		24,592,239
GNMA — 0.5%
			Government National Mortgage Association (GNMA):
	77,749		7.000% due 6/15/28-7/15/29		81,731
	361,893		6.500% due 9/15/28-2/15/31		378,814
			Total GNMA		460,545
			TOTAL MORTGAGE-BACKED SECURITIES (Cost — $45,152,871)		44,529,575
COLLATERALIZED MORTGAGE OBLIGATION — 0.4%
	388,155	AAA	Commercial Mortgage Pass-Through Certificates, Series 2001-J2A, Class A1, 5.447% due 7/16/34 (a) (Cost — $402,332)		392,882
U.S. GOVERNMENT & AGENCY OBLIGATIONS — 19.7%
U.S. Government Obligations — 19.7%
			U.S. Treasury Notes:
	1,000,000		3.625% due 1/15/10		972,891
	700,000		4.000% due 3/15/10		690,184
	6,400,000		4.000% due 4/15/10 (h)		6,309,005
	2,500,000		4.125% due 8/15/10		2,476,173
	2,100,000		5.000% due 2/15/11		2,163,575
	2,500,000		3.875% due 2/15/13		2,423,928
	630,000		4.250% due 11/15/14		622,863
	2,000,000		4.250% due 8/15/15 (h)		1,974,766
			TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost — $17,920,979)		17,633,385

See Notes to Financial Statements.

44     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
COMMON STOCKS — 0.4%
CONSUMER STAPLES — 0.0%
Food Products — 0.0%
	3,630	Aurora Foods Inc. (c)(d)*	$	0
FINANCIALS — 0.0%
Diversified Financial Services — 0.0%
	369	Outsourcing Solutions Inc. (d)*		1,567
INDUSTRIALS — 0.0%
Aerospace & Defense — 0.0%
	95	Northrop Grumman Corp.		5,710
INFORMATION TECHNOLOGY — 0.0%
Communications Equipment — 0.0%
	578	Motorola Inc.		13,057
Semiconductors & Semiconductor Equipment — 0.0%
	63	Freescale Semiconductor Inc., Class B Shares*		1,586
		TOTAL INFORMATION TECHNOLOGY		14,643
TELECOMMUNICATION SERVICES — 0.4%
Diversified Telecommunication Services — 0.2%
	66	McLeodUSA Inc., Class A Shares*		1
	6,485	Telewest Global Inc.*		154,472
		Total Diversified Telecommunication Services		154,473
Wireless Telecommunication Services — 0.2%
	6,004	Alamosa Holdings Inc.*		111,735
	1,308	Crown Castle International Corp.*		35,198
		Total Wireless Telecommunication Services		146,933
		TOTAL TELECOMMUNICATION SERVICES		301,406
		TOTAL COMMON STOCKS (Cost — $402,637)		323,326
CONVERTIBLE PREFERRED STOCKS — 0.2%
TELECOMMUNICATION SERVICES — 0.2%
Wireless Telecommunication Services — 0.2%
	125	Alamosa Holdings Inc., Series B, 7.500% due 7/31/13		171,422
	700	Crown Castle International Corp., 6.250% due 8/15/12		37,100
		TOTAL CONVERTIBLE PREFERRED STOCKS (Cost — $56,298)		208,522

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      45

Schedule of Investments (December 31, 2005) (continued)

Warrants		Security	Value
WARRANTS — 0.0%
	50	American Tower Corp., Class A Shares, Expires 8/1/08 (a)*	$	19,138
	60	Cybernet Internet Services International Inc., Expires 7/1/09 (a)(c)(d)*		0
	50	GT Group Telecom Inc., Class B Shares, Expires 2/1/10 (a)(c)(d)*		0
	50	IWO Holdings Inc., Expires 1/15/11 (a)(c)(d)*		0
	60	Merrill Corp., Class B Shares, Expires 5/1/09 (a)(c)(d)*		0
	10	Pliant Corp., Expires 6/1/10 (a)(c)(d)*		0
	150	RSL Communications Ltd., Class A Shares, Expires 11/15/06 (c)(d)*		0
	1,000	United Mexican States, Series XW10, Expires 10/10/06*		4,250
		TOTAL WARRANTS (Cost — $26,526)		23,388

Face
Amount†			Rating‡
SOVEREIGN BONDS — 5.1%
Argentina — 0.2%
				Republic of Argentina:
$	209,260	ARS	B-	5.830% due 12/31/33	75,461
	70,345		B-	Discount Notes, 8.280% due 12/31/33	59,266
	195,557		NR	Series GDP, zero coupon, due 12/15/35 (e)	10,365
	593,471	ARS	NR	Series PGDP, zero coupon, due 12/15/35 (e)	9,315
				Total Argentina	154,407
Brazil — 1.1%
				Federative Republic of Brazil:
	250,000		BB-	8.750% due 2/4/25	276,875
	485,000		BB-	Collective Action Securities, 8.000% due 1/15/18	523,679
	214,122		BB-	DCB, Series L, 5.250% due 4/15/12	211,980
				Total Brazil	1,012,534
Bulgaria — 0.1%
	50,000		BBB	Republic of Bulgaria, 8.250% due 1/15/15	60,500
Colombia — 0.3%
				Republic of Colombia:
	50,000		BB	10.000% due 1/23/12	59,550
	50,000		BB	10.750% due 1/15/13	62,250
	125,000		BB	8.125% due 5/21/24	135,313
				Total Colombia	257,113
Ecuador — 0.1%
	75,000		CCC+	Republic of Ecuador, step bond to yield 11.055% due 8/15/30	68,438
Italy — 0.4%
	350,000		AA-	Region of Lombardy, 5.804% due 10/25/32	378,702

See Notes to Financial Statements.

46     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Face
Amount†		Rating‡	Security	Value
Mexico — 0.9%
			United Mexican States:
$	225,000	BBB	8.125% due 12/30/19	$	276,750
			Series A, Notes:
	225,000	BBB	6.375% due 1/16/13		239,625
	275,000	BBB	5.875% due 1/15/14		285,312
			Total Mexico		801,687
Panama — 0.2%
			Republic of Panama:
	50,000	BB	7.250% due 3/15/15		53,325
	75,000	BB	9.375% due 1/16/23		94,313
			Total Panama		147,638
Peru — 0.2%
			Republic of Peru:
	50,000	BB	9.125% due 2/21/12		57,375
	73,500	BB	FLIRB, 5.000% due 3/7/17		69,090
	61,500	BB	PDI, 5.000% due 3/7/17		58,348
			Total Peru		184,813
Philippines — 0.4%
			Republic of the Philippines:
	50,000	BB-	8.375% due 3/12/09		53,563
	50,000	BB-	8.875% due 3/17/15		55,437
	100,000	BB-	9.875% due 1/15/19		118,875
	75,000	BB-	10.625% due 3/16/25		95,437
	50,000	BB-	9.500% due 2/2/30		58,875
			Total Philippines		382,187
Russia — 0.4%
	250,000	BBB	Russian Federation, 11.000% due 7/24/18		369,687
South Africa — 0.1%
	50,000	BBB+	Republic of South Africa, 6.500% due 6/2/14		54,125
Turkey — 0.4%
			Republic of Turkey:
	100,000	BB-	9.000% due 6/30/11		114,250
	25,000	BB-	11.500% due 1/23/12		31,781
	75,000	BB-	7.375% due 2/5/25		77,625
	100,000	BB-	11.875% due 1/15/30		154,000
			Total Turkey		377,656

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      47

Schedule of Investments (December 31, 2005) (continued)

Face
Amount†		Rating‡	Security	Value
Venezuela — 0.3%
			Bolivarian Republic of Venezuela, Collective Action Security:
$	150,000	B+	10.750% due 9/19/13	$	184,875
	75,000	B+	9.375% due 1/13/34		89,063
			Total Venezuela		273,938
			TOTAL SOVEREIGN BONDS (Cost — $4,266,505)		4,523,425
			TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $88,082,431)		87,744,590
SHORT-TERM INVESTMENT — 46.6%
Repurchase Agreement — 46.6%
$	41,675,000		Interest in $577,312,000 joint tri-party repurchase agreement dated 12/30/05 with Morgan Stanley, 4.250% due 1/3/06; Proceeds at maturity — $41,694,680; (Fully collateralized by various U.S. government agency obligations, 0.000% to 6.300% due 2/5/07 to 10/6/25; Market value — $42,949,861) (Cost — $41,675,000) (h)		41,675,000
			TOTAL INVESTMENTS — 144.6% (Cost — $129,757,431#)		129,419,590
			Liabilities in Excess of Other Assets — (44.6)%		(39,898,077)
			TOTAL NET ASSETS — 100.0%	$	89,521,513

^‡ All ratings are by Standard & Poor’s Ratings Service, unless otherwise footnoted. All ratings are unaudited.

^* Non-income producing security.

^† Face amount denominated in U.S. dollars, unless otherwise indicated.

(a)	Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees, unless otherwise noted.
(b)	Security is currently in default.
(c)	Illiquid security.
(d)	Security is valued in good faith at fair value by or under the direction of the Board of Trustees (See Note 1).
(e)	Variable rate security. Interest rate disclosed is that which is in effect at December 31, 2005.
(f)	This security is traded on a “to-be-announced” basis (See Note 1).
(g)	All or a portion of this security is acquired under mortgage dollar roll agreement (See Notes 1 and 3).
(h)	All or a portion of this security is segregated for open futures contracts, TBA’s and mortgage dollar rolls.
(i)	Ratings by Moody’s Investors Service. All ratings are unaudited.
#	Aggregate cost for federal income tax purposes is $129,774,456.

See page 75 for definitions of ratings.

Abbreviations used in this schedule:

ARS  — Argentine Peso

DCB  — Debt Conversion Bond

FLIRB — Front-Loaded Interest Reduction Bonds

GDP  — Gross Domestic Product

NIM  — Net Interest Margin

PDI  — Past Due Interest

See Notes to Financial Statements.

48     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005)

 EQUITY INDEX PORTFOLIO

Shares		Security	Value
COMMON STOCKS — 100.1%
CONSUMER DISCRETIONARY — 10.8%
Auto Components — 0.2%
	9,248	Cooper Tire & Rubber Co.	$	141,679
	22,568	Dana Corp.		162,038
	26,308	Goodyear Tire & Rubber Co.*		457,233
	28,596	Johnson Controls Inc.		2,084,935
		Total Auto Components		2,845,885
Automobiles — 0.3%
	275,291	Ford Motor Co.		2,125,247
	84,129	General Motors Corp.		1,633,785
	40,900	Harley-Davidson Inc.		2,105,941
		Total Automobiles		5,864,973
Distributors — 0.1%
	25,682	Genuine Parts Co.		1,127,953
Diversified Consumer Services — 0.1%
	21,713	Apollo Group Inc., Class A Shares*		1,312,768
	47,973	H&R Block Inc.		1,177,737
		Total Diversified Consumer Services		2,490,505
Hotels, Restaurants & Leisure — 1.5%
	64,126	Carnival Corp.		3,428,817
	19,771	Darden Restaurants Inc.		768,696
	27,404	Harrah’s Entertainment Inc.		1,953,631
	48,952	Hilton Hotels Corp.		1,180,233
	50,866	International Game Technology		1,565,655
	25,431	Marriott International Inc., Class A Shares		1,703,114
	185,973	McDonald’s Corp.		6,271,010
	114,261	Starbucks Corp.*		3,428,973
	32,294	Starwood Hotels & Resorts Worldwide Inc.		2,062,295
	17,145	Wendy’s International Inc.		947,433
	42,338	Yum! Brands Inc.		1,984,805
		Total Hotels, Restaurants & Leisure		25,294,662
Household Durables — 0.7%
	12,022	Black & Decker Corp.		1,045,433
	19,103	Centex Corp.		1,365,674
	40,588	D.R. Horton Inc.		1,450,209
	21,687	Fortune Brands Inc.		1,692,020
	11,607	KB HOME		843,365
	28,278	Leggett & Platt Inc.		649,263

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      49

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Household Durables — 0.7% (continued)
	19,805	Lennar Corp., Class A Shares	$	1,208,501
	11,698	Maytag Corp.		220,156
	41,191	Newell Rubbermaid Inc.		979,522
	31,756	Pulte Homes Inc.		1,249,916
	8,406	Snap-on Inc.		315,729
	10,915	Stanley Works		524,357
	9,959	Whirlpool Corp.		834,166
		Total Household Durables		12,378,311
Internet & Catalog Retail — 0.6%
	45,739	Amazon.com Inc.*		2,156,594
	170,498	eBay Inc.*		7,374,038
		Total Internet & Catalog Retail		9,530,632
Leisure Equipment & Products — 0.2%
	14,350	Brunswick Corp.		583,471
	42,487	Eastman Kodak Co.		994,196
	26,893	Hasbro Inc.		542,701
	59,939	Mattel Inc.		948,235
		Total Leisure Equipment & Products		3,068,603
Media — 3.3%
	10,047	CCE Spinco Inc.*		131,616
	80,383	Clear Channel Communications Inc.		2,528,045
	326,033	Comcast Corp., Class A Shares*		8,463,817
	8,631	Dow Jones & Co. Inc.		306,314
	12,841	E.W. Scripps Co., Class A Shares		616,625
	36,133	Gannett Co. Inc.		2,188,576
	62,447	Interpublic Group of Cos. Inc.*		602,613
	10,191	Knight-Ridder Inc.		645,090
	55,677	McGraw-Hill Cos. Inc.		2,874,603
	6,282	Meredith Corp.		328,800
	21,275	New York Times Co., Class A Shares		562,724
	364,011	News Corp., Class A Shares		5,660,371
	26,989	Omnicom Group Inc.		2,297,574
	697,221	Time Warner Inc.		12,159,534
	39,307	Tribune Co.		1,189,430
	34,385	Univision Communications Inc., Class A Shares*		1,010,575
	235,506	Viacom Inc., Class B Shares		7,677,496
	287,039	Walt Disney Co.		6,880,325
		Total Media		56,124,128

See Notes to Financial Statements.

50     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Multiline Retail — 1.2%
	17,052	Big Lots Inc.*	$	204,795
	9,840	Dillard’s Inc., Class A Shares		244,229
	48,033	Dollar General Corp.		915,989
	23,033	Family Dollar Stores Inc.		570,988
	39,368	Federated Department Stores Inc.		2,611,279
	37,083	J.C. Penney Co. Inc.		2,061,815
	51,140	Kohl’s Corp.*		2,485,404
	32,810	Nordstrom Inc.		1,227,094
	15,236	Sears Holdings Corp.*		1,760,215
	131,533	Target Corp.		7,230,369
		Total Multiline Retail		19,312,177
Specialty Retail — 2.2%
	27,162	AutoNation Inc.*		590,230
	8,326	AutoZone Inc.*		763,911
	43,878	Bed Bath & Beyond Inc.*		1,586,190
	60,303	Best Buy Co. Inc.		2,621,975
	24,073	Circuit City Stores Inc.		543,809
	86,006	Gap Inc.		1,517,146
	318,163	Home Depot Inc.		12,879,238
	52,123	Limited Brands Inc.		1,164,949
	115,954	Lowe’s Cos. Inc.		7,729,494
	46,802	Office Depot Inc.*		1,469,583
	10,320	OfficeMax Inc.		261,715
	19,979	RadioShack Corp.		420,158
	17,079	Sherwin-Williams Co.		775,728
	109,402	Staples Inc.		2,484,519
	21,331	Tiffany & Co.		816,764
	69,418	TJX Cos. Inc.		1,612,580
		Total Specialty Retail		37,237,989
Textiles, Apparel & Luxury Goods — 0.4%
	56,369	Coach Inc.*		1,879,343
	17,608	Jones Apparel Group Inc.		540,918
	16,077	Liz Claiborne Inc.		575,878
	28,323	NIKE Inc., Class B Shares		2,458,153
	7,954	Reebok International Ltd.		463,161
	13,324	V.F. Corp.		737,350
		Total Textiles, Apparel & Luxury Goods		6,654,803
		TOTAL CONSUMER DISCRETIONARY		181,930,621

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      51

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
CONSUMER STAPLES — 9.6%
Beverages — 2.1%
	115,526	Anheuser-Busch Cos. Inc.	$	4,962,997
	12,410	Brown-Forman Corp., Class B Shares		860,261
	308,675	Coca-Cola Co.		12,442,689
	44,557	Coca-Cola Enterprises Inc.		854,158
	29,305	Constellation Brands Inc., Class A Shares*		768,670
	8,496	Molson Coors Brewing Co., Class B Shares		569,147
	20,837	Pepsi Bottling Group Inc.		596,147
	247,992	PepsiCo Inc.		14,651,367
		Total Beverages		35,705,436
Food & Staples Retailing — 2.4%
	54,666	Albertson’s Inc.		1,167,119
	71,354	Costco Wholesale Corp.		3,529,882
	120,677	CVS Corp.		3,188,286
	107,967	Kroger Co.*		2,038,417
	66,335	Safeway Inc.		1,569,486
	20,217	SUPERVALU INC		656,648
	94,006	Sysco Corp.		2,918,886
	371,003	Wal-Mart Stores Inc.		17,362,941
	151,766	Walgreen Co.		6,717,163
	19,617	Whole Foods Market Inc.		1,518,160
		Total Food & Staples Retailing		40,666,988
Food Products — 1.1%
	96,621	Archer-Daniels-Midland Co.		2,382,674
	27,566	Campbell Soup Co.		820,640
	77,318	ConAgra Foods Inc.		1,568,009
	54,497	General Mills Inc.		2,687,792
	50,454	H.J. Heinz Co.		1,701,309
	27,408	Hershey Co.		1,514,292
	38,207	Kellogg Co.		1,651,306
	19,710	McCormick & Co. Inc., Non Voting Shares		609,433
	116,384	Sara Lee Corp.		2,199,658
	37,420	Tyson Foods Inc., Class A Shares		639,882
	26,720	Wm. Wrigley Jr. Co.		1,776,613
		Total Food Products		17,551,608
Household Products — 2.3%
	22,629	Clorox Co.		1,287,364
	77,119	Colgate-Palmolive Co.		4,229,977

See Notes to Financial Statements.

52     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Household Products — 2.3% (continued)
	70,664	Kimberly-Clark Corp.	$	4,215,108
	500,549	Procter & Gamble Co.		28,971,776
		Total Household Products		38,704,225
Personal Products — 0.2%
	11,172	Alberto-Culver Co.		511,119
	69,836	Avon Products Inc.		1,993,818
		Total Personal Products		2,504,937
Tobacco — 1.5%
	310,876	Altria Group Inc.		23,228,655
	12,619	Reynolds American Inc.		1,202,969
	24,600	UST Inc.		1,004,418
		Total Tobacco		25,436,042
		TOTAL CONSUMER STAPLES		160,569,236
ENERGY — 9.3%
Energy Equipment & Services — 1.7%
	50,651	Baker Hughes Inc.		3,078,568
	48,052	BJ Services Co.		1,762,067
	75,464	Halliburton Co.		4,675,749
	23,361	Nabors Industries Ltd.*		1,769,596
	25,750	National-Oilwell Varco Inc.*		1,614,525
	20,398	Noble Corp.		1,438,875
	16,315	Rowan Cos. Inc.		581,467
	87,374	Schlumberger Ltd.		8,488,384
	48,942	Transocean Inc.*		3,410,768
	48,943	Weatherford International Ltd.*		1,771,736
		Total Energy Equipment & Services		28,591,735
Oil, Gas & Consumable Fuels — 7.6%
	11,848	Amerada Hess Corp.		1,502,563
	35,057	Anadarko Petroleum Corp.		3,321,651
	48,824	Apache Corp.		3,345,421
	56,705	Burlington Resources Inc.		4,887,971
	334,746	Chevron Corp.		19,003,530
	206,938	ConocoPhillips		12,039,653
	67,229	Devon Energy Corp.		4,204,502
	98,348	El Paso Corp.		1,195,912
	35,575	EOG Resources Inc.		2,610,138
	929,278	Exxon Mobil Corp.		52,197,545
	17,140	Kerr-McGee Corp.		1,557,340
	15,605	Kinder Morgan Inc.		1,434,880

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      53

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Oil, Gas & Consumable Fuels — 7.6% (continued)
	54,364	Marathon Oil Corp.	$	3,314,573
	24,382	Murphy Oil Corp.		1,316,384
	59,475	Occidental Petroleum Corp.		4,750,863
	20,200	Sunoco Inc.		1,583,276
	90,690	Valero Energy Corp.		4,679,604
	84,755	Williams Cos. Inc.		1,963,773
	53,843	XTO Energy Inc.		2,365,861
		Total Oil, Gas & Consumable Fuels		127,275,440
		TOTAL ENERGY		155,867,175
FINANCIALS — 21.3%
Capital Markets — 3.1%
	115,595	Bank of New York Co. Inc.		3,681,701
	16,679	Bear Stearns Cos. Inc.		1,926,925
	154,809	Charles Schwab Corp.		2,271,048
	60,267	E*TRADE Financial Corp.*		1,257,170
	12,745	Federated Investors Inc., Class B Shares		472,075
	22,147	Franklin Resources Inc.		2,082,039
	69,150	Goldman Sachs Group Inc.		8,831,146
	33,452	Janus Capital Group Inc.		623,211
	40,451	Lehman Brothers Holdings Inc.		5,184,605
	62,133	Mellon Financial Corp.		2,128,055
	137,533	Merrill Lynch & Co. Inc.		9,315,110
	161,283	Morgan Stanley		9,151,197
	27,695	Northern Trust Corp.		1,435,155
	49,069	State Street Corp.		2,720,385
	19,226	T. Rowe Price Group Inc.		1,384,849
		Total Capital Markets		52,464,671
Commercial Banks — 5.7%
	52,076	AmSouth Bancorp		1,364,912
	597,187	Bank of America Corp.		27,560,180
	81,367	BB&T Corp.		3,410,091
	24,802	Comerica Inc.		1,407,762
	18,572	Compass Bancshares Inc.		896,842
	82,578	Fifth Third Bancorp		3,114,842
	18,595	First Horizon National Corp.		714,792
	34,243	Huntington Bancshares Inc.		813,271
	60,612	KeyCorp		1,995,953
	11,990	M&T Bank Corp.		1,307,509
	30,678	Marshall & Ilsley Corp.		1,320,381
	84,719	National City Corp.		2,844,017
	70,792	North Fork Bancorporation Inc.		1,936,869

See Notes to Financial Statements.

54     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Commercial Banks — 5.7% (continued)
	43,236	PNC Financial Services Group Inc.	$	2,673,282
	68,324	Regions Financial Corp.		2,333,948
	53,913	SunTrust Banks Inc.		3,922,710
	46,264	Synovus Financial Corp.		1,249,591
	271,326	U.S. Bancorp		8,109,934
	234,420	Wachovia Corp.		12,391,441
	250,893	Wells Fargo & Co.		15,763,607
	15,512	Zions Bancorporation		1,172,087
		Total Commercial Banks		96,304,021
Consumer Finance — 1.3%
	184,537	American Express Co.		9,496,274
	44,763	Capital One Financial Corp.		3,867,523
	187,122	MBNA Corp.		5,080,362
	62,121	SLM Corp.		3,422,246
		Total Consumer Finance		21,866,405
Diversified Financial Services — 3.9%
	36,718	Ameriprise Financial Inc.		1,505,438
	29,989	CIT Group Inc.		1,552,830
	755,360	Citigroup Inc. (a)		36,657,621
	521,962	JPMorgan Chase & Co.		20,716,672
	37,430	Moody’s Corp.		2,298,950
	41,497	Principal Financial Group Inc.		1,968,203
		Total Diversified Financial Services		64,699,714
Insurance — 4.9%
	46,985	ACE Ltd.		2,510,878
	74,558	AFLAC Inc.		3,460,982
	97,680	Allstate Corp.		5,281,558
	15,991	Ambac Financial Group Inc.		1,232,266
	387,605	American International Group Inc.		26,446,289
	47,169	Aon Corp.		1,695,726
	29,491	Chubb Corp.		2,879,796
	26,146	Cincinnati Financial Corp.		1,168,203
	56,059	Genworth Financial Inc., Class A Shares		1,938,520
	44,541	Hartford Financial Services Group Inc.		3,825,627
	20,161	Jefferson-Pilot Corp.		1,147,766
	25,548	Lincoln National Corp.		1,354,810
	20,144	Loews Corp.		1,910,658
	79,433	Marsh & McLennan Cos. Inc.		2,522,792
	20,044	MBIA Inc.		1,205,847
	112,263	MetLife Inc.		5,500,887
	29,331	Progressive Corp.		3,425,274

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      55

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Insurance — 4.9% (continued)
	76,129	Prudential Financial Inc.	$	5,571,882
	18,528	SAFECO Corp.		1,046,832
	100,528	St. Paul Travelers Cos. Inc.		4,490,586
	15,468	Torchmark Corp.		860,021
	44,442	UnumProvident Corp.		1,011,056
	25,836	XL Capital Ltd., Class A Shares		1,740,830
		Total Insurance		82,229,086
Real Estate — 0.7%
	14,092	Apartment Investment and Management Co., Class A Shares		533,664
	31,525	Archstone-Smith Trust		1,320,582
	60,940	Equity Office Properties Trust		1,848,310
	42,779	Equity Residential		1,673,515
	27,422	Plum Creek Timber Co. Inc.		988,563
	36,868	ProLogis		1,722,473
	12,250	Public Storage Inc.		829,570
	27,231	Simon Property Group Inc.		2,086,712
	17,500	Vornado Realty Trust		1,460,725
		Total Real Estate		12,464,114
Thrifts & Mortgage Finance — 1.7%
	88,530	Countrywide Financial Corp.		3,026,841
	143,921	Fannie Mae		7,024,784
	102,795	Freddie Mac		6,717,653
	38,077	Golden West Financial Corp.		2,513,082
	13,931	MGIC Investment Corp.		916,939
	53,831	Sovereign Bancorp Inc.		1,163,826
	148,292	Washington Mutual Inc.		6,450,702
		Total Thrifts & Mortgage Finance		27,813,827
		TOTAL FINANCIALS		357,841,838
HEALTH CARE — 13.3%
Biotechnology — 1.5%
	183,274	Amgen Inc.*		14,452,988
	29,279	Applera Corp.— Applied Biosystems Group		777,650
	50,429	Biogen Idec Inc.*		2,285,946
	16,348	Chiron Corp.*		726,832
	38,100	Genzyme Corp.*		2,696,718
	67,614	Gilead Sciences Inc.*		3,558,525
	36,753	MedImmune Inc.*		1,287,090
		Total Biotechnology		25,785,749

See Notes to Financial Statements.

56     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Health Care Equipment & Supplies — 2.2%
	7,928	Bausch & Lomb Inc.	$	538,311
	92,542	Baxter International Inc.		3,484,206
	37,019	Becton, Dickinson, & Co.		2,224,102
	36,881	Biomet Inc.		1,348,738
	87,785	Boston Scientific Corp.*		2,149,855
	15,545	C.R. Bard Inc.		1,024,726
	18,106	Fisher Scientific International Inc.*		1,120,037
	49,155	Guidant Corp.		3,182,786
	23,618	Hospira Inc.*		1,010,378
	179,817	Medtronic Inc.		10,352,065
	7,615	Millipore Corp.*		502,895
	19,533	PerkinElmer Inc.		460,198
	54,028	St. Jude Medical Inc.*		2,712,206
	43,218	Stryker Corp.		1,920,176
	23,932	Thermo Electron Corp.*		721,071
	17,228	Waters Corp.*		651,218
	36,701	Zimmer Holdings Inc.*		2,475,115
		Total Health Care Equipment & Supplies		35,878,083
Health Care Providers & Services — 3.2%
	43,070	Aetna Inc.		4,061,932
	30,802	AmerisourceBergen Corp.		1,275,203
	63,411	Cardinal Health Inc.		4,359,506
	66,781	Caremark Rx Inc.*		3,458,588
	19,142	CIGNA Corp.		2,138,161
	23,899	Coventry Health Care Inc.*		1,361,287
	22,077	Express Scripts Inc.*		1,850,053
	62,827	HCA Inc.		3,172,763
	36,791	Health Management Associates Inc., Class A Shares		807,930
	24,220	Humana Inc.*		1,315,873
	33,515	IMS Health Inc.		835,194
	20,009	Laboratory Corp. of America Holdings*		1,077,485
	11,576	Manor Care Inc.		460,377
	45,724	McKesson Corp.		2,358,901
	45,091	Medco Health Solutions Inc.*		2,516,078
	20,412	Patterson Cos. Inc.*		681,761
	24,883	Quest Diagnostics Inc.		1,280,977
	70,628	Tenet Healthcare Corp.*		541,010
	204,819	UnitedHealth Group Inc.		12,727,453
	97,404	WellPoint Inc.*		7,771,865
		Total Health Care Providers & Services		54,052,397

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      57

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Pharmaceuticals — 6.4%
	230,920	Abbott Laboratories	$	9,105,176
	19,480	Allergan Inc.		2,103,061
	290,388	Bristol-Myers Squibb Co.		6,673,116
	168,530	Eli Lilly & Co.		9,537,113
	50,603	Forest Laboratories Inc.*		2,058,530
	442,120	Johnson & Johnson		26,571,412
	36,109	King Pharmaceuticals Inc.*		610,964
	326,145	Merck & Co. Inc.		10,374,672
	32,541	Mylan Laboratories Inc.		649,518
	1,101,041	Pfizer Inc.		25,676,276
	219,075	Schering-Plough Corp.		4,567,714
	15,596	Watson Pharmaceuticals Inc.*		507,026
	199,467	Wyeth		9,189,445
		Total Pharmaceuticals		107,624,023
		TOTAL HEALTH CARE		223,340,252
INDUSTRIALS — 11.4%
Aerospace & Defense — 2.3%
	121,952	Boeing Co.		8,565,908
	29,803	General Dynamics Corp.		3,399,032
	17,931	Goodrich Corp.		736,964
	126,942	Honeywell International Inc.		4,728,590
	17,720	L-3 Communications Holdings Inc.		1,317,482
	53,979	Lockheed Martin Corp.		3,434,684
	53,052	Northrop Grumman Corp.		3,188,956
	67,156	Raytheon Co.		2,696,313
	26,278	Rockwell Collins Inc.		1,221,139
	152,210	United Technologies Corp.		8,510,061
		Total Aerospace & Defense		37,799,129
Air Freight & Logistics — 1.0%
	45,061	FedEx Corp.		4,658,856
	9,450	Ryder System Inc.		387,639
	164,639	United Parcel Service Inc., Class B Shares		12,372,621
		Total Air Freight & Logistics		17,419,116
Airlines — 0.1%
	103,405	Southwest Airlines Co.		1,698,944
Building Products — 0.2%
	27,276	American Standard Cos. Inc.		1,089,676
	63,999	Masco Corp.		1,932,130
		Total Building Products		3,021,806

See Notes to Financial Statements.

58     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Commercial Services & Supplies — 0.7%
	31,750	Allied Waste Industries Inc.*	$	277,495
	16,481	Avery Dennison Corp.		910,905
	155,941	Cendant Corp.		2,689,982
	20,371	Cintas Corp.		838,878
	19,321	Equifax Inc.		734,584
	18,217	Monster Worldwide Inc.*		743,618
	33,990	Pitney Bowes Inc.		1,436,078
	31,923	R.R. Donnelley & Sons Co.		1,092,086
	25,275	Robert Half International Inc.		957,670
	83,581	Waste Management Inc.		2,536,683
		Total Commercial Services & Supplies		12,217,979
Construction & Engineering — 0.1%
	12,928	Fluor Corp.		998,817
Electrical Equipment — 0.5%
	25,188	American Power Conversion Corp.		554,136
	13,876	Cooper Industries Ltd., Class A Shares		1,012,948
	61,415	Emerson Electric Co.		4,587,701
	27,084	Rockwell Automation Inc.		1,602,289
		Total Electrical Equipment		7,757,074
Industrial Conglomerates — 4.4%
	113,692	3M Co.		8,811,130
	1,575,122	General Electric Co.		55,208,026
	19,853	Textron Inc.		1,528,284
	301,017	Tyco International Ltd.		8,687,351
		Total Industrial Conglomerates		74,234,791
Machinery — 1.4%
	100,640	Caterpillar Inc.		5,813,973
	6,897	Cummins Inc.		618,868
	35,454	Danaher Corp.		1,977,624
	35,798	Deere & Co.		2,438,202
	30,067	Dover Corp.		1,217,413
	21,803	Eaton Corp.		1,462,763
	31,058	Illinois Tool Works Inc.		2,732,793
	50,090	Ingersoll-Rand Co., Ltd., Class A Shares		2,022,133
	13,726	ITT Industries Inc.		1,411,307
	9,148	Navistar International Corp.*		261,816
	25,534	PACCAR Inc.		1,767,719
	18,779	Pall Corp.		504,404
	17,871	Parker Hannifin Corp.		1,178,771
		Total Machinery		23,407,786

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      59

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Road & Rail — 0.7%
	55,496	Burlington Northern Santa Fe Corp.	$	3,930,227
	32,140	CSX Corp.		1,631,748
	60,261	Norfolk Southern Corp.		2,701,500
	39,217	Union Pacific Corp.		3,157,361
		Total Road & Rail		11,420,836
Trading Companies & Distributors — 0.0%
	11,369	W. W. Grainger Inc.		808,336
		TOTAL INDUSTRIALS		190,784,614
INFORMATION TECHNOLOGY — 15.1%
Communications Equipment — 2.7%
	17,023	ADC Telecommunications Inc.*		380,294
	24,848	Andrew Corp.*		266,619
	62,737	Avaya Inc.*		669,404
	86,998	Ciena Corp.*		258,384
	917,511	Cisco Systems Inc.*		15,707,788
	30,014	Comverse Technology Inc.*		798,072
	227,367	Corning Inc.*		4,470,035
	247,313	JDS Uniphase Corp.*		583,659
	662,783	Lucent Technologies Inc.*		1,763,003
	366,750	Motorola Inc.		8,284,883
	242,402	QUALCOMM Inc.		10,442,678
	22,835	Scientific-Atlanta Inc.		983,503
	66,900	Tellabs Inc.*		729,210
		Total Communications Equipment		45,337,532
Computers & Peripherals — 3.7%
	125,755	Apple Computer Inc.*		9,040,527
	356,224	Dell Inc.*		10,683,158
	358,196	EMC Corp.*		4,878,629
	37,614	Gateway Inc.*		94,411
	425,701	Hewlett-Packard Co.		12,187,820
	237,049	International Business Machines Corp.		19,485,428
	17,542	Lexmark International Inc., Class A Shares*		786,408
	27,630	NCR Corp.*		937,762
	54,821	Network Appliance Inc.*		1,480,167
	12,105	QLogic Corp.*		393,533
	508,084	Sun Microsystems Inc.*		2,128,872
		Total Computers & Peripherals		62,096,715

See Notes to Financial Statements.

60     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Electronic Equipment & Instruments — 0.3%
	60,864	Agilent Technologies Inc.*	$	2,026,163
	25,725	Jabil Circuit Inc.*		954,140
	21,714	Molex Inc.		563,478
	76,591	Sanmina-SCI Corp.*		326,278
	136,778	Solectron Corp.*		500,607
	36,073	Symbol Technologies Inc.		462,456
	12,547	Tektronix Inc.		353,951
		Total Electronic Equipment & Instruments		5,187,073
Internet Software & Services — 0.4%
	186,149	Yahoo! Inc.*		7,293,318
IT Services — 1.1%
	18,731	Affiliated Computer Services Inc., Class A Shares*		1,108,501
	86,356	Automatic Data Processing Inc.		3,962,877
	27,385	Computer Sciences Corp.*		1,386,777
	20,916	Convergys Corp.*		331,519
	76,979	Electronic Data Systems Corp.		1,850,575
	22	Enterasys Networks Inc.*		292
	114,636	First Data Corp.		4,930,494
	27,856	Fiserv Inc.*		1,205,329
	49,527	Paychex Inc.		1,887,969
	19,819	Sabre Holdings Corp., Class A Shares		477,836
	50,070	Unisys Corp.*		291,908
		Total IT Services		17,434,077
Office Electronics — 0.1%
	142,948	Xerox Corp.*		2,094,188
Semiconductors & Semiconductor Equipment — 3.2%
	59,320	Advanced Micro Devices Inc.*		1,815,192
	55,322	Altera Corp.*		1,025,117
	55,180	Analog Devices Inc.		1,979,307
	241,407	Applied Materials Inc.		4,330,842
	44,372	Applied Micro Circuits Corp.*		114,036
	42,090	Broadcom Corp., Class A Shares*		1,984,543
	60,023	Freescale Semiconductor Inc., Class B Shares*		1,510,779
	905,584	Intel Corp.		22,603,377
	29,277	KLA-Tencor Corp.		1,444,234
	45,532	Linear Technology Corp.		1,642,339
	58,439	LSI Logic Corp.*		467,512
	48,939	Maxim Integrated Products Inc.		1,773,549
	91,058	Micron Technology Inc.*		1,211,982
	50,741	National Semiconductor Corp.		1,318,251
	20,786	Novellus Systems Inc.*		501,358

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      61

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Semiconductors & Semiconductor Equipment — 3.2% (continued)
	24,987	NVIDIA Corp.*	$	913,525
	26,200	PMC-Sierra Inc.*		202,002
	28,842	Teradyne Inc.*		420,228
	241,311	Texas Instruments Inc.		7,738,844
	52,052	Xilinx Inc.		1,312,231
		Total Semiconductors & Semiconductor Equipment		54,309,248
Software — 3.6%
	88,728	Adobe Systems Inc.		3,279,387
	34,026	Autodesk Inc.		1,461,417
	32,679	BMC Software Inc.*		669,593
	25,262	Citrix Systems Inc.*		727,040
	68,723	Computer Associates International Inc.		1,937,301
	57,023	Compuware Corp.*		511,496
	45,007	Electronic Arts Inc.*		2,354,316
	26,929	Intuit Inc.*		1,435,316
	13,121	Mercury Interactive Corp.*		364,633
	1,369,200	Microsoft Corp.		35,804,580
	57,366	Novell Inc.*		506,542
	560,325	Oracle Corp.*		6,841,568
	41,657	Parametric Technology Corp.*		254,108
	77,728	Siebel Systems Inc.		822,362
	160,544	Symantec Corp.*		2,809,520
		Total Software		59,779,179
		TOTAL INFORMATION TECHNOLOGY		253,531,330
MATERIALS — 3.0%
Chemicals — 1.6%
	33,057	Air Products & Chemicals Inc.		1,956,644
	11,151	Ashland Inc.		645,643
	143,527	Dow Chemical Co.		6,289,353
	136,413	E.I. du Pont de Nemours & Co.		5,797,552
	12,065	Eastman Chemical Co.		622,433
	27,225	Ecolab Inc.		987,451
	18,116	Engelhard Corp.		546,197
	17,474	Hercules Inc.*		197,456
	12,216	International Flavors & Fragrances Inc.		409,236
	39,917	Monsanto Co.		3,094,765
	25,275	PPG Industries Inc.		1,463,423
	47,900	Praxair Inc.		2,536,784

See Notes to Financial Statements.

62     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Chemicals — 1.6% (continued)
	21,643	Rohm & Haas Co.	$	1,047,954
	10,123	Sigma-Aldrich Corp.		640,685
		Total Chemicals		26,235,576
Construction Materials — 0.1%
	15,292	Vulcan Materials Co.		1,036,033
Containers & Packaging — 0.2%
	16,143	Ball Corp.		641,200
	15,812	Bemis Co. Inc.		440,680
	22,467	Pactiv Corp.*		494,274
	12,256	Sealed Air Corp.*		688,420
	16,937	Temple-Inland Inc.		759,625
		Total Containers & Packaging		3,024,199
Metals & Mining — 0.8%
	129,865	Alcoa Inc.		3,840,108
	12,501	Allegheny Technologies Inc.		451,036
	26,306	Freeport-McMoRan Copper & Gold Inc., Class B Shares		1,415,263
	66,180	Newmont Mining Corp.		3,534,012
	23,168	Nucor Corp.		1,545,769
	14,391	Phelps Dodge Corp.		2,070,433
	17,099	United States Steel Corp.		821,949
		Total Metals & Mining		13,678,570
Paper & Forest Products — 0.3%
	72,883	International Paper Co.		2,449,598
	16,598	Louisiana-Pacific Corp.		455,947
	27,365	MeadWestvaco Corp.		767,041
	36,280	Weyerhaeuser Co.		2,406,815
		Total Paper & Forest Products		6,079,401
		TOTAL MATERIALS		50,053,779
TELECOMMUNICATION SERVICES — 3.0%
Diversified Telecommunication Services — 2.2%
	272,113	BellSouth Corp.		7,374,262
	19,193	CenturyTel Inc.		636,440
	50,425	Citizens Communications Co.		616,698
	227,547	Qwest Communications International Inc.*		1,285,640
	584,100	SBC Communications Inc.		14,304,609
	411,051	Verizon Communications Inc.		12,380,856
		Total Diversified Telecommunication Services		36,598,505

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      63

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Wireless Telecommunication Services — 0.8%
	56,785	ALLTEL Corp.	$	3,583,134
	435,848	Sprint Nextel Corp.		10,181,409
		Total Wireless Telecommunication Services		13,764,543
		TOTAL TELECOMMUNICATION SERVICES		50,363,048
UTILITIES — 3.3%
Electric Utilities — 1.6%
	23,941	Allegheny Energy Inc.*		757,733
	58,327	American Electric Power Co. Inc.		2,163,348
	29,637	Cinergy Corp.		1,258,387
	48,533	Edison International		2,116,524
	30,761	Entergy Corp.		2,111,743
	99,642	Exelon Corp.		5,294,976
	49,111	FirstEnergy Corp.		2,405,948
	58,361	FPL Group Inc.		2,425,483
	14,615	Pinnacle West Capital Corp.		604,330
	56,593	PPL Corp.		1,663,834
	37,514	Progress Energy Inc.		1,647,615
	110,850	Southern Co.		3,827,651
		Total Electric Utilities		26,277,572
Gas Utilities — 0.0%
	6,595	Nicor Inc.		259,249
	5,883	Peoples Energy Corp.		206,317
		Total Gas Utilities		465,566
Independent Power Producers & Energy Traders — 0.6%
	96,657	AES Corp.*		1,530,080
	82,589	Calpine Corp.*		17,179
	26,565	Constellation Energy Group Inc.		1,530,144
	137,513	Duke Energy Corp.		3,774,732
	46,472	Dynegy Inc., Class A Shares*		224,924
	71,287	TXU Corp.		3,577,895
		Total Independent Power Producers & Energy Traders		10,654,954
Multi-Utilities — 1.1%
	30,339	Ameren Corp.		1,554,570
	46,155	CenterPoint Energy Inc.		593,092
	32,195	CMS Energy Corp.*		467,149
	36,396	Consolidated Edison Inc.		1,686,227
	50,604	Dominion Resources Inc.		3,906,629
	26,233	DTE Energy Co.		1,133,003
	26,026	KeySpan Corp.		928,868

See Notes to Financial Statements.

64     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Multi-Utilities — 1.1% (continued)
	40,377	NiSource Inc.	$	842,264
	50,914	PG&E Corp.		1,889,927
	35,642	Public Service Enterprise Group Inc.		2,315,661
	38,080	Sempra Energy		1,707,507
	30,449	TECO Energy Inc.		523,114
	59,545	Xcel Energy Inc.		1,099,201
		Total Multi-Utilities		18,647,212
		TOTAL UTILITIES		56,045,304
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $1,578,763,423)		1,680,327,197

Face
Amount
SHORT-TERM INVESTMENT — 0.0%
U.S. Government Obligation — 0.0%
$	500,000	U.S. Treasury Bills, 3.820% due 3/16/06 (b) (Cost — $496,115)		496,099
		TOTAL INVESTMENTS — 100.1% (Cost — $1,579,259,538#)		1,680,823,296
		Liabilities in Excess of Other Assets — (0.1)%		(2,505,751	)
		TOTAL NET ASSETS — 100.0%	$	1,678,317,545

*  Non-income producing security.

(a)	Citigroup Inc. was the parent company of the Travelers Investment Management Company, the Fund’s investment advisor, as of December 31, 2005.
(b)	Yield to maturity on date of purchase, except in the case of Variable Rate Demand Obligations (“VRDO”), whose yields are determined on the date of the last interest change.

#  Aggregate cost for federal income tax purposes is $1,586,514,009.

Abbreviation used in this schedule:

MBIA — Municipal Bond Investors Assurance Corporation

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      65

Schedule of Investments (December 31, 2005)

 SALOMON BROTHERS VARIABLE GROWTH & INCOME FUND

Shares		Security	Value
COMMON STOCKS — 99.7%
CONSUMER DISCRETIONARY — 10.1%
Hotels, Restaurants & Leisure — 2.5%
	4,840	McDonald’s Corp.	$	163,205
	1,700	Station Casinos Inc.		115,260
		Total Hotels, Restaurants & Leisure		278,465
Household Durables — 1.0%
	4,650	Newell Rubbermaid Inc.		110,577
Media — 3.6%
	3,530	EchoStar Communications Corp., Class A Shares*		95,910
	9,400	News Corp., Class B Shares		156,134
	8,430	Time Warner Inc.		147,019
		Total Media		399,063
Specialty Retail — 3.0%
	5,180	Best Buy Co. Inc.		225,226
	4,750	Staples Inc.		107,873
		Total Specialty Retail		333,099
		TOTAL CONSUMER DISCRETIONARY		1,121,204
CONSUMER STAPLES — 10.9%
Beverages — 2.1%
	3,910	PepsiCo Inc.		231,003
Food & Staples Retailing — 2.4%
	5,850	Wal-Mart Stores Inc.		273,780
Food Products — 3.8%
	3,550	Kellogg Co.		153,431
	3,650	McCormick & Co. Inc., Non Voting Shares		112,858
	8,040	Sara Lee Corp.		151,956
		Total Food Products		418,245
Household Products — 1.8%
	500	Kimberly-Clark Corp.		29,825
	2,960	Procter & Gamble Co.		171,325
		Total Household Products		201,150
Tobacco — 0.8%
	1,170	Altria Group Inc.		87,422
		TOTAL CONSUMER STAPLES		1,211,600

See Notes to Financial Statements.

66     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
ENERGY — 9.4%
Energy Equipment & Services — 1.7%
	1,890	ENSCO International Inc.	$	83,822
	2,230	GlobalSantaFe Corp.		107,374
		Total Energy Equipment & Services		191,196
Oil, Gas & Consumable Fuels — 7.7%
	1,470	Burlington Resources Inc.		126,714
	4,680	Exxon Mobil Corp.		262,876
	2,950	Nexen Inc.		140,508
	1,350	Suncor Energy Inc.		85,225
	1,840	Total SA, Sponsored ADR		232,576
		Total Oil, Gas & Consumable Fuels		847,899
		TOTAL ENERGY		1,039,095
FINANCIALS — 20.2%
Capital Markets — 3.6%
	1,520	Goldman Sachs Group Inc.		194,119
	3,020	Merrill Lynch & Co. Inc.		204,545
		Total Capital Markets		398,664
Commercial Banks — 5.7%
	4,846	Bank of America Corp.		223,643
	2,390	Wachovia Corp.		126,335
	4,550	Wells Fargo & Co.		285,877
		Total Commercial Banks		635,855
Consumer Finance — 3.1%
	3,130	American Express Co.		161,070
	2,070	Capital One Financial Corp.		178,848
		Total Consumer Finance		339,918
Diversified Financial Services — 2.2%
	6,205	JPMorgan Chase & Co.		246,276
Insurance — 4.4%
	2,420	AFLAC Inc.		112,336
	2,500	American International Group Inc.		170,575
	1	Berkshire Hathaway Inc., Class A Shares*		88,620
	1,180	Chubb Corp.		115,227
		Total Insurance		486,758
Thrifts & Mortgage Finance — 1.2%
	1,950	Golden West Financial Corp.		128,700
		TOTAL FINANCIALS		2,236,171

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      67

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
HEALTH CARE — 11.3%
Biotechnology — 1.6%
	2,318	Amgen Inc.*	$	182,798
Health Care Providers & Services — 4.5%
	2,160	Coventry Health Care Inc.*		123,034
	3,260	UnitedHealth Group Inc.		202,576
	2,200	WellPoint Inc.*		175,538
		Total Health Care Providers & Services		501,148
Pharmaceuticals — 5.2%
	2,970	Pfizer Inc.		69,260
	4,300	Sanofi-Aventis, ADR		188,770
	1,860	Sepracor Inc.*		95,976
	5,090	Teva Pharmaceutical Industries Ltd., Sponsored ADR		218,921
		Total Pharmaceuticals		572,927
		TOTAL HEALTH CARE		1,256,873
INDUSTRIALS — 11.6%
Aerospace & Defense — 4.6%
	4,860	Boeing Co.		341,366
	4,220	Raytheon Co.		169,433
		Total Aerospace & Defense		510,799
Building Products — 2.3%
	2,830	American Standard Cos. Inc.		113,059
	4,700	Masco Corp.		141,893
		Total Building Products		254,952
Industrial Conglomerates — 4.7%
	11,930	General Electric Co.		418,146
	1,350	Textron Inc.		103,923
		Total Industrial Conglomerates		522,069
		TOTAL INDUSTRIALS		1,287,820
INFORMATION TECHNOLOGY — 15.6%
Communications Equipment — 1.5%
	5,246	ADC Telecommunications Inc.*		117,196
	2,300	Motorola Inc.		51,957
		Total Communications Equipment		169,153

See Notes to Financial Statements.

68     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Computers & Peripherals — 1.8%
	2,330	Dell Inc.*	$	69,877
	1,590	International Business Machines Corp.		130,698
		Total Computers & Peripherals		200,575
Electronic Equipment & Instruments — 0.3%
	1,670	Dolby Laboratories Inc., Class A Shares*		28,473
Internet Software & Services — 1.0%
	2,830	Yahoo! Inc.*		110,879
IT Services — 1.1%
	3,220	Paychex Inc.		122,746
Semiconductors & Semiconductor Equipment — 3.7%
	3,430	Applied Materials Inc.		61,534
	4,640	ASML Holding NV, NY Registered Shares*		93,171
	8,090	Intel Corp.		201,927
	1,600	Texas Instruments Inc.		51,312
		Total Semiconductors & Semiconductor Equipment		407,944
Software — 6.2%
	3,200	Adobe Systems Inc.		118,272
	1,640	Cognos Inc.*		56,925
	2,020	Electronic Arts Inc.*		105,666
	15,680	Microsoft Corp.		410,032
		Total Software		690,895
		TOTAL INFORMATION TECHNOLOGY		1,730,665
MATERIALS — 6.0%
Chemicals — 2.3%
	3,180	E.I. du Pont de Nemours & Co.		135,150
	3,290	Ecolab Inc.		119,328
		Total Chemicals		254,478
Metals & Mining — 3.7%
	10,390	Barrick Gold Corp.		289,570
	5,400	Placer Dome Inc.		123,822
		Total Metals & Mining		413,392
		TOTAL MATERIALS		667,870
TELECOMMUNICATION SERVICES — 3.4%
Wireless Telecommunication Services — 3.4%
	1,780	ALLTEL Corp.		112,318
	11,102	Sprint Nextel Corp.		259,343
		TOTAL TELECOMMUNICATION SERVICES		371,661

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      69

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
UTILITIES — 1.2%
Multi-Utilities — 1.2%
	3,020	Sempra Energy	$	135,417
		TOTAL INVESTMENTS — 99.7% (Cost — $8,906,238#)		11,058,376
		Other Assets in Excess of Liabilities — 0.3%		37,805
		TOTAL NET ASSETS — 100.0%	$	11,096,181

*  Non-income producing security.

#  Aggregate cost for federal income tax purposes is $8,990,039.

Abbreviation used in this schedule:

ADR — American Depositary Receipt

See Notes to Financial Statements.

70     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005)

 SALOMON BROTHERS VARIABLE AGGRESSIVE GROWTH FUND

Shares		Security	Value
COMMON STOCKS — 94.5%
CONSUMER DISCRETIONARY — 14.7%
Media — 14.5%
	53,820	Cablevision Systems Corp., New York Group, Class A Shares*	$	1,263,155
	4,117	Comcast Corp., Class A Shares*		106,877
	93,525	Comcast Corp., Special Class A Shares*		2,402,657
	11,540	Discovery Holding Co., Class A Shares*		174,831
	2,730	Liberty Global Inc., Class A Shares*		61,425
	2,730	Liberty Global Inc., Series C Shares*		57,876
	125,400	Liberty Media Corp., Class A Shares*		986,898
	145,200	Time Warner Inc.		2,532,288
	9,653	Viacom Inc., Class B Shares		314,688
	38,000	Walt Disney Co.		910,860
	5,600	World Wrestling Entertainment Inc.		82,208
		Total Media		8,893,763
Specialty Retail — 0.2%
	9,700	Charming Shoppes, Inc.*		128,040
		TOTAL CONSUMER DISCRETIONARY		9,021,803
ENERGY — 11.9%
Energy Equipment & Services  — 6.9%
	7,600	Core Laboratories NV*		283,936
	27,650	Grant Prideco Inc.*		1,219,918
	74,500	Weatherford International Ltd.*		2,696,900
		Total Energy Equipment & Services		4,200,754
Oil, Gas & Consumable Fuels  — 5.0%
	32,300	Anadarko Petroleum Corp.		3,060,425
	255	Bill Barrett Corp.*		9,845
		Total Oil, Gas & Consumable Fuels		3,070,270
		TOTAL ENERGY		7,271,024
EXCHANGE TRADED FUND — 1.7%
	26,600	Nasdaq-100 Index Tracking Stock		1,075,172
FINANCIALS — 10.7%
Capital Markets — 9.8%
	3,900	Cohen & Steers Inc.		72,657
	24,550	Lehman Brothers Holdings Inc.		3,146,574
	41,800	Merrill Lynch & Co. Inc.		2,831,114
		Total Capital Markets		6,050,345

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      71

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Diversified Financial Services — 0.4%
	4,500	CIT Group Inc.	$	233,010
Thrifts & Mortgage Finance — 0.5%
	17,849	New York Community Bancorp Inc.		294,865
		TOTAL FINANCIALS		6,578,220
HEALTH CARE — 33.6%
Biotechnology — 20.4%
	6,420	Alkermes Inc.*		122,750
	36,900	Amgen Inc.*		2,909,934
	54,850	Biogen Idec Inc.*		2,486,351
	2,600	CancerVax Corp.*		3,588
	48,175	Chiron Corp.*		2,141,861
	5,300	Genentech Inc.*		490,250
	39,448	Genzyme Corp.*		2,792,129
	28,428	ImClone Systems Inc.*		973,375
	8,200	Isis Pharmaceuticals Inc.*		42,968
	33,546	Millennium Pharmaceuticals Inc.*		325,396
	4,800	Nabi Biopharmaceuticals*		16,224
	4,860	Nanogen Inc.*		12,733
	6,410	Vertex Pharmaceuticals Inc.*		177,365
	1,265	ViaCell Inc.*		7,109
		Total Biotechnology		12,502,033
Health Care Equipment & Supplies — 0.3%
	3,400	Biosite Inc.*		191,386
Health Care Providers & Services — 5.1%
	50,520	UnitedHealth Group Inc.		3,139,313
Pharmaceuticals — 7.8%
	73,080	Forest Laboratories Inc.*		2,972,894
	13,100	Johnson & Johnson		787,310
	24,900	King Pharmaceuticals Inc.*		421,308
	3,500	Pfizer Inc.		81,620
	6,442	Teva Pharmaceutical Industries Ltd., Sponsored ADR		277,071
	14,000	Valeant Pharmaceuticals International		253,120
		Total Pharmaceuticals		4,793,323
		TOTAL HEALTH CARE		20,626,055

See Notes to Financial Statements.

72     Greenwich Street Series Fund 2005 Annual Report

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
INDUSTRIALS — 7.7%
Aerospace & Defense — 2.9%
	23,600	L-3 Communications Holdings Inc.	$	1,754,660
Industrial Conglomerates — 3.7%
	78,634	Tyco International Ltd.		2,269,377
Machinery — 1.1%
	25,000	Pall Corp.		671,500
		TOTAL INDUSTRIALS		4,695,537
INFORMATION TECHNOLOGY — 14.1%
Communications Equipment — 2.5%
	14,700	C-COR Inc.*		71,442
	51,600	Motorola Inc.		1,165,644
	16,400	Nokia Oyj, Sponsored ADR		300,120
		Total Communications Equipment		1,537,206
Computers & Peripherals — 2.9%
	3,500	LaserCard Corp.*		52,465
	48,162	Maxtor Corp.*		334,244
	31,500	Quantum Corp.*		96,075
	20,100	SanDisk Corp.*		1,262,682
		Total Computers & Peripherals		1,745,466
Electronic Equipment & Instruments  — 0.2%
	5,750	Excel Technology Inc.*		136,735
Semiconductors & Semiconductor Equipment — 7.4%
	22,000	Broadcom Corp., Class A Shares*		1,037,300
	6,500	Cirrus Logic Inc.*		43,420
	8,400	Cree Inc.*		212,016
	6,700	DSP Group Inc.*		167,902
	4,173	Freescale Semiconductor Inc., Class B Shares*		105,035
	26,725	Intel Corp.		667,056
	132,555	Micron Technology Inc.*		1,764,307
	17,700	RF Micro Devices Inc.*		95,757
	5,400	Standard Microsystems Corp.*		154,926
	17,600	Teradyne Inc.*		256,432
		Total Semiconductors & Semiconductor Equipment		4,504,151

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      73

Schedule of Investments (December 31, 2005) (continued)

Shares		Security	Value
Software — 1.1%
	5,800	Advent Software Inc.*	$	167,678
	8,800	Autodesk Inc.		377,960
	3,800	Microsoft Corp.		99,370
	4,300	RSA Security Inc.*		48,289
		Total Software		693,297
		TOTAL INFORMATION TECHNOLOGY		8,616,855
TELECOMMUNICATION SERVICES — 0.1%
Diversified Telecommunication Services — 0.1%
	2,416	AT&T Inc.		59,168
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $50,577,045)		57,943,834

Face
Amount
SHORT-TERM INVESTMENTS — 5.6%
REPURCHASE AGREEMENTS — 5.6%
$	1,409,000	Interest in $577,312,000 joint tri-party repurchase agreement dated 12/30/05 with Morgan Stanley, 4.250% due 1/3/06; Proceeds at maturity — $1,409,665; (Fully collateralized by various U.S. government agency obligations, 0.000% to 6.300% due 2/5/07 to 10/6/25; Market Value — $1,452,102)		1,409,000
	2,000,000	Interest in $599,979,000 joint tri-party repurchase agreement dated 12/30/05 with Merrill Lynch, Pierce, Fenner & Smith Inc., 4.250% due 1/3/06; Proceeds at maturity — $2,000,944; (Fully collateralized by various U.S. Treasury obligations, 0.000% to 4.500% due 1/5/06 to 11/15/15; Market value — $2,040,014)		2,000,000
		TOTAL SHORT-TERM INVESTMENTS (Cost — $3,409,000)		3,409,000
		TOTAL INVESTMENTS — 100.1% (Cost — $53,986,045#)		61,352,834
		Liabilities in Excess of Other Assets — (0.1)%		(48,566	)
		TOTAL NET ASSETS — 100.0%	$	61,304,268

*  Non-income producing security.

#  Aggregate cost for federal income tax purposes is $53,989,800.

Abbreviation used in this schedule:

ADR — American Depositary Receipt

See Notes to Financial Statements.

74     Greenwich Street Series Fund 2005 Annual Report

Bond Ratings (unaudited)

The definitions of the applicable rating symbols are set forth below:

Standard & Poor’s Ratings Service (“Standard & Poor’s”) — Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standings within the major rating categories.

AAA	—	Bonds rated “AAA” have the highest rating assigned by Standard & Poor’s. Capacity to pay interest and repay principal is extremely strong.
AA	—	Bonds rated “AA” have a very strong capacity to pay interest and repay principal and differs from the highest rated issue only in a small degree.
A	—	Bonds rated “A” have a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.
BBB	—	Bonds rated “BBB” are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories.
BB, B, CCC, CC and C	—	Bonds rated “BB” “B”, “CCC”, “CC” and “C” are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” represents the lowest degree of speculation and “C” the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
D	—	Bonds rated “D” are in default and payment of interest and/or repayment of principal is in arrears.
Moody’s Investors Service (“Moody’s”) — Numerical modifiers 1, 2 and 3 may be applied to each generic rating from “Aa” to “Caa,” where 1 is the highest and 3 the lowest ranking within its generic category.
Aaa	—	Bonds 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 edge.” 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 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 in “Aaa” securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in “Aaa” securities.
A	—	Bonds 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 which suggest a susceptibility to impairment some time in the future.
Baa	—	Bonds 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 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. Uncertainly of position characterizes bonds in this class.
B	—	Bonds that are rated “B” generally lack characteristics of desirable investments. 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 rated “Caa” are of poor standing. These issues may be in default, or present elements of danger may exist with respect to principal or interest.
Ca	—	Bonds rated “Ca” represent obligations which are speculative in a high degree. Such Issues are often in default or have other marked short-comings.
NR	—	Indicates that the bond is not rated by Standard & Poor’s and Moody’s.

Greenwich Street Series Fund 2005 Annual Report      75

Statements of Assets and Liabilities (December 31, 2005)

								Salomon			Salomon
								Brothers			Brothers
								Variable			Variable
		Diversified Strategic			Equity Index			Growth &			Aggressive
		Income Portfolio			Portfolio			Income Fund			Growth Fund
ASSETS:
	Investments, at cost	$	88,082,431		$	1,579,259,538		$	8,906,238		$	50,577,045
	Repurchase agreements, at cost		41,675,000			—			—			3,409,000
	Foreign currency, at cost		39,000			—			—			—
	Investments, at value	$	87,744,590		$	1,680,823,296		$	11,058,376		$	57,943,834
	Repurchase agreements, at value		41,675,000			—			—			3,409,000
	Foreign currency, at value		34,250			—			—			—
	Cash		134			—			—			780
	Dividends and interest receivable		833,770			2,221,757			13,708			26,130
	Deposits with brokers for open futures contracts		16,220			—			—			—
	Receivable for Fund shares sold		—			492,217			226			14,078
	Receivable for securities sold		—			113,197			89,835			—
	Prepaid expenses		15,515			23,902			757			394
Total Assets			130,319,479			1,683,674,369			11,162,902			61,394,216
LIABILITIES:
	Payable for securities purchased		40,421,297			2,021,108			24,642			—
	Payable for Fund shares repurchased		260,397			2,270,726			10			24,788
	Investment advisory fee payable		49,494			361,466			6,243			38,994
	Due to custodian		—			282,743			18,471			—
	Distribution fees payable (Notes 2 and 4)		—			26,062			—			3,098
	Administration fee payable		—			86,752			—			—
	Deferred dollar roll income		13,715			—			—			—
	Payable to broker — variation margin on open futures contracts		4,281			—			—			—
	Deferred compensation payable		2,773			3,063			2,292			1,981
	Transfer agent fees payable		976			1,719			12			137
	Trustees’ fees payable		56			26			—			116
	Accrued expenses		44,977			303,159			15,051			20,834
	Total Liabilities		40,797,966			5,356,824			66,721			89,948
Total Net Assets		$	89,521,513		$	1,678,317,545		$	11,096,181		$	61,304,268
NET ASSETS:
	Par value (Note 6)	$	9,931		$	55,240		$	2,187		$	2,641
	Paid-in capital in excess of par value		96,998,514			1,591,717,537			9,662,321			54,518,178
	Undistributed (overdistributed) net investment income		(2,773	)		114,615			(2,292	)		—
	Accumulated net investment loss		—			—			—			(1,981	)
	Accumulated net realized loss on investments, futures contracts and foreign currencies		(7,159,475	)		(15,133,605	)		(718,173	)		(581,359	)
	Net unrealized appreciation (depreciation) on investments, futures contracts and foreign currencies		(324,684	)		101,563,758			2,152,138			7,366,789
Total Net Assets		$	89,521,513		$	1,678,317,545		$	11,096,181		$	61,304,268
Shares Outstanding:
	Class I shares		9,931,070			47,549,158			2,186,650			1,423,968
	Class II shares		—			7,690,661			—			1,216,924
Net Asset Value:
	Class I shares		$9.01			$30.38			$5.07			$23.33
	Class II shares		—			$30.40			—			$23.08

See Notes to Financial Statements.

76     Greenwich Street Series Fund 2005 Annual Report

Statements of Operations (For the year ended December 31, 2005)

									Salomon			Salomon
									Brothers			Brothers
									Variable			Variable
			Diversified Strategic			Equity Index			Growth &			Aggressive
			Income Portfolio			Portfolio			Income Fund			Growth Fund
INVESTMENT INCOME:
	Dividends		$	4,733		$	30,095,878		$	166,199		$	217,755
	Interest			5,357,517			543,325			5,700			123,614
	Less: Foreign taxes withheld			—			—			(2,251	)		(1,053	)
	Total Investment Income			5,362,250			30,639,203			169,648			340,316
EXPENSES:
	Investment advisory fee (Note 2)			443,690			4,125,841			52,282			312,648
	Administration fees (Note 2)			175,198			990,202			20,461			86,456
	Custody fees			55,376			92,649			18,706			15,855
	Audit and tax			16,218			22,567			14,105			15,330
	Legal fees			13,988			6,604			8,114			15,147
	Shareholder reports (Note 4)			11,210			169,402			12,216			16,080
	Insurance			5,493			16,493			1,423			2,737
	Transfer agent fees (Notes 2 and 4)			5,030			10,015			728			169
	Trustees’ fees			3,172			35,820			1,665			2,546
	Distribution fees (Notes 2 and 4)			—			578,430			—			59,904
	License fee			—			165,034			—			—
	Miscellaneous expenses			2,355			59,669			1,099			4,203
	Total Expenses			731,730			6,272,726			130,799			531,075
Net Investment Income (Loss)				4,630,520			24,366,477			38,849			(190,759	)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCIES (NOTES 1 AND 3):
	Net Realized Gain (Loss) From:
		Investments		1,399,450			17,788,667			371,234			18,120
		Futures contracts		(94,986	)		(585,775	)		—			—
		Foreign currencies		617,933			—			3			—
	Net Realized Gain			1,922,397			17,202,892			371,237			18,120
	Change in Net Unrealized Appreciation/ Depreciation From:
		Investments		(4,113,649	)		32,557,471			(22,620	)		5,564,067
		Futures contracts		(13,228	)		(671,094	)		—			—
		Foreign currencies		37,661			—			—			—
	Change in Net Unrealized Appreciation/ Depreciation			(4,089,216	)		31,886,377			(22,620	)		5,564,067
Net Gain (Loss) on Investments, Futures Contracts and Foreign Currencies				(2,166,819	)		49,089,269			348,617			5,582,187
Increase in Net Assets From Operations			$	2,463,701		$	73,455,746		$	387,466		$	5,391,428

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      77

Statements of Changes in Net Assets (For the years ended December 31,)

		Diversified Strategic
		Income Portfolio
		2005			2004
OPERATIONS:
	Net investment income	$	4,630,520		$	5,004,061
	Net realized gain		1,922,397			1,766,018
	Change in net unrealized appreciation/depreciation		(4,089,216	)		(424,571	)
	Increase in Net Assets From Operations		2,463,701			6,345,508
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 1 AND 5):
	Net investment income		(5,001,106	)		(4,799,696	)
	Decrease in Net Assets From Distributions to Shareholders		(5,001,106	)		(4,799,696	)
FUND SHARE TRANSACTIONS (NOTE 6):
	Net proceeds from sale of shares		5,234,458			12,777,163
	Reinvestment of distributions		5,001,106			4,799,696
	Cost of shares repurchased		(18,480,976	)		(13,390,612	)
	Increase (Decrease) in Net Assets From Fund Share Transactions		(8,245,412	)		4,186,247
Increase (Decrease) in Net Assets			(10,782,817	)		5,732,059
NET ASSETS:
	Beginning of year		100,304,330			94,572,271
	End of year*	$	89,521,513		$	100,304,330
* Includes overdistributed net investment income of:			$(2,773	)		$(112,788	)

See Notes to Financial Statements.

78     Greenwich Street Series Fund 2005 Annual Report

Statements of Changes in Net Assets (For the years ended December 31,)

		Equity Index Portfolio
		2005		2004
OPERATIONS:
	Net investment income	$	24,366,477	$	24,537,742
	Net realized gain		17,202,892		7,049,449
	Change in net unrealized appreciation/depreciation		31,886,377		124,448,953
	Increase in Net Assets From Operations		73,455,746		156,036,144
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 1 AND 5):
	Net investment income		(24,301,557)		(24,899,544)
	Decrease in Net Assets From Distributions to Shareholders		(24,301,557)		(24,899,544)
FUND SHARE TRANSACTIONS (NOTE 6):
	Net proceeds from sale of shares		79,504,116		219,053,115
	Reinvestment of distributions		24,301,557		24,899,544
	Cost of shares repurchased		(126,400,333)		(73,428,986)
	Increase (Decrease) in Net Assets From Fund Share Transactions		(22,594,660)		170,523,673
Increase in Net Assets			26,559,529		301,660,273
NET ASSETS:
	Beginning of year		1,651,758,016		1,350,097,743
	End of year*	$	1,678,317,545	$	1,651,758,016
* Includes undistributed net investment income of:			$114,615		$47,585

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      79

Statements of Changes in Net Assets (For the years ended December 31,)

		Salomon Brothers Variable
		Growth & Income Fund
		2005		2004
OPERATIONS:
	Net investment income	$	38,849	$	99,926
	Net realized gain		371,237		336,947
	Change in net unrealized appreciation/depreciation		(22,620)		456,349
	Increase in Net Assets From Operations		387,466		893,222
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 1 AND 5):
	Net investment income		(40,002)		(101,977)
	Decrease in Net Assets From Distributions to Shareholders		(40,002)		(101,977)
FUND SHARE TRANSACTIONS (NOTE 6):
	Net proceeds from sale of shares		966,534		2,677,330
	Reinvestment of distributions		40,002		101,977
	Cost of shares repurchased		(2,016,392)		(1,681,850)
	Increase (Decrease) in Net Assets From Fund Share Transactions		(1,009,856)		1,097,457
Increase (Decrease) in Net Assets			(662,392)		1,888,702
NET ASSETS:
	Beginning of year		11,758,573		9,869,871
	End of year*	$	11,096,181	$	11,758,573
* Includes overdistributed net investment income of:			$(2,292)		$(1,537)

See Notes to Financial Statements.

80     Greenwich Street Series Fund 2005 Annual Report

Statements of Changes in Net Assets (For the years ended December 31,)

		Salomon Brothers Variable
		Aggressive Growth Fund
		2005		2004
OPERATIONS:
	Net investment loss	$	(190,759)	$	(161,918)
	Net realized gain		18,120		505,017
	Change in net unrealized appreciation/depreciation		5,564,067		2,563,072
	Increase in Net Assets From Operations		5,391,428		2,906,171
FUND SHARE TRANSACTIONS (NOTE 6):
	Net proceeds from sale of shares		17,389,739		25,873,371
	Cost of shares repurchased		(3,934,857)		(3,424,165)
	Increase in Net Assets From Fund Share Transactions		13,454,882		22,449,206
Increase in Net Assets			18,846,310		25,355,377
NET ASSETS:
	Beginning of year		42,457,958		17,102,581
	End of year*	$	61,304,268	$	42,457,958
* Includes accumulated net investment loss of:			$(1,981)		$(1,323)

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      81

Financial Highlights

For a share of each class of beneficial interest outstanding throughout each year ended December 31:

Diversified Strategic Income
Portfolio(1)		2005			2004			2003			2002			2001
Net Asset Value, Beginning of Year			$9.30			$9.15			$8.69			$9.13			$9.70
Income (Loss) From Operations:
	Net investment income		0.46			0.48			0.52			0.53			0.65
	Net realized and unrealized gain (loss)		(0.22	)		0.14			0.50			(0.11	)		(0.36	)
Total Income From Operations			0.24			0.62			1.02			0.42			0.29
Less Distributions From:
	Net investment income		(0.53	)		(0.47	)		(0.56	)		(0.86	)		(0.86	)
Total Distributions			(0.53	)		(0.47	)		(0.56	)		(0.86	)		(0.86	)
Net Asset Value, End of Year			$9.01			$9.30			$9.15			$8.69			$9.13
Total Return(2)			2.56	%		6.74	%		11.73	%		4.84	%		3.17	%
Net Assets, End of Year (000s)			$89,522			$100,304			$94,572			$78,009			$79,399
Ratios to Average Net Assets:
	Gross expenses		0.77	%		0.76	%		0.76	%		0.87	%		0.76	%
	Net expenses		0.77			0.76	(3)		0.76			0.87			0.76
	Net investment income		4.86			5.15			5.73			5.82			6.86
Portfolio Turnover Rate			83	%(4)		57	%(4)		54	%(4)		149	%		118	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.
(3)	The investment adviser voluntarily waived a portion of its fees.
(4)	Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 538%, 382% and 256% for the years ended December 31, 2005, December 31, 2004 and December 31, 2003, respectively.

See Notes to Financial Statements.

82     Greenwich Street Series Fund 2005 Annual Report

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended December 31:

Equity Index Portfolio — Class I Shares(1)		2005			2004			2003			2002			2001
Net Asset Value, Beginning of Year			$29.50			$27.11			$21.41			$28.21			$32.40
Income (Loss) From Operations:
	Net investment income		0.45			0.47			0.34			0.32			0.34
	Net realized and unrealized gain (loss)		0.89			2.38			5.68			(6.57	)		(4.26	)
Total Income (Loss) From Operations			1.34			2.85			6.02			(6.25	)		(3.92	)
Less Distributions From:
	Net investment income		(0.46	)		(0.46	)		(0.32	)		(0.55	)		(0.27	)
Total Distributions			(0.46	)		(0.46	)		(0.32	)		(0.55	)		(0.27	)
Net Asset Value, End of Year			$30.38			$29.50			$27.11			$21.41			$28.21
Total Return(2)			4.52	%		10.52	%		28.11	%		(22.17	)%		(12.12	)%
Net Assets, End of Year (millions)			$1,444			$1,425			$1,218			$831			$897
Ratios to Average Net Assets:
	Gross expenses		0.34	%		0.34	%		0.34	%		0.31	%		0.23	%
	Net expenses		0.34			0.34	(3)		0.34			0.31			0.23
	Net investment income		1.51			1.69			1.44			1.32			1.17
Portfolio Turnover Rate			7	%		1	%		0	%		2	%		2	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.
(3)	The investment adviser voluntarily waived a portion of its fees.

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      83

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended December 31:

Equity Index Portfolio — Class II Shares(1)		2005			2004			2003			2002			2001
Net Asset Value, Beginning of Year			$29.52			$27.13			$21.43			$28.17			$32.36
Income (Loss) From Operations:
	Net investment income		0.37			0.42			0.28			0.24			0.27
	Net realized and unrealized gain (loss)		0.89			2.36			5.66			(6.54	)		(4.26	)
Total Income (Loss) From Operations			1.26			2.78			5.94			(6.30	)		(3.99	)
Less Distributions From:
	Net investment income		(0.38	)		(0.39	)		(0.24	)		(0.44	)		(0.20	)
Total Distributions			(0.38	)		(0.39	)		(0.24	)		(0.44	)		(0.20	)
Net Asset Value, End of Year			$30.40			$29.52			$27.13			$21.43			$28.17
Total Return(2)			4.25	%		10.24	%		27.74	%		(22.37	)%		(12.36	)%
Net Assets, End of Year (millions)			$234			$227			$132			$86			$97
Ratios to Average Net Assets:
	Gross expenses		0.60	%		0.59	%		0.60	%		0.56	%		0.49	%
	Net expenses		0.60			0.59	(3)		0.60			0.56			0.49
	Net investment income		1.26			1.50			1.18			0.97			0.91
Portfolio Turnover Rate			7	%		1	%		0	%		2	%		2	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.
(3)	The investment adviser voluntarily waived a portion of its fees.

See Notes to Financial Statements.

84     Greenwich Street Series Fund 2005 Annual Report

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended December 31:

Salomon Brothers Variable Growth & Income Fund — Class I Shares		2005(1)			2004(1)			2003(1)			2002			2001
Net Asset Value, Beginning of Year			$4.91			$4.57			$3.52			$4.90			$7.92
Income (Loss) From Operations:
	Net investment income		0.02			0.04			0.01			0.00	(2)		0.03
	Net realized and unrealized gain (loss)		0.16			0.34			1.05			(1.14	)		(1.04	)
Total Income (Loss) From Operations			0.18			0.38			1.06			(1.14	)		(1.01	)
Less Distributions From:
	Net investment income		(0.02	)		(0.04	)		(0.01	)		(0.02	)		(0.12	)
	Net realized gains		—			—			—			(0.22	)		(1.89	)
Total Distributions			(0.02	)		(0.04	)		(0.01	)		(0.24	)		(2.01	)
Net Asset Value, End of Year			$5.07			$4.91			$4.57			$3.52			$4.90
Total Return(3)			3.63	%		8.38	%		30.16	%		(23.35	)%		(13.14	)%
Net Assets, End of Year (000s)			$11,096			$11,759			$9,870			$6,777			$11,087
Ratios to Average Net Assets:
	Gross expenses		1.17	%		1.09	%		1.27	%		1.36	%		0.94	%
	Net expenses		1.17			1.07	(4)		1.27			1.36			0.94
	Net investment income		0.35			0.95			0.36			0.04			0.31
Portfolio Turnover Rate			54	%		83	%		63	%		46	%		81	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	Amount represents less than $0.01 per share.
(3)	Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽⁴⁾  The investment adviser voluntarily waived a portion of its fees.

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      85

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended December 31:

Salomon Brothers Variable Aggressive Growth Fund — Class I Shares(1)		2005			2004			2003			2002			2001(2)
Net Asset Value, Beginning of Year			$21.23			$19.46			$13.89			$25.98			$178.99
Income (Loss) From Operations:
	Net investment loss		(0.06	)		(0.09	)		(0.19	)		(0.25	)		(0.50	)
	Net realized and unrealized gain (loss)		2.16			1.86			5.76			(8.18	)		(9.85	)
Total Income (Loss) From Operations			2.10			1.77			5.57			(8.43	)		(10.35	)
Less Distributions From:
	Net realized gains		—			—			—			(3.66	)		(142.66	)
Total Distributions			—			—			—			(3.66	)		(142.66	)
Net Asset Value, End of Year			$23.33			$21.23			$19.46			$13.89			$25.98
Total Return(3)			9.89	%		9.10	%		40.10	%		(32.65	)%		(5.32	)%
Net Assets, End of Year (000s)			$33,220			$21,706			$11,684			$5,975			$12,745
Ratios to Average Net Assets:
	Gross expenses		0.93	%		1.04	%		1.56	%		1.56	%		1.18	%
	Net expenses		0.93			1.04	(4)		1.56			1.56			1.18
	Net investment loss		(0.26	)		(0.47	)		(1.16	)		(1.25	)		(0.97	)
	Portfolio Turnover Rate		0	%		4	%		3	%		4	%		0	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	Per share amounts have been restated to reflect a 1 for 7 reverse stock split which was effective on September 7, 2001.
(3)	Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽⁴⁾ The investment adviser voluntarily waived a portion of its fees.

See Notes to Financial Statements.

86     Greenwich Street Series Fund 2005 Annual Report

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended December 31, unless otherwise noted:

Salomon Brothers Variable
Aggressive Growth Fund — Class II Shares(1)		2005			2004			2003(2)
Net Asset Value, Beginning of Year			$21.05			$19.35			$15.64
Income (Loss) From Operations:
	Net investment loss		(0.11	)		(0.14	)		(0.13	)
	Net realized and unrealized gain		2.14			1.84			3.84
Total Income From Operations			2.03			1.70			3.71
Net Asset Value, End of Year			$23.08			$21.05			$19.35
Total Return(3)			9.64	%		8.79	%		23.72	%
Net Assets, End of Year (000s)			$28,084			$20,752			$5,419
Ratios to Average Net Assets:
	Gross expenses		1.18	%		1.28	%		1.64	% (4)
	Net expenses		1.18			1.28	(5)		1.64	(4)
	Net investment loss		(0.51	)		(0.70	)		(1.25	)(4)
Portfolio Turnover Rate			0	%		4	%		3	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	For the period May 12, 2003 (inception date) to December 31, 2003.
(3)	Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

(4)	Annualized.
(5)	The investment adviser voluntarily waived a portion of its fees.

See Notes to Financial Statements.

Greenwich Street Series Fund 2005 Annual Report      87

Notes to Financial Statements

1.  Organization and Significant Accounting Policies

The Diversified Strategic Income Portfolio (“Diversified Strategic Income Portfolio”), Equity Index Portfolio (“Equity Index Portfolio”), Salomon Brothers Variable Growth & Income Fund (“Growth & Income Fund”) and Salomon Brothers Variable Aggressive Growth Fund (“Aggressive Growth Fund”) (the “Funds”) are separate diversified investment funds of the Greenwich Street Series Fund (the “Trust”). The Trust, a Massachusetts business trust, is registered under the Investment Company Act of 1940, as amended, (the “1940 Act”), as an open-end management investment company.

   The following are significant accounting policies consistently followed by the Funds and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.

   (a) Investment Valuation. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various relationships between securities. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Funds calculate their net asset value, the Funds may value these investments at fair value as determined in accordance with the procedures approved by the Funds’ Board of Trustees. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.

   (b) Repurchase Agreements. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian take possession of the underlying collateral securities, the market value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.

   (c) Financial Futures Contracts. Certain Funds may enter into financial futures contracts typically to hedge a portion of the portfolios. Upon entering into a financial futures contract, the Funds are required to deposit cash or securities as initial margin. Additional securities are also segregated up to the current market value of the financial futures contracts. Subsequent payments, known as variation margin, are made or received by the Funds each day, depending on the daily fluctuation in the value of the underlying financial instruments. The Funds recognize an unrealized gain or loss equal to the daily variation margin. When the financial futures contracts are closed, a realized gain or loss is

88     Greenwich Street Series Fund 2005 Annual Report

Notes to Financial Statements (continued)

recognized equal to the difference between the proceeds from (or cost of) the closing transactions and the Funds’ basis in the contracts.

   The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. In addition, investing in financial futures contracts involves the risk that the Funds could lose more than the original margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

   (d) Forward Foreign Currency Contracts. The Funds may enter into forward foreign currency contracts to hedge against foreign currency exchange rate risk on their non-US dollar denominated securities or to facilitate settlement of foreign currency denominated portfolio transactions. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The contract is marked-to-market daily and the change in value is recorded by the Funds as an unrealized gain or loss. When a forward foreign currency contract is extinguished, through either delivery or offset by entering into another forward foreign currency contract, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was extinguished.

   Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statements of Assets and Liabilities. The Funds bear the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

   (e) Securities Traded on a To-Be-Announced Basis. Certain Funds may trade securities on a to-be-announced (“TBA”) basis. In a TBA transaction, the Funds commit to purchasing or selling securities which have not yet been issued by the issuer and for which specific information is not known, such as the face amount and maturity date and the underlying pool of investments in U.S. government agency mortgage pass-through transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Funds, normally 15 to 45 days later. Beginning on the date the Funds enter into a TBA transaction, cash, U.S. government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.

   (f) Mortgage Dollar Rolls. The Diversified Strategic Income Portfolio enters into dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities to settle on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. The Fund is compensated by a fee paid by the counterparty, often in the form of a drop in the repurchase price of the securities. Dollar rolls are accounted for as financing arrangements; the fee is accrued into

Greenwich Street Series Fund 2005 Annual Report      89

Notes to Financial Statements (continued)

interest income ratably over the term of the dollar roll and any gain or loss on the roll is deferred and realized upon disposition of the rolled security.

   The risk of entering into a mortgage dollar roll is that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of proceeds of the dollar roll may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.

   (g) Credit and Market Risk. Certain Funds invest in high yield instruments that are subject to certain credit and market risks. The yields of high yield obligations reflect, among other things, perceived credit risk. The Funds’ investment in securities rated below investment grade typically involves risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading.

   (h) Security Transactions and Investment Income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Funds determine the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults on an expected interest payment, the Funds’ policy is to generally halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default.

   (i) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

   The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

   Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities, at the date of valuation, resulting from changes in exchange rates.

   Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of,

90     Greenwich Street Series Fund 2005 Annual Report

Notes to Financial Statements (continued)

among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

   (j) REIT Distributions. The character of distributions received from Real Estate Investment Trusts (“REITs”) held by the Funds are generally comprised of net investment income, capital gains, and return of capital. It is the policy of the Funds to estimate the character of distributions received from underlying REITs based on historical data provided by the REITs. After each calendar year end, REITs report the true tax character of these distributions. Differences between the estimated and actual amounts reported by the REITs are reflected in the Funds’ records in the year in which they are reported by the REITs.

   (k) Distributions to Shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Funds are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

   (l) Class Accounting. Investment income, common expenses and realized/unrealized gain (loss) on investments are allocated to the various classes of the Funds on the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that class.

   (m) Federal and Other Taxes. It is the Funds’ policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Funds intend to distribute substantially all of their income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Funds’ financial statements. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

   (n) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These

Greenwich Street Series Fund 2005 Annual Report      91

Notes to Financial Statements (continued)

reclassifications have no effect on net assets or net asset values per share. During the current year, the following reclassifications have been made:

			Accumulated Net
			Investment Loss/
			Undistributed/Overdistributed		Accumulated Net
Fund			Net Investment Income		Realized Losses			Paid-in Capital
Diversified Strategic Income		(a)	$	11,886		—		$	(11,886	)
	Portfolio	(b)		468,715	$	(468,715	)		—
Equity Index Portfolio		(c)		2,110		(2,110	)		—
Growth & Income Fund		(d)		395		—			(395	)
		(e)		3		(3	)		—
Aggressive Growth Fund		(f)		190,101		—			(190,101	)

(a)	Reclassifications are primarily due to a taxable overdistribution.
(b)	Reclassifications are primarily due to foreign currency transactions treated as ordinary income for tax purposes, income from mortgage backed securities treated as capital gains for tax purposes, book/tax differences in the treatment of consent fees, and book/tax differences in the treatment of passive foreign investment companies.

^(c) Reclassifications are primarily due to book/tax differences in the treatment of various items.

(d)	Reclassifications are primarily due to a taxable overdistribution and rounding.
(e)	Reclassifications are primarily due to foreign currency transactions treated as ordinary income for tax purposes.

^(f) Reclassifications are primarily due to a tax net operating loss.

2.  Management Agreement and Other Transactions with Affiliates

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management (“CAM”), to Legg Mason, Inc. (“Legg Mason”). As a result, the Funds’ investment advisers, Smith Barney Fund Management LLC (“SBFM”), Salomon Brothers Asset Management Inc. (“SBAM”) and TIMCO Asset Management, Inc. (“TIMCO”) (collectively, the “Manager”), and Citigroup Asset Management Ltd. (“CAM Ltd.”), the subadviser to Diversified Strategic Income Portfolio, previously indirect wholly-owned subsidiaries of Citigroup, have become wholly-owned subsidiaries of Legg Mason. Completion of the sale caused the Funds’ existing investment advisory contracts to terminate. The Funds’ shareholders approved a new investment management contract (the “Management Agreement”) between the Funds and the Manager, which became effective on December 1, 2005.

   Legg Mason, whose principal executive offices are in Baltimore, Maryland, is a financial services holding company.

   Prior to the transaction, under each investment advisory agreement, the Funds paid an investment advisory fee calculated at an annual rate of each respective Fund’s average daily

92     Greenwich Street Series Fund 2005 Annual Report

Notes to Financial Statements (continued)

net assets. These fees were calculated daily and paid monthly. The respective advisers and the annual rates were as follows:

			Advisory
	Adviser		Fee Rate
Diversified Strategic Income Portfolio		SBFM		0.450	%
Equity Index Portfolio		TIMCO		0.250
Aggressive Growth Fund		SBAM		0.600

   Growth and Income Fund paid investment advisory fees to SBAM, in accordance with the following breakpoint schedule:

	Advisory
Average Daily Net Assets	Fee Rate
First $1.0 billion		0.450	%
Next $1.0 billion		0.425
Next $1.0 billion		0.400
Next $1.0 billion		0.375
Over $4.0 billion		0.350

   CAM Ltd. served as sub-investment adviser to the Diversified Strategic Income Portfolio and was paid a monthly fee by SBFM calculated at a rate of 0.15% of the Fund’s average daily net assets. The Diversified Strategic Income Portfolio did not make any direct payments to CAM Ltd.

   In addition, under each administration agreement, the Funds paid SBFM an administration fee calculated at an annual rate of each respective Fund’s average daily net assets. These fees were calculated daily and paid monthly. The Equity Index Portfolio paid an administration fee calculated at an annual rate of 0.06% of the Fund’s average daily net assets. The Diversified Strategic Income Portfolio, Growth and Income Fund, and Aggressive Growth Fund each paid administration fees, in accordance with the following breakpoint schedules:

Diversified Strategic Income Portfolio:

	Administration
Average Daily Net Assets	Fee Rate
First $1.0 billion		0.200%
Next $1.0 billion		0.175
Next $3.0 billion		0.150
Next $5.0 billion		0.125
Over $10.0 billion		0.100

Greenwich Street Series Fund 2005 Annual Report      93

Notes to Financial Statements (continued)

Growth & Income Fund:

	Administration
Average Daily Net Assets	Fee Rate
First $1.0 billion		0.200%
Next $1.0 billion		0.175
Next $1.0 billion		0.150
Next $1.0 billion		0.125
Over $4.0 billion		0.100

Aggressive Growth Fund:

	Administration
Average Daily Net Assets	Fee Rate
First $1.0 billion		0.150%
Next $1.0 billion		0.125
Next $3.0 billion		0.100
Next $5.0 billion		0.075
Over $10.0 billion		0.050

   Not withstanding the foregoing, prior to October 1, 2005, the Aggressive Growth Fund paid an investment advisory fee to SBAM, in accordance with the following breakpoint schedule:

	Advisory
Average Daily Net Assets	Fee Rate
First $5.0 billion		0.600%
Next $2.5 billion		0.575
Next $2.5 billion		0.550
Over $10.0 billion		0.500

   In addition, the Diversified Strategic Income Portfolio and the Aggressive Growth Fund paid SBFM an administration fee calculated at an annual rate of 0.20% of their respective average daily net assets.

   These fees were calculated daily and paid monthly.

94     Greenwich Street Series Fund 2005 Annual Report

Notes to Financial Statements (continued)

   Under the new Management Agreement, the Funds pay the Manager a management fee for advisory and administrative services in accordance with the following breakpoint schedules:

Diversified Strategic Income Portfolio:

	Management
Average Daily Net Assets	Fee Rate
First $1.0 billion		0.650%
Next $1.0 billion		0.625
Next $3.0 billion		0.600
Next $5.0 billion		0.575
Over $10.0 billion		0.550

Growth & Income Fund:

	Management
Average Daily Net Assets	Fee Rate
First $1.0 billion		0.650%
Next $1.0 billion		0.600
Next $1.0 billion		0.550
Next $1.0 billion		0.500
Over $4.0 billion		0.450

Aggressive Growth Fund:

	Management
Average Daily Net Assets	Fee Rate
First $1.0 billion		0.750%
Next $1.0 billion		0.725
Next $3.0 billion		0.700
Next $5.0 billion		0.675
Over $10.0 billion		0.650

   The Equity Index Portfolio pays the Manager an advisory fee calculated at an annual rate of 0.25% of the Fund’s average daily net assets and an administration fee calculated at an annual rate of 0.06% of the Fund’s average daily net assets.

   These fees are calculated daily and paid monthly.

   The Funds’ Board has approved PFPC Inc. (“PFPC”) to serve as transfer agent for the Funds, effective January 1, 2006. The principal business office of PFPC is located at 4400 Computer Drive, Westborough, MA 01581. During the period covered by this report, Citicorp Trust Bank, fsb. (“CTB”), a subsidiary of Citigroup, acted as the Funds’ transfer agent. PFPC acted as the Funds’ sub-transfer agent. CTB received account fees and asset-based fees that varied according to the size and type of account. PFPC was responsible for

Greenwich Street Series Fund 2005 Annual Report      95

Notes to Financial Statements (continued)

shareholder recordkeeping and financial processing for all shareholder accounts and was paid by CTB. For the period ended December 31, 2005, the Funds paid transfer agent fees of $13,823 to CTB.

	Transfer Agent
Diversified Strategic Income Portfolio		$4,583
Equity Index Portfolio		9,167
Growth & Income Fund		35
Aggressive Growth Fund		38

   The Funds’ Board has appointed the Funds’ current distributor, Citigroup Global Markets Inc. (“CGM”) and Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, as co-distributors of the Funds. The Funds’ Board has also approved amended and restated Rule 12b-1 Plans (each, a “Rule 12b-1 Plan”). CGM and other broker-dealers, financial intermediaries and financial institutions (each called a “Service Agent”) that currently offer Fund shares will continue to make the Funds’ shares available to their clients. Additional Service Agents may offer Funds shares in the future.

   Effective December 1, 2005, The Trust, on behalf of the Equity Index Portfolio, Growth & Income Fund and Aggressive Growth Fund, adopted an amended shareholder services and distribution plan pursuant to Rule 12b-1 (“Rule 12b-1 Plan”) under the 1940 Act for the Funds’ Class II shares. The Plan provides that the Trust, on behalf of the Funds, shall pay CGM a fee up to 0.25% of the average daily net assets of the Funds attributable to Class II shares. As of December 31, 2005, Growth & Income Fund had not issued any Class II Shares.

   During the year ended December 31, 2005, CGM and its affiliates received brokerage commissions of $50 from Growth & Income Fund and $38 from Aggressive Growth Fund.

   The Funds have adopted an unfunded, non-qualified deferred compensation plan (the “Plan”) which allows non-interested trustees (“Independent Trustees”) to defer the receipt of all or a portion of the trustees’ fees earned until a later date specified by the Independent Trustees. The deferred fees earn a return based on notional investments selected by the Independent Trustees. The balance of the deferred fees payable may change depending upon the investment performance. Any gains or losses incurred in the deferred balances are reported in the statement of operations under trustees’ fees. Under the Plan, deferred fees are considered a general obligation of the Funds and any payments made pursuant to the Plan will be made from the Funds’ general assets.

   As of December 31, 2005, the Diversified Strategic Income Portfolio, Equity Index Portfolio, Growth & Income Fund and Aggressive Growth Fund have accrued $2,773, $3,063, $2,292 and $1,981 as deferred compensation, respectively.

   Certain officers and one Trustee of the Trust are employees of Legg Mason or its affiliates and do not receive any compensation from the Trust.

96     Greenwich Street Series Fund 2005 Annual Report

Notes to Financial Statements (continued)

3.  Investments

During the year ended December 31, 2005, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments and mortgage dollar rolls) were as follows:

					U.S. Government &
	Investments				Agency Obligations
	Purchases		Sales		Purchases		Sales
Diversified Strategic Income Portfolio	$	21,452,646	$	46,637,749	$	53,454,223	$	34,717,503
Equity Index Portfolio		155,492,992		109,398,527		—		—
Growth & Income Fund		5,986,348		6,788,169		—		—
Aggressive Growth Fund		13,063,121		60,988		—		—

   At December 31, 2005, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

	Gross unrealized		Gross unrealized			Net unrealized
	appreciation		depreciation			appreciation/depreciation
Diversified Strategic Income Portfolio	$	1,485,048	$	(1,839,914	)	$	(354,866	)
Equity Index Portfolio		321,228,586		(226,919,299	)		94,309,287
Growth & Income Fund		2,210,520		(142,183	)		2,068,337
Aggressive Growth Fund		11,892,061		(4,529,027	)		7,363,034

   At December 31, 2005, the Funds had the following open futures contracts:

Diversified Strategic	Number of		Expiration		Basis		Market		Unrealized
Income Portfolio	Contracts		Date		Value		Value		Gain/Loss
Contracts to Buy:
U.S. Treasury 10 Year Notes		21		3/06	$	2,278,743	$	2,297,531	$	18,788
U.S. Treasury 2 Year Notes		11		3/06		2,255,851		2,257,062		1,211
										19,999
Contracts to Sell:
U.S. Treasury 5 Year Notes		4		3/06	$	423,329	$	425,375		(2,046	)
Net Unrealized Gain on Open Futures Contracts									$	17,953

   During the year ended December 31, 2005, the Diversified Strategic Income Portfolio entered into mortgage dollar roll transactions in the aggregate amount of $412,431,914. For the year ended December 31, 2005, the Fund recorded interest income of $699,262

Greenwich Street Series Fund 2005 Annual Report      97

Notes to Financial Statements (continued)

related to such transactions. At December 31, 2005, the Fund had outstanding net contracts to repurchase mortgage-backed securities of $40,407,598 for scheduled settlements on January 12 and 18, 2006.

4.  Class Specific Expenses

Pursuant to a Rule 12b-1 Plan, the Equity Index Portfolio, Growth & Income Fund and Aggressive Growth Fund each pay a distribution fee with respect to its Class II shares calculated at the annual rate of 0.25% of the average daily net assets attributable to Class II shares. As of December 31, 2005, no Class II shares were issued for Growth & Income Fund. For the year ended December 31, 2005, total Distribution fees, which are accrued daily and paid monthly, were as follows:

	Class II
Equity Index Portfolio	$578,430
Aggressive Growth Fund	59,904

   For the year ended December 31, 2005, total Transfer Agent fees were as follows:

	Class I		Class II
Equity Index Portfolio	$	5,007	$	5,008
Aggressive Growth Fund		88		81

   For the year ended December 31, 2005, total Shareholder Reports expenses were as follows:

	Class I	Class II
Equity Index Portfolio	$143,229	$	26,173
Aggressive Growth Fund	8,419		7,661

98     Greenwich Street Series Fund 2005 Annual Report

Notes to Financial Statements (continued)

5.  Distributions to Shareholders by Class

	Year Ended		Year Ended
	December 31, 2005		December 31, 2004
Diversified Strategic Income Portfolio
Net investment income	$	5,001,106	$	4,799,696
Equity Index Portfolio Class I
Net investment income	$	21,430,279	$	21,936,892
Equity Index Portfolio Class II
Net investment income	$	2,871,278	$	2,962,652
Growth & Income Fund
Net investment income	$	40,002	$	101,977

   For the years ended December 31, 2005 and 2004, the Aggressive Growth Fund did not make any distributions.

6.  Shares of Beneficial Interest

At December 31, 2005, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.001 per share. The Equity Index Portfolio, Growth & Income Fund and Aggressive Growth Fund have the ability to issue multiple classes of shares. Each share of a class represents an identical interest and has the same rights, except that each class bears certain direct expenses specifically related to the distribution of its shares.

   On August 30, 2002, the Aggressive Growth Fund and the Growth & Income Fund created a separate class of shares designated as Class II shares. Prior to that date, these Funds issued one class of shares, which, as of August 30, 2002, has been designated Class I shares. As of December 31, 2005, Growth & Income Fund had not issued any Class II shares.

   Transactions in shares of each Fund were as follows:

	Year Ended						Year Ended
	December 31, 2005						December 31, 2004
	Shares			Amount			Shares			Amount
Diversified Strategic Income Portfolio
Shares sold		559,692		$	5,234,458			1,370,414		$	12,777,163
Shares issued on reinvestment		552,927			5,001,106			517,828			4,799,696
Shares repurchased		(1,970,148	)		(18,480,976	)		(1,436,108	)		(13,390,612	)
Net Increase (Decrease)		(857,529	)	$	(8,245,412	)		452,134		$	4,186,247

Greenwich Street Series Fund 2005 Annual Report      99

Notes to Financial Statements (continued)

	Year Ended						Year Ended
	December 31, 2005						December 31, 2004
	Shares			Amount			Shares			Amount
Equity Index Portfolio Class I
Shares sold		1,783,407		$	52,469,338			4,668,053		$	129,139,424
Shares issued on reinvestment		699,911			21,430,279			743,910			21,936,892
Shares repurchased		(3,243,069	)		(96,663,549	)		(2,029,271	)		(56,382,704	)
Net Increase (Decrease)		(759,751	)	$	(22,763,932	)		3,382,692		$	94,693,612
Equity Index Portfolio Class II
Shares sold		917,995		$	27,034,778			3,314,334		$	89,913,691
Shares issued on reinvestment		93,715			2,871,278			100,387			2,962,652
Shares repurchased		(1,001,831	)		(29,736,784	)		(610,686	)		(17,046,282	)
Net Increase		9,879		$	169,272			2,804,035		$	75,830,061
Growth & Income Fund
Shares sold		199,677		$	966,534			578,485		$	2,677,330
Shares issued on reinvestment		7,828			40,002			20,749			101,977
Shares repurchased		(414,168	)		(2,016,392	)		(367,287	)		(1,681,850	)
Net Increase (Decrease)		(206,663	)	$	(1,009,856	)		231,947		$	1,097,457
Aggressive Growth Fund Class I
Shares sold		473,718		$	10,157,123			523,041		$	10,418,783
Shares repurchased		(72,209	)		(1,562,217	)		(101,052	)		(2,029,612	)
Net Increase		401,509		$	8,594,906			421,989		$	8,389,171
Aggressive Growth Fund Class II
Shares sold		342,024		$	7,232,616			777,437		$	15,454,588
Shares repurchased		(110,836	)		(2,372,640	)		(71,755	)		(1,394,553	)
Net Increase		231,188		$	4,859,976			705,682		$	14,060,035

7.  Income Tax Information and Distributions to Shareholders

The tax character of distributions paid during the fiscal year ended December 31, 2005, was as follows:

		Diversified Strategic		Equity Index		Growth &
		Income Portfolio		Portfolio		Income Fund
Distributions paid from:
	Ordinary Income	$	5,001,106	$	24,301,557	$	40,002

   The Aggressive Growth Fund did not make any distributions during the fiscal year ended December 31, 2005.

100     Greenwich Street Series Fund 2005 Annual Report

Notes to Financial Statements (continued)

   The tax character of distributions paid during the fiscal year ended December 31, 2004 was as follows:

		Diversified Strategic		Equity Index		Growth &
		Income Portfolio		Portfolio		Income Fund
Distributions paid from:
	Ordinary Income	$	4,799,696	$	24,899,544	$	101,977

   The Aggressive Growth Fund did not make any distributions during the fiscal year ended December 31, 2004.

   As of December 31, 2005, the components of accumulated earnings (losses) on a tax basis were as follows:

	Diversified
	Strategic Income			Equity Index			Growth &			Aggressive
	Portfolio			Portfolio			Income Fund			Growth Fund
Undistributed ordinary income — net		—		$	117,678			—			—
Capital loss carryforward*	$	(7,111,968	)		(7,879,134	)	$	(625,649	)	$	(577,590	)
Other book/tax temporary differences		(33,255	)(a)		(3,063	)(c)		(11,015	) (e)		(1,995	)(e)
Unrealized appreciation/(depreciation)		(341,709	)(b)		94,309,287	(d)		2,068,337	(f)		7,363,034	(g)
Total accumulated earnings/(losses) — net	$	(7,486,932	)	$	86,544,768		$	1,431,673		$	6,783,449

*  During the taxable year ended December 31, 2005, Diversified Strategic Income Portfolio utilized $1,332,611, Equity Index Portfolio utilized $22,423,970, Growth & Income Fund utilized $264,015, and Aggressive Growth Fund utilized $18,134, of each of their respective capital loss carryovers available from prior years. As of December 31, 2005, the Funds had the following net capital loss carryforwards remaining:

	Diversified
	Strategic Income			Equity Index			Growth &			Aggressive
	Portfolio			Portfolio			Income Fund			Growth Fund
Years of Expiration
12/31/2008	$	(449,197	)		—			—			—
12/31/2009		(4,543,816	)		—			—			—
12/31/2010		(2,118,955	)	$	(7,879,134	)		—		$	(577,590	)
12/31/2011		—			—		$	(625,649	)		—
	$	(7,111,968	)	$	(7,879,134	)	$	(625,649	)	$	(577,590	)

These amounts will be available to offset any future taxable gains.

(a)	Other book/tax temporary differences are attributable primarily to the realization for tax purposes of unrealized gains on certain futures contracts, the deferral of post- October capital losses for tax purposes, and differences in the book/tax treatment of various items.
(b)	The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and book/tax differences in the treatment of consent fees.

^(c) Other book/tax temporary differences are attributable primarily to differences in the book/tax treatment of various items.

(d)	The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales, the difference between the book and tax cost basis of investments in real estate investment trusts, and other book/tax basis of adjustments.
(e)	Other book/tax temporary differences are attributable primarily to the deferral of post-October capital losses for tax purposes and differences in the book/tax treatment of various items.

^(f) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales.

^(g) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to other book/tax basis adjustments.

Greenwich Street Series Fund 2005 Annual Report      101

Notes to Financial Statements (continued)

8.  Regulatory Matters

On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and CGM relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).

   The SEC order finds that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the Funds’ investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also finds that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

   The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan prepared and submitted for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.

   The order required SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGM would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Funds’ Board selected a new transfer agent for the Funds. No Citigroup affiliate submitted a

102     Greenwich Street Series Fund 2005 Annual Report

Notes to Financial Statements (continued)

proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

   At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.

   On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason Inc.

9.  Legal Matters

Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGM and SBFM, (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC described in Note 8. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the advisor for the Smith Barney family of funds, rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses.

   On October 5, 2005, a motion to consolidate the five actions and any subsequently-filed, related action was filed. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future.

   As of the date of this report, the Funds’ investment manager believes that 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 Funds’ investment manager and its affiliates to continue to render services to the Funds under their respective contracts.

* * *

   Beginning in June 2004, class action lawsuits alleging violations of the federal securities laws were filed against CGM (the “Distributor”) and a number of its affiliates, including SBFM and Salomon Brothers Asset Management Inc (the “Advisers”), substantially all of the mutual funds managed by the Advisers, including the Funds (the “Funds”), and directors or trustees of the Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGM 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 CGM for steering clients towards proprietary funds. The complaints also alleged that the defendants breached their fiduciary duty to the Funds by improperly charging Rule l2b-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.

Greenwich Street Series Fund 2005 Annual Report      103

Notes to Financial Statements (continued)

   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, the Funds’ investment manager 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, the Funds’ investment manager 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.

   The Defendants have moved to dismiss the Complaint. Those motions are pending before the court.

10.  Other Matters

On September 16, 2005, the staff of the Securities and Exchange Commission (the “Commission”) informed SBFM and Salomon Brothers Asset Management Inc (“SBAM”) that the staff is considering recommending that the Commission institute administrative proceedings against SBFM and SBAM for alleged violations of Section 19(a) and 34(b) of the Investment Company Act (and related Rule 19a-1). The notification is a result of an industry wide inspection by the Commission and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. Section 19(a) and related Rule 19a-1 of the Investment Company Act generally require funds that are making dividend and distribution payments to provide shareholders with a written statement disclosing the source of the dividends and distributions, and, in particular, the portion of the payments made from each of net investment income, undistributed net profits and/ or paid-in capital. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM or SBAM.

   Although there can be no assurance, SBFM and SBAM believes that this matter is not likely to have a material adverse effect on the Funds or SBFM and SBAM’s ability to perform investment management services relating to the Funds.

104     Greenwich Street Series Fund 2005 Annual Report

Report of Independent Registered Public Accounting Firm

The Shareholders and Board of Trustees
Greenwich Street Series Fund:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Diversified Strategic Income Portfolio, Equity Index Portfolio, Salomon Brothers Variable Growth & Income Fund and Salomon Brothers Variable Aggressive Growth Fund (formerly Salomon Brothers Variable Emerging Growth Fund), each a series of Greenwich Street Series Fund, as of December 31, 2005, and the related statements of operations for the year then ended, statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

   We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Diversified Strategic Income Portfolio, Equity Index Portfolio, Salomon Brothers Variable Growth & Income Fund and Salomon Brothers Variable Aggressive Growth Fund as of December 31, 2005, and the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

New York, New York
February 22, 2006

Greenwich Street Series Fund 2005 Annual Report      105

Board Approval of Management and Subadvisory Agreements (unaudited)

Greenwich Street Series Fund

At separate meetings of the Trust’s Board of Trustees, the Board considered the re-approval for an annual period of the Trust’s investment advisory agreements pursuant to which Smith Barney Fund Management LLC (“SBFM”) provides the Diversified Strategic Income Portfolio, TIMCO Asset Management, Inc. (“TIMCO”) provides the Equity Index Portfolio, and Salomon Brothers Asset Management Inc. (“SBAM”) provides the Growth & Income Fund and the Aggressive Growth Fund with investment advisory services. The Trust’s Board also considered the re-approval for an annual period of the sub-investment advisory agreement between SBFM and Citigroup Asset Management Limited (“CAM Ltd.”) pursuant to which CAM Ltd. provides the Diversified Strategic Income Portfolio with sub-investment advisory services, and the Trust’s administration agreement pursuant to which SBFM provides each Fund with administrative services. The investment advisory agreements, sub-investment advisory agreement and administration agreement are collectively referred to as the (“Agreement”). SBFM, TIMCO, SBAM and CAM Ltd. were each wholly-owned subsidiaries of Citigroup, Inc. (“Citigroup”) and are referred to as the (“Manager”). The Board members who are not “interested persons” (as defined in the Investment Company Act of 1940, as amended (the “Independent Trustees”)) of the Trust were assisted in their review by Fund counsel and independent legal counsel and met with independent legal counsel in executive sessions separate from representatives of the Manager. The Independent Trustees requested and received information from the Manager they deemed reasonably necessary for their review of the Agreement and the Manager’s performance. This information was initially reviewed by a special committee of the Independent Trustees and then by the full Board. Prior to the Board’s deliberations, Citigroup had announced an agreement to sell the Manager to Legg Mason, which, subject to certain approvals, was expected to be effective later in the year. Consequently, representatives of Legg Mason discussed with the Board Legg Mason’s intentions regarding the preservation and strengthening of the Manager’s business. The Independent Trustees also requested and received certain assurances from senior management of Legg Mason regarding the continuation of the level of services provided to the Funds and their shareholders should the sale of the Manager be consummated. At subsequent Board meetings, representatives of Citigroup Asset Management (“CAM”) and Legg Mason made additional presentations to and responded to further questions from the Board regarding Legg Mason’s acquisition of CAM, which includes the Manager. After considering these presentations and reviewing additional written materials provided by CAM and Legg Mason, the Board, including the Independent Trustees, approved, subject to shareholder approval, a new Agreement permitting the Manager to continue to provide its services to the Funds after consummation of the sale of the Manager to Legg Mason. (Shareholders approved the new Agreement and the sale of CAM to Legg Mason was consummated as of December 1, 2005.)

   In voting to approve the Agreement, the Independent Trustees considered whether the approval of the Agreement would be in the best interests of the respective Funds and their shareholders, an evaluation based on several factors including those discussed below.

106     Greenwich Street Series Fund 2005 Annual Report

Board Approval of Management and Subadvisory Agreements (unaudited) (continued)

Analysis of the Nature, Extent and Quality of the Services

provided to each Fund

The Board received a presentation from representatives of the Manager regarding the nature, extent and quality of services provided to each Fund and other funds in the CAM fund complex. In addition, the Independent Trustees received and considered other information regarding the services provided to the respective Fund by the Manager under the Agreement during the past year, including a description of the administrative and other services rendered to the Funds and their shareholders by SBFM. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager about the management of the respective Fund’s affairs and SBFM’s role in coordinating the activities of the Trust’s other service providers. The Board’s evaluation of the services provided by the Manager took into account the Board’s knowledge and familiarity gained as Board members of funds in the CAM fund complex, including the scope and quality of the Manager’s investment management and other capabilities and the quality of SBFM’s administrative and other services. The Board observed that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Trust’s expanded compliance programs. The Board also considered the Manager’s response to recent regulatory compliance issues affecting the Manager and the CAM fund complex. The Board reviewed information received from the Manager and the Trust’s Chief Compliance Officer regarding the implementation to date of the Trust’s compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended.

   The Board reviewed the qualifications, backgrounds and responsibilities of each Fund’s senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the willingness of the Manager to consider and implement organizational changes to improve investment results and the services provided to the CAM fund complex. The Board noted that the Manager’s Office of the Chief Investment Officer, comprised of the senior officers of the investment teams managing the funds in the CAM complex, participates in reporting to the Board on investment matters. The Board also considered, based on its knowledge of the Manager and its affiliates, the financial resources available to CAM and its parent organization, Citigroup.

   The Board also considered the Manager’s brokerage policies and practices, the standards applied in seeking best execution, the Manager’s policies and practices regarding soft dollars, the use of a broker affiliated with the Manager and the existence of quality controls applicable to brokerage allocation procedures. In addition, management also reported to the Board on, among other things, its business plans, recent organizational changes and portfolio manager compensation plan.

   The Board concluded that, overall, it was satisfied with the nature, extent and quality of services provided (and expected to be provided) under the Agreement by the Manager.

Greenwich Street Series Fund 2005 Annual Report      107

Board Approval of Management and Subadvisory Agreements (unaudited) (continued)

Fund Performance

The Board received and reviewed performance information for each Fund and for a group of comparable funds (the “Performance Universe”) selected by Lipper Inc., an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the relevant Fund with the funds included in the Performance Universe. The Board also was provided with information comparing each Fund’s performance to the Lipper category averages over various time periods. The Board members noted that they had also received and discussed with management information throughout the year at periodic intervals comparing each Fund’s performance against its benchmark index.

   Diversified Strategic Income Portfolio — The information comparing the Diversified Strategic Income Portfolio’s performance to that of its Performance Universe, consisting of all underlying variable insurance portfolios classified as “general bond funds” by Lipper, was for the one-, three-, five- and ten-year periods ended March 31, 2005. The Diversified Strategic Income Portfolio performed at the median for the one-year period, but its performance for the three-, five- and ten-year periods was below the median. The Board also reviewed performance information provided by the Manager for periods ended June 2005, which showed that the Diversified Strategic Income Portfolio’s performance continued to be competitive compared to the Lipper category average during the second quarter. The Board noted that in July 2002 there had been a change in the portfolio management team managing the Diversified Strategic Income Portfolio’s investments and took into account reports throughout the year demonstrating that the Fund’s performance was improving. Based on its review, the Board generally was satisfied with the Manager’s efforts to improve Diversified Strategic Income Portfolio’s performance, but concluded that it was necessary to closely monitor the performance of the Fund and its portfolio management team.

   Equity Index Portfolio — The information comparing the Equity Index Portfolio’s performance to that of its Performance Universe, consisting of all underlying variable insurance portfolios classified as “S&P 500 index funds” by Lipper, was for the one-, three-, five- and ten-year periods ended March 31, 2005. The Equity Index Portfolio performed at the median for the one-year period, better than the median for the three- and five-year periods and below the median for the ten-year period. The Board also reviewed performance information provided by the Manager for periods ended June 2005, which showed the Fund’s performance continued to be competitive during the second quarter compared to the Lipper category average. Based on its review, the Board generally was satisfied with the Equity Index Portfolio’s performance.

   Aggressive Growth Fund — The information comparing the Aggressive Growth Fund’s performance to that of its Performance Universe, consisting of all underlying variable insurance portfolios classified as “multi-cap growth funds” by Lipper, was for the one-, three-, five- and ten-year periods ended March 31, 2005. The Aggressive Growth Fund performed below the median for the one-year period and better than the median for the

108     Greenwich Street Series Fund 2005 Annual Report

Board Approval of Management and Subadvisory Agreements (unaudited) (continued)

three-, five- and ten-year periods. In fact, the Aggressive Growth Fund’s performance for the five- and ten-year periods ranked in the 1st quintile of the Performance Universe. The Board also reviewed performance information provided by the Manager for periods ended June 2005, which showed the Fund outperformed the Lipper category average during the second quarter. The Board discussed with representatives of the Manager the reasons for the Fund’s underperformance compared to the Lipper category average for the one-year period ended March 31, 2005. The Board members noted that the portfolio manager is very experienced with a superior long-term performance record, and expressed their confidence in the portfolio management team. Based on its review, the Board generally was satisfied with the Aggressive Growth Fund’s performance.

   Growth & Income Fund — The information comparing the Growth & Income Fund’s performance to that of its Performance Universe, consisting of all underlying variable insurance portfolios classified as “large-cap core funds” by Lipper, was for the one-, three-, five- and ten-year periods ended March 31, 2005. The Growth & Income Fund performed below the median for the one- and ten-year periods and slightly below the median for the three-year period. The Fund’s performance for the five-year period was better than the median. The Board also reviewed performance information provided by the Manager for periods ended June 2005, which showed that the Fund performed slightly better than the Lipper category average during the second quarter. The Board discussed with representatives of the Manager the Fund’s investment strategy and the Manager’s efforts to improve the Growth & Income Fund’s performance. Based on its review, the Board generally was satisfied with the Manager’s efforts to improve Growth & Income Fund’s performance, but concluded that it was necessary to continue to closely monitor the performance of the Fund and its portfolio management team.

Management Fees and Expense Ratios

The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) payable by each Fund to the Manager for investment advisory services and to SBFM for administrative services in light of the nature, extent and quality of the management services provided by the Manager and SBFM. The Board noted that SBFM, and not the Diversified Strategic Income Portfolio, pays the sub-investment advisory fee to CAM Ltd. and, accordingly, that the retention of CAM Ltd. as sub-investment adviser to the Fund does not increase the fees and expenses incurred by the Fund.

   Additionally, the Board received and considered information comparing the Contractual Management Fee and each Fund’s overall expense ratio with those of funds in both the relevant expense group (the “Expense Group”) and a broader group of funds, each selected and provided by Lipper. The Board also reviewed information regarding the fees the Manager charged its other U.S. clients investing primarily in asset classes similar to those of the Funds including, where applicable, separate accounts. The Manager reviewed with the Board the significant differences in the scope of services provided to the Funds and to these other clients, noting that the Trust is provided with regulatory compliance and administrative services, office facilities and fund officers (including the Trust’s chief

Greenwich Street Series Fund 2005 Annual Report      109

Board Approval of Management and Subadvisory Agreements (unaudited) (continued)

executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Funds by other fund providers. The Board considered the fee comparisons in light of the differences required to manage these different types of accounts. The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a proposed framework of fees based on asset classes.

   Management also discussed with the Board the Funds’ distribution arrangements. The Board was provided with information concerning revenues received by and certain expenses incurred by the Trust’s affiliated distributors and how the amounts received by the distributors are expended.

   Diversified Strategic Income Portfolio — The information comparing the Diversified Strategic Income Portfolio’s Contractual Management Fee as well as its actual total expense ratio to its Expense Group, consisting of 10 underlying variable insurance portfolios (including the Fund) classified as “general bond funds” by Lipper, showed that the Diversified Strategic Income Portfolio’s Contractual Management Fee was slightly higher than the median of management fees paid by the other funds in the Expense Group. The Board noted that the Diversified Strategic Income Portfolio’s actual total expense ratio was slightly lower than the median of total expense ratios of the other funds in the Expense Group. After discussion with the Board, the Manager offered to institute fee breakpoints effective October 1, 2005, acknowledging that Diversified Strategic Income Portfolio did not yet have enough assets to realize the benefits of the new fee schedule. The Board noted that breakpoints will help reduce the management fee of Diversified Strategic Income Portfolio to the extent Diversified Strategic Income Portfolio’s assets increase to a level at which the breakpoints are triggered.

   Equity Index Portfolio — The information comparing the Equity Index Portfolio’s Contractual Management Fee as well as its actual total expense ratio to its Expense Group, consisting of 12 underlying variable insurance portfolios (including the Fund) classified as “S&P 500 index funds” by Lipper, showed that the Equity Index Portfolio’s Contractual Management Fee was higher than the median of management fees paid by the other funds in the Expense Group. The Board noted that the Equity Index Portfolio’s actual total expense ratio also was higher than the median of total expense ratios of the other funds in the Expense Group.

   Aggressive Growth Fund — The information comparing the Aggressive Growth Fund’s Contractual Management Fee as well as its actual total expense ratio to its Expense Group, consisting of 10 underlying variable insurance portfolios (including the Fund) classified as “multi-cap growth funds” by Lipper, showed that the Aggressive Growth Fund’s Contractual Management Fee was lower than the median of management fees paid by the other funds in the Expense Group. The Board noted that the Aggressive Growth Fund’s actual total expense ratio was higher than the median of total expense ratios of the other funds in the Expense Group. The Board noted that commencing August 1, 2004, the Manager reduced its Contractual Management Fee and implemented breakpoints and that the full benefit of this adjustment was not reflected in the Lipper Report. After a discussion

110     Greenwich Street Series Fund 2005 Annual Report

Board Approval of Management and Subadvisory Agreements (unaudited) (continued)

with the Board, the Manager offered an additional reduction to the Contractual Management Fee and to institute revised fee breakpoints effective October 1, 2005, acknowledging that Aggressive Growth Fund did not yet have enough assets to realize the benefits of the new fee schedule. The Board noted that breakpoints will help reduce the management fee of Aggressive Growth Fund to the extent Aggressive Growth Fund’s assets increase to a level at which the breakpoints are triggered.

   Growth & Income Fund — The information comparing the Growth & Income Fund’s Contractual Management Fee as well as its actual total expense ratio to its Expense Group, consisting of 12 underlying variable insurance portfolios (including the Fund) classified as “large-cap core funds” by Lipper, showed that the Growth & Income Fund’s Contractual Management Fee was lower than the median of management fees paid by the other funds in the Expense Group. The Board noted that the Growth & Income Fund’s actual total expense ratio was higher than the median of total expense ratios of the other funds in the Expense Group. The Board noted that commencing August 1, 2004, breakpoints were added to Growth & Income Fund’s Contractual Management Fee, acknowledging that Growth & Income Fund did not yet have enough assets to realize the benefit of the breakpoint schedule.

   Taking all of the above into consideration, the Board determined that the management fee payable with respect to each Fund was reasonable in light of the comparative performance and expense information and the nature, extent and quality of the services provided to the Fund under the respective Agreement.

Manager Profitability

The Board received and considered a profitability analysis of the Manager and its affiliates in providing services to the Funds. The Board also received profitability information with respect to the CAM fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data as well as a report from an outside consultant that had reviewed the Manager’s methodology. The Board also noted the profitability percentage ranges determined by appropriate court cases to be reasonable given the services rendered to investment companies. With respect to each Fund, the Board determined that the Manager’s profitability was not excessive in light of the nature, extent and quality of the services provided to each Fund.

Economies of Scale

The Board received and considered information regarding whether there have been economies of scale with respect to the management of each Fund, whether the Fund has appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered whether economies of scale in the provision of services to each Fund were being passed along to the shareholders. The Board also considered whether alternative fee structures (such as with breakpoints for those management fees without breakpoints or with additional breakpoints at lower asset

Greenwich Street Series Fund 2005 Annual Report      111

Board Approval of Management and Subadvisory Agreements (unaudited) (continued)

levels for those management fees with breakpoints) would be more appropriate or reasonable taking into consideration economies of scale or other efficiencies.

   Diversified Strategic Income Portfolio — The Board noted that the Diversified Strategic Income Portfolio had not yet reached the specified asset level at which a breakpoint to its new Contractual Management Fee would be triggered. The Board noted, however, that the new Contractual Management Fee increases the potential for sharing economies of scale with shareholders as the Fund’s assets grow than if no breakpoints were in place. The Board also noted that as the Fund’s assets increase over time, the Fund and its shareholders should realize other economies of scale as certain expenses, such as fixed Fund fees, become a smaller percentage of overall assets. The Board noted that it appeared that the benefits of any economies of scale also would be appropriately shared with shareholders through increased investment in fund management and administration resources.

   Equity Index Portfolio — The Board noted that as the Equity Index Portfolio’s assets increased over time, the Fund and its shareholders realized economies of scale as certain expenses, such as fixed Fund fees, became a smaller percentage of overall assets. The Board noted that it appeared that the benefits of any economics of scale also were appropriately shared with shareholders through increased investment in fund management and administration resources.

   Aggressive Growth Fund — The Board noted that the Aggressive Growth Fund had not yet reached the specified asset level at which a breakpoint to its Contractual Management Fee would be triggered. The Board noted, however, that the Contractual Management Fee increases the potential for sharing economies of scale with shareholders as the Fund’s assets grow than if no breakpoints were in place. The Board also noted that as the Fund’s assets increase over time, the Fund and its shareholders should realize other economies of scale as certain expenses, such as fixed Fund fees, become a smaller percentage of overall assets. The Board noted that it appeared that the benefits of any economies of scale also would be appropriately shared with shareholders through increased investment in fund management and administration resources.

   Growth & Income Fund — The Board noted that the Growth & Income Fund had not yet reached the specified asset level at which a breakpoint to its Contractual Management Fee would be triggered. The Board noted, however, that the Contractual Management Fee increases the potential for sharing economies of scale with shareholders as the Fund’s assets grow than if no breakpoints were in place. The Board also noted that as the Fund’s assets increase over time, the Fund and its shareholders should realize other economies of scale as certain expenses, such as fixed Fund fees, become a smaller percentage of overall assets. The Board noted that it appeared that the benefits of any economies of scale also would be appropriately shared with shareholders through increased investment in fund management and administration resources.

Other Benefits to the Manager

The Board considered other benefits received by the Manager and its affiliates as a result of the Manager’s relationship with the Funds, including any soft dollar arrangements, receipt

112     Greenwich Street Series Fund 2005 Annual Report

Board Approval of Management and Subadvisory Agreements (unaudited) (continued)

of brokerage commissions and the opportunity to offer additional products and services to each Fund’s shareholders.

   In light of the costs of providing investment management and other services to the Fund and the Manager’s ongoing commitment to the Funds, the profits and other ancillary benefits that the Manager and its affiliates received were considered reasonable.

   Based on their discussions and considerations, including those described above, the Board members approved the Agreement to continue for another year.

   No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Agreement.

Additional Information

On June 23, 2005, Citigroup Inc. entered into a definitive agreement (the “Transaction Agreement”) with Legg Mason, Inc. under which Citigroup agreed to sell substantially all of its asset management business, CAM, which includes the Adviser of Diversified Strategic Income Portfolio, Equity Index Portfolio, Aggressive Growth Fund and Growth & Income Fund and the subadviser of Diversified Strategic Income Portfolio, to Legg Mason in exchange for the broker-dealer and investment banking businesses of Legg Mason and certain other considerations (the “Transaction”). The Transaction closed on December 1, 2005.

   The consummation of the Transaction resulted in the automatic termination of the Fund’s current advisory agreement of Diversified Strategic Income Portfolio, Equity Index Portfolio, Aggressive Growth Fund and Growth & Income Fund and subadvisory agreement of Diversified Strategic Income Portfolio in accordance with the Investment Company Act of 1940, as amended (the “1940 Act”). Prior to the closing of the Transaction, the Trusts’ Board approved a new management agreement between Diversified Strategic Income Portfolio, Aggressive Growth Fund and Growth & Income Fund and the Adviser and a new advisory agreement between Equity Index Portfolio and the Adviser (the “New Management Agreement”) and a new subadvisory agreement between the Adviser and Citigroup Asset Management Limited, the Diversified Strategic Income Portfolio’s subadviser (the “Subadviser”) (the “New Subadvisory Agreement”) and authorized the Trusts’ officers to submit the New Management Agreement and the New Subadvisory Agreement to shareholders for their approval.

   On July 11, 2005, members of the Board discussed with CAM management and certain Legg Mason representatives the Transaction and Legg Mason’s general plans and intentions regarding CAM’s business and its combination with Legg Mason’s business. The Board Members also inquired about the plans for and anticipated roles and responsibilities of certain CAM employees and officers after the Transaction.

   At a meeting held on August 1, 2005, the Trust’s Board, including a majority of the Board Members who are not “interested persons” of the Trust or the Adviser as defined in the 1940 Act (the “Independent Board Members”), approved the New Management Agreement and the New Subadvisory Agreement. To assist the Board in its consideration of the New Management Agreement, Legg Mason provided materials and information about

Greenwich Street Series Fund 2005 Annual Report      113

Board Approval of Management and Subadvisory Agreements (unaudited) (continued)

Legg Mason, including its financial condition, asset management capabilities and organization, and CAM provided materials and information about the Transaction between Legg Mason and Citigroup. To assist the Board in its consideration of the New Subadvisory Agreement, the Board received in advance of their meeting certain materials and information. Representatives of CAM and Legg Mason also made presentations to and responded to questions from the Board. The Independent Board Members, through their independent legal counsel, also requested and received additional information from CAM and Legg Mason in connection with their consideration of the New Management Agreement [and the New Subadvisory Agreement. The additional information was provided in advance of and at the August meeting. After the presentations and after reviewing the written materials provided, the Independent Board Members met in executive session with their counsel to consider the New Management Agreement and the New Subadvisory Agreement. The Independent Board Members also conferred separately and with their counsel about the Transaction on a number of occasions, including in connection with the July and August meetings.

   In their deliberations concerning the New Management Agreement, among other things, the Board Members considered:

      (i) the reputation, financial strength and resources of Legg Mason and its investment advisory subsidiaries;

      (ii) that, following the Transaction, CAM will be part of an organization focused on the asset management business;

      (iii) that Legg Mason is an experienced and respected asset management firm, and that Legg Mason has advised the Board Members that (a) it may wish to combine certain CAM operations with those of certain Legg Mason subsidiaries; (b) it is expected that these combination processes will result in changes to portfolio managers or portfolio management teams for a number of the CAM funds, subject to Board oversight and appropriate notice to shareholders, and that, in other cases, the current portfolio managers or portfolio management teams will remain in place; and (c) in the future, it may recommend that Legg Mason subsidiaries be appointed as the adviser or subadviser to some or all of the CAM funds, subject to applicable regulatory requirements;

      (iv) that Legg Mason and its wholly-owned subsidiary, Western Asset Management Company and its affiliates (“Western Asset”), are experienced and respected asset management firms, and that Legg Mason has advised the Board Members that (a) it intends to combine the fixed income investment operations (including money market fund operations) of CAM with those of Western Asset and may also wish to combine other CAM operations with those of other Legg Mason subsidiaries; (b) after the closing of the Transaction, it will take steps to combine the investment management operations of Western Asset with the fixed income operations of the Adviser, which, among other things, may involve Western Asset and the Adviser sharing common systems and procedures, employees (including portfolio managers), investment and trading platforms, and other resources; (c) it is expected

114     Greenwich Street Series Fund 2005 Annual Report

Board Approval of Management and Subadvisory Agreements (unaudited) (continued)

that these combination processes will result in changes to portfolio managers or portfolio management teams for a number of the CAM funds, subject to Board oversight and appropriate notice to shareholders, and that, in other cases, the current portfolio managers or portfolio management teams will remain in place; and (d) in the future, it may recommend that Western Asset or other Legg Mason subsidiaries be appointed as the adviser or subadviser to some or all of the CAM funds, subject to applicable regulatory requirements;

      (v) that CAM management had advised the Board that a number of portfolio managers and other key CAM personnel would be retained after the closing of the Transaction;

      (vi) that CAM management and Legg Mason have advised the Board that following the Transaction, there is not expected to be any diminution in the nature, quality and extent of services provided to the Funds and their shareholders by the Adviser, including compliance services;

      (vii) that under the Transaction Agreement, Citigroup and Legg Mason have agreed not to take any action that is not contemplated by the Transaction or fail to take any action that to their respective knowledge would cause any “undue burden” on each Fund’s shareholders under applicable provisions of the 1940 Act;

      (viii) the assurances from Citigroup and Legg Mason that, for a three-year period following the closing of the Transaction, Citigroup-affiliated broker-dealers will continue to offer the Funds as an investment product, and the potential benefits to each Fund’s shareholders from this and other third-party distribution access;

      (ix) the division of responsibilities between the Adviser and the Subadviser and the services provided by each of them, and the cost to the Adviser of obtaining those services;

      (x) the potential benefits to each Fund’s shareholders from being part of a combined fund family with Legg Mason-sponsored funds;

      (xi) that Citigroup and Legg Mason would derive benefits from the Transaction and that, as a result, they have a financial interest in the matters that were being considered;

      (xii) the potential effects of regulatory restrictions on the Funds if Citigroup-affiliated broker-dealers remain principal underwriters of the Funds’ after the closing of the Transaction;

      (xiii) the fact that the Funds’ total advisory and administrative fees will not increase by virtue of the New Management Agreement, but will remain the same;

      (xiv) the terms and conditions of the New Management Agreement, including the differences from the current advisory agreement, and the benefits of a single, uniform form of agreement covering these services;

      (xv) that the Funds would not bear the costs of obtaining shareholder approval of the New Management Agreement;

      (xvi) that the Funds would avail themselves of permissions granted under certain licensing arrangements between Citigroup and Legg Mason that would permit

Greenwich Street Series Fund 2005 Annual Report      115

Board Approval of Management and Subadvisory Agreements (unaudited) (continued)

the Funds (including any share classes thereof) to maintain their current name, as well as all logos, trademarks and service marks, related to Citigroup or any of its affiliates for some agreed upon time period after the closing of the Transaction; and

      (xvii) that, as discussed in detail above, within the past year the Board had performed a full annual review of the current advisory agreement as required by the 1940 Act. In that regard, the Board, in its deliberations concerning the New Management Agreement, considered the same factors regarding the nature, quality and extent of services provided, costs of services provided, profitability, fall-out benefits, fees and economies of scale and investment performance as it did when it renewed the current advisory agreement, and reached substantially the same conclusions.

   In their deliberations concerning the New Subadvisory Agreement, among other things, the Board Members considered:

      (i) the current responsibilities of the Subadviser and the services currently provided by it;

      (ii) Legg Mason’s combination plans, as described above;

      (iii) that CAM management and Legg Mason have advised the Board that following the Transaction, there is not expected to be any diminution in the nature, quality and extent of services provided to the Fund and its shareholders by the Subadviser, including compliance services;

      (iv) the fact that the fees paid to the Subadviser (which are paid by the Adviser and not the Fund) will not increase by virtue of the New Subadvisory Agreement, but will remain the same;

      (v) the terms and conditions of the New Subadvisory Agreement, and, the benefits of a single, uniform form of agreement covering these services;

      (vi) that, as discussed in greater detail above, within the past year the Board had performed a full annual review of the current subadvisory agreement as required by the 1940 Act. In that regard, the Board, in its deliberations concerning the New Subadvisory Agreement, considered the same factors regarding the nature, quality and extent of services provided, costs of services provided, fees and economies of scale and investment performance as it did when it renewed the current subadvisory agreement, and reached substantially the same conclusions.

      (vii) that the Fund would not bear the costs of obtaining shareholder approval of the New Subadvisory Agreement; and

      (viii) the factors enumerated and/or discussed above in connection with the approval of the New Management Agreement, to the extent relevant.

116     Greenwich Street Series Fund 2005 Annual Report

Additional Information (unaudited)

Information about Trustees and Officers

The business and affairs of the Greenwich Street Series Fund (“Trust”) are managed under the direction of the Board of Trustees. Information pertaining to the Trustees and Officers of the Trust is set forth below. Each Trustee and Officer holds office for his or her lifetime, unless that individual resigns, retires or is otherwise removed. The Statement of Additional Information includes additional information about Trustees and is available, without charge, upon request by calling Shareholder Services at 1-800-451-2010.

					Number of
			Term of		Portfolios
			Office* and	Principal	in Fund
	Position(s)		Length of	Occupation(s)	Complex		Other Board
	Held with		Time	During Past	Overseen by		Memberships Held
Name, Address and Birth Year	Trust		Served	5 Years	Trustee		by Trustee
Non-Interested Trustees:
Dwight B. Crane Harvard Business School Soldiers Field Morgan Hall #375 Boston, MA 02163 Birth Year: 1937		Trustee	Since 1995	Professor, Harvard Business School		49	None
Burt N. Dorsett 201 East 62nd Street New York, NY 10021 Birth Year: 1930		Trustee	Since 1991	President of Dorsett McCabe Capital Management Inc.; Chief Investment Officer of Leeb Capital Management, Inc. (since 1999)		27	None
Elliot S. Jaffe The Dress Barn, Inc. Executive Office 30 Dunnigan Drive Suffern, NY 10901 Birth Year: 1926		Trustee	Since 1991	Chairman of the Board of The Dress Barn, Inc.		27	The Dress Barn, Inc.
Stephen E. Kaufman Stephen E. Kaufman PC 277 Park Avenue, 47th Floor New York, NY 10172 Birth Year: 1932		Trustee	Since 1995	Attorney		55	None
Cornelius C. Rose, Jr. Meadowbrook Village Building 1, Apt. 6 West Lebanon, NH 03784 Birth Year: 1932		Trustee	Since 1991	Chief Executive Officer of Performance Learning Systems		27	None

Greenwich Street Series Fund 2005 Annual Report      117

Additional Information (unaudited) (continued)

				Number of
		Term of		Portfolios
		Office* and	Principal	in Fund
	Position(s)	Length of	Occupation(s)	Complex		Other Board
	Held with	Time	During Past	Overseen by		Memberships Held
Name, Address and Birth Year	Trust	Served	5 Years	Trustee		by Trustee
Interested Trustee:
R. Jay Gerken** CAM 399 Park Avenue Mezzanine New York, NY 10022 Birth Year: 1951	Chairman, President and Chief Executive Officer	Since 2002	Managing Director of CAM; Chairman, President and Chief Executive Officer of Smith Barney Fund Management LLC (“SBFM”), and Citi Fund Management Inc. (“CFM”); President and Chief Executive Officer of certain mutual funds associated with CAM; Formerly Portfolio Manager of Smith Barney Allocation Series Inc. (from 1996 to 2001) and Smith Barney Growth and Income Fund (from 1996 to 2000); Chairman, President and Chief Executive Officer of Travelers Investment Adviser, Inc. (“TIA”) (from 2002 to 2005)		183	None

118     Greenwich Street Series Fund 2005 Annual Report

Additional Information (unaudited) (continued)

				Number of
		Term of		Portfolios
		Office* and	Principal	in Fund
	Position(s)	Length of	Occupation(s)	Complex		Other Board
	Held with	Time	During Past	Overseen by		Memberships Held
Name, Address and Birth Year	Trust	Served	5 Years	Trustee		by Trustee
Officers:
Andrew B. Shoup CAM 125 Broad Street 11th Floor New York, NY 10004 Birth Year: 1956	Senior Vice President and Chief Administrative Officer	Since 2003	Director of CAM; Senior Vice President and Chief Administrative Officer of certain mutual funds associated with CAM; Chief Financial Officer and Treasurer of certain mutual funds associated with CAM; Head of International Funds Administration of CAM (from 2001 to 2003); Director of Global Funds to Administration of CAM (from 2000 to 2001); Head of U.S. Citibank Funds Administration of CAM (from 1998 to 2000)		N/A	N/A
Kaprel Ozsolak CAM 125 Broad Street 11th Floor New York, NY 10004 Birth Year: 1965	Chief Financial Officer and Treasurer	Since 2004	Director of CAM; Chief Financial Officer and Treasurer of certain mutual funds associated with Citigroup; Controller of certain funds associated with Citigroup (from 2002 to 2004)		N/A	N/A
Olivier Asselin Citigroup Asset Management Limited (“CAM Ltd”) Citigroup Centre Canada Square Canary Wharf, London E14 5LB Birth Year: 1963	Vice President and Investment Officer	Since 2002	Investment Officer of CAM Ltd.		N/A	N/A

Greenwich Street Series Fund 2005 Annual Report      119

Additional Information (unaudited) (continued)

				Number of
		Term of		Portfolios
		Office* and	Principal	in Fund
	Position(s)	Length of	Occupation(s)	Complex		Other Board
	Held with	Time	During Past	Overseen by		Memberships Held
Name, Address and Birth Year	Trust	Served	5 Years	Trustee		by Trustee
Kevin Caliendo CAM 399 Park Avenue New York, NY 10022 Birth Year: 1970	Vice President and Investment Officer	Since 2002	Managing Director of CAM Investment Officer of Salomon Brothers Assets Management Inc. (“SBAM”)		N/A	N/A
Richard A. Freeman CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1953	Vice President and Investment Officer	Since 2004	Managing Director of CAM and Investment Officer of SBAM		N/A	N/A
John G. Goode CAM One Sansome Street 36th Floor San Francisco, CA 94104 Birth Year: 1944	Vice President and Investment Officer	Since 1993	Managing Director of CAM; Investment Officer of SBFM		N/A	N/A
Martin R. Hanley CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1965	Vice President and Investment Officer	Since 2001	Managing Director of CAM; Investment Officer of SBFM		N/A	N/A
Michael A. Kagan CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1960	Vice President and Investment Officer	Since 2000	Managing Director of CAM; Investment Officer of SBFM		N/A	N/A
John Lau TIMCO 100 First Stamford Place 7th Floor Stamford CT 06902 Birth Year: 1965	Vice President and Investment Officer	Since 2000	Investment Officer of TIMCO Asset Management, Inc. (“TIMCO”)		N/A	N/A
Daniel Willey TIMCO 100 First Stamford Place 7th Floor Stamford, CT 06902 Birth Year: 1955	Vice President and Investment Officer	Since 1994	Investment Officer of TIMCO		N/A	N/A
Alex Romeo TIMCO 100 First Stamford Place 7th Floor Stamford, CT 06902 Birth Year: 1964	Vice President and Investment Officer	Since 1998	Investment Officer of TIMCO		N/A	N/A

120     Greenwich Street Series Fund 2005 Annual Report

Additional Information (unaudited) (continued)

				Number of
		Term of		Portfolios
		Office* and	Principal	in Fund
	Position(s)	Length of	Occupation(s)	Complex		Other Board
	Held with	Time	During Past	Overseen by		Memberships Held
Name, Address and Birth Year	Trust	Served	5 Years	Trustee		by Trustee
Louis Scott TIMCO 100 First Stamford Place 7th Floor Stamford, CT 06902 Birth Year: 1962	Vice President and Investment Officer	Since 1999	Investment Officer of TIMCO		N/A	N/A
Roger M. Lavan CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1963	Vice President and Investment Officer	Since 2002	Managing Director of CAM; Investment Officer of SBAM		N/A	N/A
Beth A. Semmel, CFA CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1960	Vice President and Investment Officer	Since 2002	Managing Director of CAM; Investment Officer of SBAM		N/A	N/A
Peter J. Wilby, CFA CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1958	Vice President and Investment Officer	Since 2002	Managing Director of CAM; Chief Investment Officer of SBAM		N/A	N/A
David M. Zahn CAM Ltd Citigroup Centre Canada Square 7th Floor Canary Wharf, London E14 5LB Birth Year: 1970	Vice President and Investment Officer	Since 2002	Investment Officer of CAM Ltd		N/A	N/A
John Chiota CAM 100 First Stamford Place 5th Floor Stamford, CT 06902 Birth Year: 1968	Chief Anti-Money Laundering Compliance Officer	Since 2006	Vice President of CAM (since 2004); Chief Anti-Money Laundering Compliance Officer with certain mutual funds associated with CAM (since 2006); prior to August 2004, Chief AML Compliance Officer with TD Waterhouse.		N/A	N/A

Greenwich Street Series Fund 2005 Annual Report      121

Additional Information (unaudited) (continued)

					Number of
			Term of		Portfolios
			Office* and	Principal	in Fund
	Position(s)		Length of	Occupation(s)	Complex		Other Board
	Held with		Time	During Past	Overseen by		Memberships Held
Name, Address and Birth Year	Trust		Served	5 Years	Trustee		by Trustee
Ted P. Becker CAM 399 Park Avenue New York, NY 10022 Birth Year: 1951	Chief Compliance Officer		Since 2006	Managing Director of Compliance at Legg Mason & Co., LLC, (2005- Present); Chief Compliance Officer with certain mutual funds associated with CAM (since 2006); Managing Director of Compliance at Citigroup Asset Management (2002-2005). Prior to 2002, Managing Director-Internal Audit & Risk Review at Citigroup Inc.		N/A	N/A
Steven Frank CAM 125 Broad Street New York, NY 10004 Birth Year: 1967		Controller	Since 2005	Vice President of CAM (since 2002); Controller of certain mutual funds associated with Citigroup; Assistant Controller of CAM (from 2001 to 2005).		N/A	N/A
Robert I. Frenkel CAM 300 First Stamford Place 4th Floor Stamford, CT 06902 Birth Year: 1954	Secretary and Chief Legal Officer Secretary		Since 2003	Managing Director and General Counsel of Global Mutual Funds for CAM and its predecessor (since 1994); Secretary and Chief Legal Officer of certain mutual funds associated with CAM		N/A	N/A

*	Each Trustee and Officer serves until his or her successor has been duly elected and qualified.
**	Mr. Gerken is an “interested person” of the Trust as defined in the Investment Company Act of 1940, as amended, because Mr. Gerken is an officer of SBFM and certain of its affiliates.

122     Greenwich Street Series Fund 2005 Annual Report

Additional Shareholder Information (unaudited)

On November 15, 2005, a Special Meeting of Shareholders was held to elect Trustees. The following table provides the number of votes cast for, authority withheld as well as the number of abstentions.

			Authority
Election of Trustees1	Votes For		Withheld		Abstentions
Nominees:
Dwight B. Crane		143,577,643.247		5,339,555.080		0.000
Burt N. Dorsett		143,517,903.371		5,399,294.956		0.000
Elliot S. Jaffe		143,458,316.975		5,458,881.352		0.000
Stephen E. Kaufman		143,448,491.617		5,468,706.710		0.000
Cornelius C. Rose, Jr.		143,482,573.616		5,434,624.711		0.000
R. Jay Gerken		143,426,673.737		5,490,524.590		0.000

Diversified Strategic Income Portfolio

Results of a Special Meeting of Shareholders

On November 15, 2005, a Special Meeting of Shareholders was held for the following purposes: 1) to approve a new management agreement and 2) to approve a new subadvisory agreement. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter voted on at the Special Meeting of Shareholders.

			Votes				Broker
Item Voted On	Votes For		Against		Abstentions		Non-Votes
New Management Agreement		9,225,960.911		307,849.153		395,829.466		0.000
New Subadvisory Agreement		9,215,603.171		304,908.753		409,127.606		0.000

Equity Index Portfolio

Results of a Special Meeting of Shareholders

On November 15, 2005, a Special Meeting of Shareholders was held for the following purposes: 1) to approve a new management agreement. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter voted on at the Special Meeting of Shareholders.

			Votes				Broker
Item Voted On	Votes For		Against		Abstentions		Non-Votes
New Advisory Agreement		51,616,707.923		1,916,002.153		2,291,391.535		0.000

Greenwich Street Series Fund 2005 Annual Report      123

Additional Shareholder Information (unaudited) (continued)

Salomon Brothers Variable Growth & Income Fund

Results of a Special Meeting of Shareholders

On November 15, 2005, a Special Meeting of Shareholders was held for the following purposes: 1) to approve a new management agreement. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter voted on at the Special Meeting of Shareholders.

			Votes				Broker
Item Voted On	Votes For		Against		Abstentions		Non-Votes
New Management Agreement		1,134,516.500		28,857.866		76,759.267		0.000

Salomon Brother Variable Aggressive Growth Fund

Results of a Special Meeting of Shareholders

On November 15, 2005, a Special Meeting of Shareholders was held for the following purposes: 1) to approve a new management agreement. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter voted on at the Special Meeting of Shareholders.

			Votes				Broker
Item Voted On	Votes For		Against		Abstentions		Non-Votes
New Management Agreement		1,819,836.540		9,047.655		11,477.008		0.000

124     Greenwich Street Series Fund 2005 Annual Report

Important Tax Information (unaudited)

The following information is provided with respect to the distributions paid during the taxable year ended December 31, 2005:

	Equity Index Portfolio			Growth & Income Fund
Record Date:		8/18/2005	12/27/2005		12/27/2005
Payable Date:		8/19/2005	12/28/2005		12/28/2005
Dividends Qualifying for the Dividends Received Deduction for Corporations		100.00%	100.00%		100.00%

Please retain this information for your records.

Greenwich Street Series Fund 2005 Annual Report      125

Greenwich Street Series Fund

TRUSTEES

Dwight B. Crane
Burt N. Dorsett
R. Jay Gerken, CFA
  Chairman
Elliot S. Jaffe
Stephen E. Kaufman
Cornelius C. Rose, Jr.

OFFICERS

R. Jay Gerken, CFA
President and
Chief Executive Officer

Andrew B. Shoup
Senior Vice President and
Chief Administrative Officer
Kaprel Ozsolak
Chief Financial Officer
and Treasurer
Oliver Asselin
Vice President and
Investment Officer
Kevin Caliendo
Vice President and
Investment Officer
Richard A. Freeman
Vice President and
Investment Officer
Martin R. Hanley
Vice President and
Investment Officer
Michael A. Kagan
Vice President and
Investment Officer
John Lau
Vice President and
Investment Officer
Roger M. Lavan
Vice President and
Investment Officer

OFFICERS (Cont’d.)

Alex A. Romeo
Vice President and
Investment Officer
Beth A. Semmel, CFA
Vice President and
Investment Officer
Louis Scott
Vice President and
Investment Officer
Peter J. Wilby, CFA
Vice President and
Investment Officer
Daniel Willey
Vice President and
Investment Officer
David M. Zahn
Vice President and
Investment Officer
Ted P. Becker
Chief Compliance Officer
John Chiota
Chief Anti-Money Laundering
Compliance Officer
Steven Frank
Controller
Robert I. Frenkel
Secretary and
Chief Legal Officer

INVESTMENT MANAGERS

Smith Barney Fund
  Management LLC

Salomon Brothers Asset
  Management Inc

TIMCO Asset Management, Inc.

ADMINISTRATOR

Smith Barney Fund
  Management LLC

DISTRIBUTORS

Citigroup Global Markets Inc.
Legg Mason Investor Services, LLC

CUSTODIAN

State Street Bank and Trust Company

TRANSFER AGENT

PFPC Inc.
4400 Computer Drive
Westborough, Massachusetts 01581

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP
345 Park Avenue
New York, New York 10154

This report is submitted for the general information of shareholders of the Greenwich Street Series Fund, but it may also be used as sales literature when proceeded or accompanied by the current prospectus.
This report must be preceded or accompanied by a free prospectus. Investors should consider the Funds’ investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Funds. Please read the prospectus carefully before investing.
www.citigroupam.com
^©2005 Legg Mason Investors Services, LLC,
Member NASD, SIPC

S-6223P (2/06) 06-9665

Greenwich Street Series Fund
Diversified Strategic Income Portfolio
Equity Index Portfolio
Salomon Brothers Variable Growth & Income Fund
Salomon Brothers Variable Aggressive Growth Fund

The Funds are separate investment funds of the Greenwich Street Series Fund, a Massachusetts business trust.

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Funds, shareholders can call 1-800-451-2010.

Information on how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the Funds’ website at www.citigroupam.com and (3) on the SEC’s website at www.sec.gov.

EX-99.17.G

SEMI-ANNUAL REPORT JUNE 30, 2006	Legg Mason Partners Variable Portfolios II Legg Mason Partners   Variable Diversified   Strategic Income Portfolio Legg Mason Partners   Variable Equity Index   Portfolio Legg Mason Partners   Variable Growth and   Income Portfolio Legg Mason Partners   Variable Aggressive   Growth Portfolio
	INVESTMENT PRODUCTS:       NOT FDIC INSURED   •NO BANK GUARANTEE       •MAY LOSE VALUE

Legg Mason Partners
Variable Portfolios II

Semi-Annual Report • June 30, 2006

What’s

Inside

Letter from the Chairman		I
Fund at a Glance:
	Legg Mason Partners Variable Diversified Strategic Income Portfolio	1
	Legg Mason Partners Variable Equity Index Portfolio	2
	Legg Mason Partners Variable Growth and Income Portfolio	3
	Legg Mason Partners Variable Aggressive Growth Portfolio	4
Fund Expenses		5
Schedules of Investments		7
Statements of Assets and Liabilities		48
Statements of Operations		49
Statements of Changes in Net Assets		50
Financial Highlights		54
Notes to Financial Statements		60
Board Approval of Management and Subadvisory Agreements		75

“Smith Barney”, “Salomon Brothers” and “Citi” are service marks of Citigroup, licensed for use by Legg Mason as the names of funds and investment managers. Legg Mason and its affiliates, as well as the Funds’ investment manager, are not affiliated with Citigroup.

Letter from the Chairman

R. JAY GERKEN, CFA

Chairman, President and

Chief Executive Officer

Dear Shareholder,

The U.S. economy appeared to be on solid footing during the six-month reporting period. After gross domestic product (“GDP”)ⁱ rose 1.7% in the fourth quarter of 2005 — the first quarter in which GDP growth did not surpass 3.0% in nearly three years — the economy rebounded sharply in the first quarter of 2006. During this time, GDP rose 5.6%, its best showing since the third quarter of 2003. In the second quarter 2006, GDP growth was a more modest 2.5%, according to the Commerce Department’s initial reading for the period. The decline was largely attributed to lower consumer spending, triggered by higher interest rates and oil prices, as well as a cooling housing market. In addition, business spending fell during the quarter.

   The Federal Reserve Board (“Fed”)ⁱⁱ continued to raise interest rates during the reporting period. Despite the “changing of the guard” from Fed Chairman Alan Greenspan to Ben Bernanke in early 2006, it was “business as usual” for the Fed, as it raised short-term interest rates four times during the period. Since it began its tightening campaign in June 2004, the Fed has increased rates 17 consecutive times, bringing the federal funds rateⁱⁱⁱ from 1.00% to 5.25%. Coinciding with its latest rate hike in June 2006, the Fed said: “The extent and timing of any additional firming...will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.”

   For the six-month period ended June 30, 2006, the U.S. stock market produced positive returns, with the S&P 500 Index^iv returning 2.71%. While the economy expanded and corporate profits remained strong, the headwinds from steadily rising interest rates, inflationary pressures and the potential for additional Fed rate hikes tempered returns.

   Looking at the market more closely, small-cap stocks outperformed their mid-and large-cap counterparts, with the Russell 2000^v, Russell Midcap^vi and Russell 1000^vii Indexes returning 8.21%, 4.84% and 2.76%, respectively. From an investment style perspective, value stocks significantly outperformed growth stocks, with the Russell 3000 Value^viii and Russell 3000 Growth^ix Indexes returning 6.90% and -0.32%, respectively, over the reporting period.

Legg Mason Partners Variable Portfolios II      I

Performance Snapshot as of June 30, 2006 (unaudited)

	6 Months
Variable Diversified Strategic Income Portfolio1	-0.55%
Lehman Brothers U.S. Aggregate Bond Index	-0.72%
Lipper Variable General Bond Funds Category Average	0.09%
Variable Equity Index Portfolio1 — Class I Shares	2.54%
Variable Equity Index Portfolio1 — Class II Shares	2.44%
S&P 500 Index	2.71%
Lipper Variable S&P 500 Index Objective Funds Category Average	2.54%
Variable Growth and Income Portfolio1	0.99%
S&P 500 Index	2.71%
Russell 1000 Index	2.76%
Lipper Variable Large-Cap Core Funds Category Average	1.25%
Variable Aggressive Growth Portfolio1 — Class I Shares	1.37%
Variable Aggressive Growth Portfolio1 — Class II Shares	1.26%
Russell 3000 Growth Index	-0.32%
Lipper Variable Multi-Cap Growth Funds Category Average	-0.68%

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost.

Fund returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the deduction of all fund expenses.

Performance figures reflect reimbursements and/or fee waivers, without which the performance would have been lower.

Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended June 30, 2006 and include the reinvestment of all distributions, including returns of capital, if any. Returns were calculated among the 52 funds in the variable general bond funds category. Returns were calculated among the 55 funds in the variable S&P 500 index objective funds category. Returns were calculated among the 222 funds in the variable large-cap core funds category. Returns were calculated among the 140 funds in the variable multi-cap growth funds category.

¹ The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

II     Legg Mason Partners Variable Portfolios II

Legg Mason Partners Variable Diversified Strategic Income Portfolio²

Special Shareholder Notices

As part of the continuing effort to integrate investment products managed by the advisers acquired with Citigroup’s asset management business, Legg Mason, Inc. (“Legg Mason”) has recommended various Fund actions in order to streamline product offerings, eliminate redundancies and improve efficiencies within the organization. At Board meetings held during June and July 2006, the Fund’s Board reviewed and approved these recommendations, and provided authorization to move ahead with proxy solicitations for those matters needing shareholder approval.

   The Fund’s Board has approved the appointment of Legg Mason Partners Fund Advisor, LLC (“LMPFA”) as the Fund’s investment manager effective August 1, 2006. The Fund’s Board has also approved the appointment of Western Asset Management Company (“Western Asset”) and Western Asset Management Company Limited (“Western Asset Limited”) as the Fund’s subadvisers effective August 1, 2006. The portfolio managers who are responsible for the day-to-day management of the Fund remain the same immediately prior to and immediately after the date of these changes. LMPFA, Western Asset and Western Asset Limited are wholly-owned subsidiaries of Legg Mason.

   During the reporting period, management of the Fund was assumed by a team of investment professionals from Western Asset and Western Asset Limited. The Fund’s portfolio managers include S. Kenneth Leech, Stephen A. Walsh, Carl L. Eichstaedt, Edward A. Moody and Mark Lindbloom from Western Asset and Detlev Schlichter and Andres Sanchez-Balcazar from Western Asset Limited.

   The Fund was formerly known as Greenwich Street Series — Diversified Strategic Income Portfolio.

Performance Update

For the six months ended June 30, 2006, the Fund returned -0.55%. These shares outperformed the Fund’s unmanaged benchmark, the Lehman Brothers U.S. Aggregate Bond Index, which returned -0.72% for the same period. The

² The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

Legg Mason Partners Variable Portfolios II      III

Lipper Variable General Bond Funds Category Average³ increased 0.09% over the same time frame.

Legg Mason Partners Variable Equity Index Portfolio⁴

Special Shareholder Notices

As part of the continuing effort to integrate investment products managed by the advisers acquired with Citigroup’s asset management business, Legg Mason, Inc. (“Legg Mason”) has recommended various Fund actions in order to streamline product offerings, eliminate redundancies and improve efficiencies within the organization. At Board meetings held during June and July 2006, the Fund’s Board reviewed and approved these recommendations, and provided authorization to move ahead with proxy solicitations for those matters needing shareholder approval.

   During the reporting period, Charles Ko and Michael Soares, portfolio managers of Batterymarch Financial Management, Inc. (“Batterymarch”), assumed management of the Fund. Batterymarch is a wholly-owned subsidiary of Legg Mason.

   The Fund was formerly known as Greenwich Street Series — Equity Index Portfolio.

Performance Update

For the six months ended June 30, 2006, Class I shares returned 2.54%. These shares underperformed the Fund’s unmanaged benchmark, the S&P 500 Index, which returned 2.71% for the same period. The Lipper Variable S&P 500

³ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended June 30, 2006 including the reinvestment of dividends and capital gains distributions, if any, calculated among the 52 funds in the Fund’s Lipper category.

⁴ The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

IV     Legg Mason Partners Variable Portfolios II

Index Objective Funds Category Average⁵ increased 2.54% over the same time frame.

Legg Mason Partners Variable Growth and Income Portfolio⁶

Special Shareholder Notices

As part of the continuing effort to integrate investment products managed by the advisers acquired with Citigroup’s asset management business, Legg Mason, Inc. (“Legg Mason”) has recommended various Fund actions in order to streamline product offerings, eliminate redundancies and improve efficiencies within the organization. At Board meetings held during June and July 2006, the Fund’s Board reviewed and approved these recommendations, and provided authorization to move ahead with proxy solicitations for those matters needing shareholder approval.

   The Fund’s Board has approved the appointment of Legg Mason Partners Fund Advisor, LLC (“LMPFA”) as the Fund’s investment manager effective August 1, 2006. The Fund’s Board has also approved the appointment of CAM North America, LLC (“CAM N.A.”) as the Fund’s subadviser effective August 1, 2006. The portfolio manager who is responsible for the day-to-day management of the Fund remains the same immediately prior to and immediately after the date of these changes. LMPFA and CAM N.A. are wholly-owned subsidiaries of Legg Mason.

   Michael Kagan, a portfolio manager of CAM N.A., is responsible for the day-to-day management of the Fund.

   The Fund’s Board has also approved a reorganization pursuant to which the Fund’s assets would be acquired, and its liabilities assumed, by the Legg Mason Partners Variable Appreciation Portfolio (the “Acquiring Fund”), in exchange for shares of the Acquiring Fund. The Fund would then be liquidated, and shares of the Acquiring Fund would be distributed to Fund shareholders. Proxy materials describing the reorganization, and other initiatives requiring shareholder approval, are expected to be sent to shareholders later in 2006.

⁵ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended June 30, 2006, including the reinvestment of dividends and capital gains distributions, if any, calculated among the 55 funds in the Fund’s Lipper category.

⁶ The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

Legg Mason Partners Variable Portfolios II      V

If shareholder approval is obtained, Fund actions are generally expected to be implemented during 2007.

   The Fund was formerly known as Salomon Brothers Variable Growth and Income Fund.

Performance Update

For the six months ended June 30, 2006, the Fund returned 0.99%. In comparison, the Fund’s unmanaged benchmarks, the S&P 500 Index and the Russell 1000 Index, returned 2.71% and 2.76%, respectively, for the same period. The Lipper Variable Large-Cap Core Funds Category Average⁷ increased 1.25% over the same time frame.

Legg Mason Partners Variable Aggressive Growth Portfolio⁸

Special Shareholder Notices

As part of the continuing effort to integrate investment products managed by the advisers acquired with Citigroup’s asset management business, Legg Mason, Inc. (“Legg Mason”) has recommended various Fund actions in order to streamline product offerings, eliminate redundancies and improve efficiencies within the organization. At Board meetings held during June and July 2006, the Fund’s Board reviewed and approved these recommendations, and provided authorization to move ahead with proxy solicitations for those matters needing shareholder approval.

   The Fund’s Board has approved the appointment of Legg Mason Partners Fund Advisor, LLC (“LMPFA”) as the Fund’s investment manager effective August 1, 2006. The Fund’s Board has also approved the appointment of CAM North America, LLC (“CAM N.A.”) as the Fund’s subadviser effective August 1, 2006. The portfolio manager who is responsible for the day-to-day management of the Fund remains the same immediately prior to and immediately after the date of these changes. LMPFA and CAM N.A. are wholly-owned subsidiaries of Legg Mason.

   The Fund’s Board has also approved a reorganization pursuant to which the Fund’s assets would be acquired, and

⁷ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended June 30, 2006, including the reinvestment of dividends and capital gains distributions, if any, calculated among the 222 funds in the Fund’s Lipper category.

⁸ The Fund is an underlying investment option of various variable annuity and variable life insurance products. The Fund’s performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results.

VI     Legg Mason Partners Variable Portfolios II

its liabilities assumed, by the Legg Mason Partners Variable Portfolios III — Legg Mason Partners Variable Aggressive Growth Portfolio (the “Acquiring Fund”), in exchange for shares of the Acquiring Fund. The Fund would then be liquidated, and shares of the Acquiring Fund would be distributed to Fund shareholders. Proxy materials describing the reorganization, and other initiatives requiring shareholder approval, are expected to be sent to shareholders later in 2006. If shareholder approval is obtained, Fund actions are generally expected to be implemented during 2007.

   The Fund was formerly known as Salomon Brothers Variable Aggressive Growth Fund.

Performance Update

For the six months ended June 30, 2006, Class I shares returned 1.37%. The Fund outperformed its unmanaged benchmark, the Russell 3000 Growth Index, which returned -0.32% for the same period. The Lipper Variable Multi-Cap Growth Funds Category Average⁹ decreased 0.68%.

Information About Your Funds

As you may be aware, several issues in the mutual fund industry have come under the scrutiny of federal and state regulators. Affiliates of the Funds’ Manager have, in recent years, received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the Funds’ response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The Funds are not in a position to predict the outcome of these requests and investigations.

   Important information with regard to recent regulatory developments that may affect the Funds is contained in the Notes to Financial Statements included in this report.

⁹ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended June 30, 2006, including the reinvestment of dividends and capital gains distributions, if any, calculated among the 140 funds in the Fund’s Lipper category, and excluding sales charges.

Legg Mason Partners Variable Portfolios II      VII

   As always, thank you for your continued confidence in our stewardship of your assets. We look forward to helping you to meet your financial goals.

Sincerely,

R. Jay Gerken, CFA

Chairman, President and Chief Executive Officer

July 28, 2006

VIII     Legg Mason Partners Variable Portfolios II

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

RISKS:

Variable Diversified Strategic Income Portfolio: Investing in foreign securities is subject to certain risks not associated with domestic investing, such as currency fluctuations, and changes in political and economic conditions. These risks are magnified in emerging or developing markets. As interest rates rise, bond prices fall, reducing the value of the Fund’s share price. High yield bonds involve greater credit and liquidity risks than investment grade bonds. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Please see the Fund’s prospectus for more information on these and other risks.

Variable Equity Index Portfolio: The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Please see the Fund’s prospectus for more information on these and other risks.

Variable Growth and Income Portfolio: As interest rates rise, bond prices fall, reducing the value of the Fund’s share price. High yield bonds involve greater credit and liquidity risks than investment grade bonds. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Please see the Fund’s prospectus for more information on these and other risks.

Variable Aggressive Growth Portfolio: Investments in small- and medium-capitalization companies may involve a higher degree of risk and volatility than investments in larger, more established companies. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Investing in foreign securities is subject to certain risks not associated with domestic investing, such as currency fluctuations, and changes in political and economic conditions. These risks are magnified in emerging or developing markets. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

i	Gross domestic product is a market value of goods and services produced by labor and property in a given country.
ii	The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.
iii	The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.
iv	The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.
v	The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
vi	The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represents approximately 25% of the total market capitalization of the Russell 1000 Index.
vii	The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.
viii	The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.)
ix	The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

Legg Mason Partners Variable Portfolios II      IX

(This page intentionally left blank.)

Fund at a Glance (unaudited)

Legg Mason Partners Variable Diversified Strategic Income Portfolio

Investment Breakdown

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      1

Fund at a Glance (unaudited) (continued)

Legg Mason Partners Variable Equity Index Portfolio

Investment Breakdown

2     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Fund at a Glance (unaudited) (continued)

Legg Mason Partners Variable Growth and Income Portfolio

Investment Breakdown

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      3

Fund at a Glance (unaudited) (continued)

Legg Mason Partners Variable Aggressive Growth Portfolio

Investment Breakdown

4     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Fund Expenses (unaudited)

Example

As a shareholder of the Funds, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

   This example is based on an investment of $1,000 invested on January 1, 2006 and held for the six months ended June 30, 2006.

Actual Expenses

The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

Based on Actual Total Return (1)

					Beginning		Ending		Annualized			Expenses
		Actual Total			Account		Account		Expense			Paid During
		Return(2)			Value		Value		Ratio			the Period(3)
Legg Mason Partners Variable Diversified Strategic Income Portfolio — Class I			(0.55	)%	$	1,000.00	$	994.50		0.72	%	$	3.56
Legg Mason Partners Variable Equity Index Portfolio
	Class I		2.54			1,000.00		1,025.40		0.33			1.66
	Class II		2.44			1,000.00		1,024.40		0.58			2.91
Legg Mason Partners Variable Growth and Income Portfolio
	Class I		0.99			1,000.00		1,009.90		1.13			5.63
Legg Mason Partners Variable Aggressive Growth Portfolio
	Class I		1.37			1,000.00		1,013.70		0.83			4.14
	Class II		1.26			1,000.00		1,012.60		1.09			5.44

(1)	For the six months ended June 30, 2006.
(2)	Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.
(3)	Expenses (net of fee waivers and/or expense reimbursements) are equal to each Funds’ or class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      5

Fund Expenses (unaudited) (continued)

Hypothetical Example for Comparison Purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

   Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

Based on Hypothetical Total Return (1)

		Hypothetical			Beginning		Ending		Annualized			Expenses
		Annualized			Account		Account		Expense			Paid During
		Total Return			Value		Value		Ratio			the Period(2)
Legg Mason Partners Variable Diversified Strategic Income Portfolio — Class I			5.00	%	$	1,000.00	$	1,021.22		0.72	%	$	3.61
Legg Mason Partners Variable Equity Index Portfolio
	Class I		5.00			1,000.00		1,023.16		0.33			1.66
	Class II		5.00			1,000.00		1,021.92		0.58			2.91
Legg Mason Partners Variable Growth and Income Portfolio
	Class I		5.00			1,000.00		1,019.19		1.13			5.66
Legg Mason Partners Variable Aggressive Growth Portfolio
	Class I		5.00			1,000.00		1,020.68		0.83			4.16
	Class II		5.00			1,000.00		1,019.39		1.09			5.46

(1)	For the six months ended June 30, 2006.
(2)	Expenses (net of fee waivers and/or expense reimbursements) are equal to each Funds’ or class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

6     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited)

LEGG MASON VARIABLE DIVERSIFIED STRATEGIC INCOME PORTFOLIO

Face
Amount†		Security		Value
MORTGAGE-BACKED SECURITIES — 44.9%
FHLMC — 11.9%
		Federal Home Loan Mortgage Corp. (FHLMC), Gold:
$	129,387		7.000% due 2/1/15-5/1/16	$	132,689
	160,999		6.500% due 9/1/31		162,618
	8,800,000		5.000% due 7/13/36 (a)(b)		8,219,746
	1,000,000		6.000% due 7/13/36 (a)(b)		984,688
		Total FHLMC			9,499,741
FNMA — 25.3%
		Federal National Mortgage Association (FNMA):
	651,362		6.500% due 3/1/16-3/1/32		658,744
	140,205		6.000% due 8/1/16-4/1/32		138,596
	151,476		5.500% due 12/1/16		148,990
	2,000,000		5.000% due 7/18/21 (a)(b)		1,926,250
	5,900,000		6.000% due 8/17/21-7/13/36 (a)(b)		5,811,499
	62,690		7.500% due 2/1/30-7/1/31		64,874
	581,798		7.000% due 7/1/30-4/1/32		596,243
	820,643		6.000% due 4/1/32 (c)		811,011
	10,350,000		5.500% due 7/13/36-8/14/36 (a)(b)		9,941,219
		Total FNMA			20,097,426
GNMA — 7.7%
		Government National Mortgage Association (GNMA):
	62,844		7.000% due 6/15/28-7/15/29		64,858
	310,040		6.500% due 9/15/28-2/15/31		314,860
	2,000,000		5.000% due 7/20/36 (a)(b)		1,893,124
	3,900,000		6.000% due 7/20/36 (a)(b)		3,868,312
		Total GNMA			6,141,154
		TOTAL MORTGAGE-BACKED SECURITIES (Cost — $36,902,226)			35,738,321

Face
Amount†		Rating‡
ASSET-BACKED SECURITIES — 10.4%
Home Equity — 9.8%
	454,082	AAA	Accredited Mortgage Loan Trust, Series 2005-3, Class A1, 5.562% due 9/25/35 (d)	454,769
	808,039	AAA	ACE Securities Corp., Series 2006-SL2, Class A, 5.492% due 1/25/36 (c)(d)	808,744
	200,000	A	Ameriquest Mortgage Securities Inc., Series 2004-R11, Class M5, 6.522% due 11/25/34 (d)	204,335
	743,545	A	Argent Securities Inc., Series 2006-W4, Class A2A, 5.382% due 5/25/36 (c)(d)	743,996

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      7

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security		Value
Home Equity — 9.8% (continued)
$	651,428	AAA	Bayview Financial Acquisition Trust, Series 2006-B, Class 2A1, 5.200% due 4/28/36 (c)(d)		$	651,631
	510,000	AAA	Bear Stearns Asset Backed Securities, Series 2004-B01, Class 1A2, 5.672% due 9/25/34 (c)(d)			513,436
	270,000	AA	Countrywide Asset-Backed Certificates, Series 2004-05, Class M4, 6.572% due 6/25/34 (d)			274,535
	742,228	AAA	Countrywide Home Equity Loan Trust, Series 2006-D, Class 2A, 5.398% due 9/15/31 (c)(d)			742,640
	839,054	AAA	GSRPM Mortgage Loan Trust, Series 2006-1, Class A1, 5.622% due 3/25/35 (c)(d)(e)			839,054
	735,431	AAA	Indymac Home Equity Loan Asset-Backed Trust, Series 2006-H1, Class A, 5.492% due 4/25/36 (c)(d)			735,881
	775,114	AAA	IXIS Real Estate Capital Trust, Series 2006-HE2, Class A1, 5.382% due 8/25/36 (c)(d)			775,584
	200,000	A+	Novastar Home Equity Loan, Series 2004-01, Class M4, 6.297% due 2/25/34 (d)			201,762
	791,620	AAA	SACO I Trust, Series 2006-4, Class A1, 5.492% due 2/25/34 (c)(d)			792,181
			Sail Net Interest Margin Notes:
	7,825	BBB		Series 2003-3, Class A, 7.750% due 4/27/33 (e)		7,205
	25,495	BBB-		Series 2004-BN2A, Class A, 5.000% due 12/27/34 (e)		25,459
			Total Home Equity			7,771,212
Student Loan — 0.6%
	469,112	AAA	First Horizon ABS Trust, Series 2006-HE1, Class A, 5.482% due 10/25/34 (c)(d)			469,089
			TOTAL ASSET-BACKED SECURITIES (Cost — $8,223,398)			8,240,301
COLLATERALIZED MORTGAGE OBLIGATIONS — 24.8%
	845,764	AAA	American Home Mortgage Investment Trust, Series 2005-1, Class 6A, 5.294% due 6/25/45 (c)(d)			830,320
	400,000	AAA	Banc of America Commercial Mortgage Inc., 4.668% due 7/10/43 (c)			367,258
	464,558	AAA	Banc of America Mortgage Securities, Series 2005-H, Class 2A1, 4.821% due 9/25/35 (c)(d)			452,094
	372,823	AAA	Commercial Mortgage Pass-Through Certificates, Series 2001-J2A, Class A1, 5.447% due 7/16/34 (e)			369,408
			Countrywide Alternative Loan Trust:
	742,302	AAA		Series 2005-59, Class 1A1, 5.596% due 11/20/35 (c)(d)		745,492
	977,541	AAA		Series 2005-72, Class A1, 5.592% due 1/25/36 (c)(d)		979,132
	788,413	AAA		Series 2006-OA6, Class 1A1A, 5.532% due 4/25/36 (c)(d)		788,492
	735,506	AAA	Countrywide Home Loan Mortgage Pass Through Trust, Series 2005-9, Class 1A1, 5.622% due 5/25/35 (c)(d)			739,342
	728,582	AAA	Countrywide Home Loans, Series 2004-23, Class A, 6.869% due 11/25/34 (c)(d)			737,572

See Notes to Financial Statements.

8     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security			Value
$	602,394	AAA	Deutsche ALT-A Securities Inc. Mortgage Loan Trust, Series 2005-AR1, Class 2A1, 4.998% due 8/25/35 (c)(d)			$	593,322
			Downey Savings and Loan Association Mortgage Loan Trust:
	658,386	AAA		Series 2005-AR2, Class 2A1A, 5.461% due 3/19/45 (c)(d)			659,582
				Series 2006-AR1:
	765,291	AAA			Class 1A1A, 4.808% due 4/19/36 (c)(d)		765,291
	765,291	AAA			Class 1A1B, 4.808% due 4/19/36 (c)(d)		765,291
	1,175,325	AAA	GSR Mortgage Loan Trust, Series 2005-AR5, Class 1A1, 4.614% due 10/25/35 (c)(d)				1,158,816
			Harborview Mortgage Loan Trust:
	880,302	AAA		Series 2004-08, Class 2A4A, 5.651% due 11/19/34 (c)(d)			883,936
	343,632	AAA		Series 2004-08, Class 3A2, 5.651% due 11/19/34 (d)			344,690
	908,081	AAA		Series 2004-11, Class 3A1A, 5.126% due 1/19/35 (c)(d)			911,893
			Indymac Index Mortgage Loan Trust:
	735,703	AAA		Series 2005-AR1, Class 1A1, 5.286% due 3/25/35 (c)(d)			733,748
	785,417	AAA		Series 2006-AR4, Class A1A, 5.532% due 5/25/46 (c)(d)			785,417
	640,000	Aaa(f)	JPMorgan Chase Commercial Mortgage Securities Corp., Series 2006-CB15, Class A4, 5.814% due 6/12/43 (c)(d)				635,182
	270,000	AAA	Merrill Lynch Mortgage Trust, Series 2006-C1, Class A4, 5.844% due 5/12/39 (d)				267,388
	856,762	AAA	Morgan Stanley Mortgage Loan Trust, Series 2006-3AR, Class 2A3, 5.913% due 3/25/36 (c)(d)				854,627
			Structured Asset Mortgage Investments Inc., Series 2006-AR5:
	1,087,782	AAA		Class 1A1, 5.532% due 5/25/36 (c)(d)			1,086,282
	500,000	AAA		Class 2A1, 5.532% due 5/25/36 (c)(d)			499,295
			Washington Mutual Inc.:
	1,024,335	AAA		Series 2005-AR17, Class A1A1, 5.592% due 12/25/45 (c)(d)			1,027,895
	724,489	AAA		Series 2005-AR19, Class A1A2, 5.612% due 12/25/45 (c)(d)			727,319
	700,000	AAA		Series 2006-AR6, Class 2A1, 5.997% due 8/25/36 (c)(d)			698,906
	285,550	AAA	Wells Fargo Mortgage Backed Securities Trust, Series 2006-AR8, Class 2A3, 5.240% due 5/25/36 (d)				281,991
			TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost — $19,740,059)				19,689,981
CORPORATE BONDS & NOTES — 31.6%
Aerospace & Defense — 0.2%
			L-3 Communications Corp., Senior Subordinated Notes:
	25,000	BB+		7.625% due 6/15/12			25,500
	125,000	BB+		6.375% due 10/15/15			120,000
			Total Aerospace & Defense				145,500
Airlines — 0.3%
			Continental Airlines Inc., Pass-Through Certificates:
	15,478	B+		Series 2000-2, Class C, 8.312% due 4/2/11			14,680
	100,000	B		Series 2001-2, Class D, 7.568% due 12/1/06			99,808

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      9

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security			Value
Airlines — 0.3% (continued)
			United Airlines Inc., Pass-Through Certificates:
$	23,260	NR		Series 2000-1, Class B, 8.030% due 7/1/11 (g)		$	23,740
	49,094	NR		Series 2000-2, Class B, 7.811% due 10/1/09 (g)			51,202
	45,000	NR		Series 2001-1, Class C, 6.831% due 9/1/08 (g)			44,466
			Total Airlines				233,896
Auto Components — 0.1%
	25,000	B	Arvin Capital I, Capital Securities, 9.500% due 2/1/27				25,375
	25,000	B-	Rexnord Corp., Senior Subordinated Notes, 10.125% due 12/15/12				27,683
			Total Auto Components				53,058
Automobiles — 0.8%
	290,000	BBB	DaimlerChrysler North America Holding Corp., 5.875% due 3/15/11				285,547
			Ford Motor Co.:
				Debentures:
	50,000	B+			6.625% due 10/1/28		34,750
	25,000	B+			8.900% due 1/15/32		20,063
	250,000	B+		Notes, 7.450% due 7/16/31			181,875
			General Motors Corp., Senior Debentures:
	155,000	B-		8.250% due 7/15/23			122,837
	5,000	B-		8.375% due 7/15/33			4,050
			Total Automobiles				649,122
Beverages — 0.1%
	40,000	B	Cott Beverages USA Inc., Senior Subordinated Notes, 8.000% due 12/15/11				40,100
Building Products — 0.1%
			Associated Materials Inc.:
	50,000	CCC		Senior Discount Notes, step bond to yield 9.399% due 3/1/14			30,375
	20,000	CCC		Senior Subordinated Notes, 9.750% due 4/15/12			20,000
			Total Building Products				50,375
Capital Markets — 1.4%
	65,000	B	BCP Crystal U.S. Holdings Corp., Senior Subordinated Notes, 9.625% due 6/15/14				70,850
	450,000	A+	Goldman Sachs Group Inc., Notes, 4.500% due 6/15/10				430,613
	80,000	A-	Lehman Brothers Holdings E-Capital Trust I, Notes, 5.953% due 8/19/65 (d)				80,073
	140,000	A+	Lehman Brothers Holdings Inc., Notes, 4.000% due 1/22/08				136,393
	350,000	A+	Morgan Stanley, Notes, 3.625% due 4/1/08				338,861
	30,000	BB+	Morgan Stanley Bank AG for OAO Gazprom, Loan Participation Notes, 9.625% due 3/1/13				34,437
			Total Capital Markets				1,091,227
Chemicals — 0.4%
	50,000	BB-	Arco Chemical Co., Debentures, 9.800% due 2/1/20				59,000
	35,000	B	Huntsman International LLC, Senior Notes, 9.875% due 3/1/09				36,575

See Notes to Financial Statements.

10     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security			Value
Chemicals — 0.4% (continued)
$	105,000	BB-	Lyondell Chemical Co., Senior Secured Notes, 11.125% due 7/15/12			$	114,450
	85,000	BBB-	Methanex Corp., Senior Notes, 8.750% due 8/15/12				91,694
			Total Chemicals				301,719
Commercial Banks — 1.5%
	130,000	BBB+	Glitnir Banki HF, Subordinated Notes, 6.693% due 6/15/16 (d)(e)				129,390
	120,000	BBB-	Resona Preferred Global Securities Cayman Ltd., 7.191% due 7/30/15 (d)(e)				120,566
	130,000	BBB-	Shinsei Finance Cayman Ltd., Bonds, 6.418% due 7/20/16 (d)(e)				122,311
	420,000	A	Wachovia Corp., Subordinated Notes, 5.250% due 8/1/14				401,226
	400,000	AA-	Wells Fargo & Co., Senior Notes, 4.200% due 1/15/10				382,556
			Total Commercial Banks				1,156,049
Commercial Services & Supplies — 0.6%
	50,000	CCC+	Allied Security Escrow Corp., Senior Subordinated Notes, 11.375% due 7/15/11				48,750
	115,000	BB-	Allied Waste North America Inc., Senior Notes, Series B, 8.500% due 12/1/08				119,600
	75,000	CCC+	Brand Services Inc., Senior Notes, 12.000% due 10/15/12				84,938
	25,000	B-	Cardtronics Inc., Senior Subordinated Notes, 9.250% due 8/15/13 (e)				24,750
	25,000	BB-	Corrections Corporation of America, Senior Subordinated Notes, 6.250% due 3/15/13				23,625
	210,000	BBB	Waste Management Inc., 6.375% due 11/15/12				214,508
			Total Commercial Services & Supplies				516,171
Communications Equipment — 0.1%
	75,000	B-	Nortel Networks Corp., Notes, 6.875% due 9/1/23				60,375
Computers & Peripherals — 0.0%
	25,000	B-	SunGard Data Systems Inc., Senior Notes, 9.125% due 8/15/13 (e)				26,062
Consumer Finance — 3.7%
			Ford Motor Credit Co.:
				Notes:
	740,000	B+			7.375% due 10/28/09 (c)		684,644
	25,000	B+			7.875% due 6/15/10		23,081
				Senior Notes:
	500,000	B+			5.800% due 1/12/09 (c)		457,042
	131,963	B+			10.486% due 6/15/11 (d)(e)		132,566
			General Motors Acceptance Corp.:
	60,000	BB		Medium-Term Notes, 4.375% due 12/10/07			57,573
				Notes:
	660,000	BB			6.125% due 8/28/07 (c)		653,275
	500,000	BB			5.625% due 5/15/09 (c)		475,886
	20,000	BB			7.250% due 3/2/11		19,409
	275,000	BB			6.875% due 9/15/11		262,674

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      11

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security			Value
Consumer Finance — 3.7% (continued)
$	150,000	BB			6.750% due 12/1/14	$	139,540
	60,000	BB		Senior Notes, 5.850% due 1/14/09			57,538
			Total Consumer Finance				2,963,228
Containers & Packaging — 0.7%
	75,000	B-	Berry Plastics Corp., Senior Subordinated Notes, 10.750% due 7/15/12				81,562
	75,000	B-	Graphic Packaging International Corp., Senior Subordinated Notes, 9.500% due 8/15/13				74,625
	150,000	B-	JSG Funding PLC, Senior Notes, 9.625% due 10/1/12				155,250
	155,000	BB-	Owens-Brockway Glass Container Inc., Senior Secured Notes, 8.875% due 2/15/09				160,425
	25,000	B	Plastipak Holdings Inc., Senior Notes, 8.500% due 12/15/15 (e)				25,125
	15,000	NR	Pliant Corp., Senior Secured Second Lien Notes, 11.125% due 9/1/09**				15,900
	25,000	CC	Radnor Holdings Corp., Senior Notes, 11.000% due 3/15/10				9,875
			Total Containers & Packaging				522,762
Diversified Consumer Services — 0.3%
			Service Corp. International:
	55,000	BB		Debentures, 7.875% due 2/1/13			55,756
	195,000	BB		Senior Notes, 6.500% due 3/15/08			194,513
			Total Diversified Consumer Services				250,269
Diversified Financial Services — 3.3%
	130,000	BBB+	Aiful Corp., Notes, 5.000% due 8/10/10 (e)				123,729
			Alamosa Delaware Inc.:
	44,000	A-		Senior Discount Notes, 12.000% due 7/31/09			46,860
	54,000	A-		Senior Notes, 11.000% due 7/31/10			59,400
	550,000	A+	Bank of America Corp., Subordinated Notes, 7.400% due 1/15/11 (c)				585,771
	20,000	BB-	Case Credit Corp., Notes, 6.750% due 10/21/07				20,050
	90,000	AA-	Credit Suisse First Boston USA Inc., Notes, 4.875% due 8/15/10				87,312
	440,000	AAA	General Electric Capital Corp., Medium-Term Notes, Series A, 4.125% due 9/1/09				421,758
	20,000	B	Hexion U.S. Finance Corp./ Hexion Nova Scotia Finance ULC, Senior Secured Notes, 9.000% due 7/15/14				20,350
	430,000	AA-	HSBC Finance Corp., Notes, 4.625% due 1/15/08				424,011
	100,000	A	ILFC E-Capital Trust I, 5.900% due 12/21/65 (d)(e)				97,574
	620,000	A	JPMorgan Chase & Co., Subordinated Notes, 5.125% due 9/15/14 (c)				586,581
	100,000	BBB	MUFG Capital Finance 1 Ltd., 6.346% due 7/25/16 (d)				96,635
	40,000	B-	Nell AF SARL, Senior Notes, 8.375% due 8/15/15 (e)				38,650
	50,000	CCC+	Vanguard Health Holdings Co. I LLC, Senior Discount Notes, step bond to yield 9.384% due 10/1/15				35,500
			Total Diversified Financial Services				2,644,181

See Notes to Financial Statements.

12     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†			Rating‡	Security		Value
Diversified Telecommunication Services — 1.2%
$	230,000		A-	Deutsche Telekom International Finance, Senior Notes, 5.750% due 3/23/16		$	217,471
	50,000		NR	GT Group Telecom Inc., Senior Discount Notes, 13.250% due 2/1/10 (g)(h)(i)			0
	75,000		B	Intelsat Ltd., Senior Discount Notes, step bond to yield 9.207% due 2/1/15 (e)			52,125
	25,000		B+	Intelsat Subsidiary Holding Co., Ltd., Senior Notes, 9.613% due 1/15/12 (d)			25,375
	160,000		BBB+	Koninklijke KPN NV, Senior Notes, 8.000% due 10/1/10			169,860
	50,000		B-	Northern Telecom Capital Corp., Notes, 7.875% due 6/15/26			41,250
	16,000		B	PanAmSat Corp., Senior Notes, 9.000% due 8/15/14			16,320
				Qwest Communications International Inc., Senior Notes:
	75,000		B		7.500% due 2/15/14		73,500
	90,000		B		Series B, 7.500% due 2/15/14		88,200
	10,000		BB	Qwest Corp., Debentures, 7.500% due 6/15/23			9,425
	140,000		BBB+	Telecom Italia Capital SA, Notes, 5.250% due 10/1/15			126,942
	1,000,000	MXN	BBB+	Telefonos de Mexico SA de CV, Senior Notes, 8.750% due 1/31/16			82,038
	80,000		A	Verizon Global Funding Corp., Notes, 7.375% due 9/1/12			85,142
				Total Diversified Telecommunication Services			987,648
Electric Utilities — 1.1%
	25,000		B+	Edison Mission Energy, Senior Notes, 7.730% due 6/15/09			25,375
	230,000		BBB	Exelon Corp., Bonds, 5.625% due 6/15/35			202,431
				FirstEnergy Corp., Notes:
	120,000		BBB-		Series B, 6.450% due 11/15/11		122,240
	270,000		BBB-		Series C, 7.375% due 11/15/31		290,530
	25,000		B	Inergy L.P./ Inergy Finance Corp., Senior Notes, 6.875% due 12/15/14			23,375
	90,000		B-	Orion Power Holdings Inc., Senior Notes, 12.000% due 5/1/10			102,150
	130,000		BBB	Pacific Gas & Electric Co., First Mortgage Bonds, 6.050% due 3/1/34			123,094
				Total Electric Utilities			889,195
Energy Equipment & Services — 0.0%
	22,000		B-	Dresser-Rand Group Inc., Senior Subordinated Notes, 7.625% due 11/1/14			21,120
Food Products — 0.6%
	45,000		BB-	Dean Foods Co., Senior Notes, 6.900% due 10/15/17			42,413
	75,000		B	Dole Food Co. Inc., Senior Notes, 7.250% due 6/15/10			67,500
	355,000		BBB+	Kraft Foods Inc., Senior Notes, 5.625% due 11/1/11 (c)			350,062
				Total Food Products			459,975
Health Care Providers & Services — 0.9%
	25,000		B	Community Health Systems Inc., Senior Subordinated Notes, 6.500% due 12/15/12			23,844
	25,000		B	DaVita Inc., Senior Notes, 6.625% due 3/15/13			23,875
	50,000		B+	Extendicare Health Services Inc., Senior Notes, 9.500% due 7/1/10			52,437
	140,000		BB+	HCA Inc., Debentures, 8.360% due 4/15/24			140,812

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      13

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security		Value
Health Care Providers & Services — 0.9% (continued)
$	50,000	B-	IASIS Healthcare LLC/ IASIS Capital Corp., Senior Subordinated Notes, 8.750% due 6/15/14		$	49,250
	50,000	B-	Psychiatric Solutions Inc., Senior Subordinated Notes, 7.750% due 7/15/15			49,188
			Tenet Healthcare Corp., Senior Notes:
	75,000	B		7.375% due 2/1/13		68,812
	25,000	B		9.875% due 7/1/14		25,125
	300,000	BBB+	WellPoint Health Networks Inc., Notes, 6.375% due 1/15/12			305,365
			Total Health Care Providers & Services			738,708
Hotels, Restaurants & Leisure — 1.0%
	75,000	B+	Boyd Gaming Corp., Senior Subordinated Notes, 6.750% due 4/15/14			71,531
	75,000	BB+	Caesars Entertainment Inc., Senior Subordinated Notes, 8.875% due 9/15/08			78,937
	25,000	B-	Carrols Corp., Senior Subordinated Notes, 9.000% due 1/15/13			25,188
	75,000	B-	Herbst Gaming Inc., Senior Subordinated Notes, 7.000% due 11/15/14			71,625
	50,000	B	Las Vegas Sands Corp., Senior Notes, 6.375% due 2/15/15			46,625
			Mandalay Resort Group, Senior Subordinated:
	30,000	B+		Debentures, 7.625% due 7/15/13		29,850
	80,000	B+		Notes, Series B, 10.250% due 8/1/07		83,300
	125,000	BB	MGM MIRAGE Inc., Senior Notes, 6.750% due 9/1/12			120,937
	50,000	B+	Mohegan Tribal Gaming Authority, Senior Subordinated Notes, 6.875% due 2/15/15			47,375
	75,000	B+	Penn National Gaming Inc., Senior Subordinated Notes, 6.875% due 12/1/11			73,688
	75,000	B-	Pinnacle Entertainment Inc., Senior Subordinated Notes, 8.750% due 10/1/13			78,563
	25,000	B+	Scientific Games Corp., Senior Subordinated Notes, 6.250% due 12/15/12			23,500
	50,000	B+	Turning Stone Casino Resort Enterprise, Senior Notes, 9.125% due 12/15/10 (e)			50,750
			Total Hotels, Restaurants & Leisure			801,869
Household Durables — 0.3%
	70,000	BB+	Schuler Homes Inc., Senior Subordinated Notes, 10.500% due 7/15/11			73,747
	50,000	B	Sealy Mattress Co., Senior Subordinated Notes, 8.250% due 6/15/14			50,250
	25,000	B+	Standard Pacific Corp., Senior Subordinated Notes, 9.250% due 4/15/12			24,969
	98,000	B	Tempur-Pedic Inc./ Tempur Production USA Inc., Senior Subordinated Notes, 10.250% due 8/15/10			103,880
			Total Household Durables			252,846
Independent Power Producers & Energy Traders — 0.9%
	55,000	B	AES Corp., Senior Notes, 9.500% due 6/1/09			58,575
	260,000	BBB	Duke Energy Corp., Senior Notes, 5.625% due 11/30/12			257,252

See Notes to Financial Statements.

14     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security		Value
Independent Power Producers & Energy Traders — 0.9% (continued)
			Dynegy Holdings Inc., Senior Debentures:
$	125,000	B-		7.125% due 5/15/18	$	110,000
	30,000	B-		7.625% due 10/15/26		26,400
			NRG Energy Inc., Senior Notes:
	25,000	B-		7.250% due 2/1/14		24,437
	85,000	B-		7.375% due 2/1/16		83,087
			TXU Corp., Senior Notes:
	40,000	BB+		Series P, 5.550% due 11/15/14		36,481
	60,000	BB+		Series R, 6.550% due 11/15/34		53,009
	40,000	BBB-	TXU Electric Delivery Co., Senior Secured Notes, 6.375% due 1/15/15			40,158
			Total Independent Power Producers & Energy Traders			689,399
Industrial Conglomerates — 0.6%
	50,000	NR	Aqua-Chem Inc., Senior Subordinated Notes, 11.250% due 7/1/08 (h)			45,000
	4,000	B	Koppers Inc., Senior Notes, 9.875% due 10/15/13			4,310
	420,000	BBB+	Tyco International Group SA, Notes, 6.000% due 11/15/13			416,703
			Total Industrial Conglomerates			466,013
Insurance — 0.1%
	65,000	BB	Markel Capital Trust I, Capital Securities, Series B, 8.710% due 1/1/46			67,461
IT Services — 0.3%
	200,000	BBB-	Electronic Data Systems Corp., 7.125% due 10/15/09			206,700
	5,000	B	Iron Mountain Inc., Senior Subordinated Notes, 8.625% due 4/1/13			5,025
			Total IT Services			211,725
Machinery — 0.1%
	100,000	B	Mueller Holdings Inc., Discount Notes, step bond to yield 12.068% due 4/15/14			84,500
Media — 3.7%
	125,000	B	Advanstar Communications Inc., Senior Secured Notes, 10.750% due 8/15/10			134,687
	50,000	B	Cadmus Communications Corp., Senior Subordinated Notes, 8.375% due 6/15/14			49,750
	188,212	B-	CanWest Media Inc., Senior Subordinated Notes, 8.000% due 9/15/12			187,271
	175,000	CCC-	CCH I Holdings LLC/ CCH I Holding Capital Corp., Senior Accreting Notes, 11.750% due 5/15/14			111,125
	189,000	CCC-	CCH I LLC/ CCH Capital Corp., Senior Secured Notes, 11.000% due 10/1/15			166,320
	245,000	BBB+	Comcast Cable Communications Holdings Inc., Notes, 8.375% due 3/15/13			272,460
	190,000	BBB+	Comcast Corp., Notes, 6.500% due 1/15/15			191,800
			CSC Holdings Inc., Senior Notes:
	50,000	B+		6.750% due 4/15/12 (e)		48,500
	5,000	B+		Series B, 7.625% due 4/1/11		5,025
	65,000	B	Dex Media East LLC/ Dex Media East Finance Co., Senior Notes, Series B, 12.125% due 11/15/12			73,287

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      15

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security	Value
Media — 3.7% (continued)
$	100,000	B	Dex Media West LLC/ Dex Media Finance Co., Senior Notes, Series B, 8.500% due 8/15/10	$	104,250
	81,000	BB-	DIRECTV Holdings LLC/ DIRECTV Financing Co. Inc., Senior Notes, 8.375% due 3/15/13		85,252
	150,000	BB-	EchoStar DBS Corp., Senior Notes, 6.625% due 10/1/14		141,375
	100,000	CCC+	Houghton Mifflin Co., Senior Discount Notes, step bond to yield 11.492% due 10/15/13		83,000
	130,000	CCC+	Insight Communications Co. Inc., Senior Discount Notes, 12.250% due 2/15/11		137,800
	40,000	B	Lamar Media Corp., Senior Subordinated Notes, 6.625% due 8/15/15		37,200
	410,000	BB+	Liberty Media Corp., Senior Notes, 7.875% due 7/15/09		426,514
	175,000	B-	LodgeNet Entertainment Corp., Senior Subordinated Notes, 9.500% due 6/15/13		187,250
	90,000	BBB	News America Inc., 6.200% due 12/15/34		81,932
	100,000	B	R.H. Donnelley Finance Corp. I, Senior Subordinated Notes, 10.875% due 12/15/12 (e)		110,250
	25,000	B	R.H. Donnelley Inc., Senior Subordinated Notes, 10.875% due 12/15/12		27,563
	25,000	B+	Rainbow National Services LLC, Senior Subordinated Debentures, 10.375% due 9/1/14 (e)		27,812
	10,000	B	Sinclair Broadcast Group Inc., Senior Subordinated Notes, 8.000% due 3/15/12		10,200
	250,000	BBB+	Time Warner Inc., Senior Notes, 7.625% due 4/15/31		269,959
			Total Media		2,970,582
Metals & Mining — 0.1%
	75,000	B+	Aleris International Inc., Senior Secured Notes, 10.375% due 10/15/10		81,375
Multi-Utilities — 0.3%
	45,000	BB+	Avista Corp., Senior Notes, 9.750% due 6/1/08		47,853
	220,000	BBB	Dominion Resources Inc., Senior Notes, 5.700% due 9/17/12		215,559
			Total Multi-Utilities		263,412
Multiline Retail — 0.0%
	25,000	B-	Neiman Marcus Group Inc., Senior Subordinated Notes, 10.375% due 10/15/15 (e)		26,687

See Notes to Financial Statements.

16     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security			Value
Oil, Gas & Consumable Fuels — 4.6%
$	190,000	BBB-	Amerada Hess Corp., Notes, 7.300% due 8/15/31			$	201,940
	180,000	BBB+	Anadarko Finance Co., Senior Notes, Series B, 7.500% due 5/1/31				193,957
			Chesapeake Energy Corp., Senior Notes:
	100,000	BB		6.625% due 1/15/16			93,500
	50,000	BB		6.250% due 1/15/18			45,875
	220,000	AA	ChevronTexaco Capital Co., Notes, 3.500% due 9/17/07				214,687
	88,000	BB-	Cimarex Energy Co., Senior Notes, 9.600% due 3/15/12				93,280
	410,000	A-	ConocoPhillips Holding Co., Senior Notes, 6.950% due 4/15/29 (c)				447,462
	240,000	BBB	Devon Energy Corp., Debentures, 7.950% due 4/15/32				277,365
			El Paso Corp., Medium-Term Notes:
	50,000	B		7.375% due 12/15/12			49,875
	330,000	B		7.800% due 8/1/31 (c)			322,163
	75,000	B-	EXCO Resources Inc., Senior Notes, 7.250% due 1/15/11				72,375
	150,000	BB	Gaz Capital SA, Notes, 8.625% due 4/28/34 (e)				172,095
	370,000	BB+	Kerr-McGee Corp., Notes, 7.875% due 9/15/31 (c)				419,482
			Kinder Morgan Energy Partners LP:
	120,000	BBB+		6.750% due 3/15/11			122,710
	30,000	BBB+		Senior Notes, 6.300% due 2/1/09			30,152
			Pemex Project Funding Master Trust, Notes:
	50,000	BBB		5.750% due 12/15/15 (e)			46,113
	25,000	BBB		6.625% due 6/15/35 (e)			22,656
	75,000	B-	Stone Energy Corp., Senior Subordinated Notes, 6.750% due 12/15/14				75,656
	105,000	B	Swift Energy Co., Senior Subordinated Notes, 9.375% due 5/1/12				111,300
	50,000	A-	Vintage Petroleum Inc., Senior Notes, 8.250% due 5/1/12				52,909
	25,000	B	Whiting Petroleum Corp., Senior Subordinated Notes, 7.000% due 2/1/14				23,750
			Williams Cos. Inc.:
				Notes:
	150,000	BB-			7.125% due 9/1/11		150,750
	25,000	BB-			8.750% due 3/15/32		27,313
	125,000	BB-		Senior Notes, 7.625% due 7/15/19			127,500

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      17

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security		Value
Oil, Gas & Consumable Fuels — 4.6% (continued)
			XTO Energy Inc.:
$	30,000	BBB-		7.500% due 4/15/12	$	31,929
	210,000	BBB-		Senior Notes, 6.250% due 4/15/13		210,424
			Total Oil, Gas & Consumable Fuels			3,637,218
Paper & Forest Products — 0.6%
	75,000	B+	Bowater Canada Finance Corp., Notes, 7.950% due 11/15/11			71,625
	370,000	BBB	Weyerhaeuser Co., Notes, 6.750% due 3/15/12			378,458
			Total Paper & Forest Products			450,083
Pharmaceuticals — 0.1%
	75,000	BB-	Valeant Pharmaceuticals International, Senior Notes, 7.000% due 12/15/11			71,625
Real Estate Investment Trusts (REITs) — 0.2%
	130,000	BB	Host Marriott LP, Senior Notes, Series I, 9.500% due 1/15/07			133,900
Semiconductors & Semiconductor Equipment — 0.0%
	7,000	CCC	Amkor Technology Inc., Senior Subordinated Notes, 10.500% due 5/1/09			7,193
Textiles, Apparel & Luxury Goods — 0.2%
	75,000	B-	Levi Strauss & Co., Senior Notes, 9.750% due 1/15/15			75,375
	125,000	B-	Simmons Co., Senior Discount Notes, step bond to yield 9.955% due 12/15/14			83,750
			Total Textiles, Apparel & Luxury Goods			159,125
Thrifts & Mortgage Finance — 0.1%
	100,000	CCC-	Ocwen Capital Trust I, Capital Securities, 10.875% due 8/1/27			105,500
Tobacco — 0.4%
	320,000	BBB	Altria Group Inc., Notes, 7.000% due 11/4/13			338,084
Wireless Telecommunication Services — 0.6%
	125,000	A-	Nextel Communications Inc., Senior Notes, Series D, 7.375% due 8/1/15			127,321
	300,000	A-	Sprint Capital Corp., Notes, 8.375% due 3/15/12			331,848
	50,000	A-	UbiquiTel Operating Co., Senior Notes, 9.875% due 3/1/11			54,625
			Total Wireless Telecommunication Services			513,794
			TOTAL CORPORATE BONDS & NOTES (Cost — $25,446,897)			25,133,131
SOVEREIGN BONDS — 3.2%
Brazil — 0.9%
			Federative Republic of Brazil, Collective Action Securities:
	430,000	BB		8.000% due 1/15/18		453,650
	250,000	BB		8.750% due 2/4/25		274,500
			Total Brazil			728,150

See Notes to Financial Statements.

18     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Rating‡	Security		Value
Colombia — 0.2%
			Republic of Colombia:
$	50,000	BB		10.750% due 1/15/13	$	58,900
	81,000	BB		8.125% due 5/21/24		82,620
			Total Colombia			141,520
Italy — 0.4%
	350,000	AA-	Region of Lombardy, 5.804% due 10/25/32			349,029
Mexico — 0.8%
			United Mexican States:
	175,000	BBB		8.125% due 12/30/19		197,925
			Medium-Term Notes, Series A:
	200,000	BBB		6.375% due 1/16/13		201,000
	250,000	BBB		5.875% due 1/15/14		243,750
			Total Mexico			642,675
Panama — 0.1%
			Republic of Panama:
	50,000	BB		7.250% due 3/15/15		50,750
	10,000	BB		9.375% due 4/1/29		11,925
	35,000	BB		6.700% due 1/26/36		32,025
			Total Panama			94,700
Russia — 0.8%
			Russian Federation:
	66,667	BBB		8.250% due 3/31/10		69,333
	175,000	BBB		11.000% due 7/24/18		241,938
	260,000	BBB		5.000% due 3/31/30 (e)		277,225
			Total Russia			588,496
			TOTAL SOVEREIGN BONDS (Cost — $2,589,957)			2,544,570
U.S. GOVERNMENT & AGENCY OBLIGATIONS — 8.8%
U.S. Government Agencies — 0.3%
	50,000		Federal National Mortgage Association (FNMA), 6.625% due 9/15/09			51,712
	200,000		Tennessee Valley Authority, Notes, 5.375% due 4/1/56			189,778
			Total U.S. Government Agencies			241,490
U.S. Government Obligations — 8.5%
	90,000		U.S. Treasury Bonds, 6.250% due 8/15/23			99,288
			U.S. Treasury Notes:
	1,000,000			3.625% due 1/15/10 (c)		952,422
	300,000			4.000% due 3/15/10		288,973
	1,900,000			4.000% due 4/15/10 (c)		1,828,752
	840,000			5.000% due 2/15/11 (c)		838,196
	120,000			4.500% due 2/28/11		117,047
	5,000			4.875% due 5/31/11		4,951
	200,000			4.000% due 11/15/12		188,047

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      19

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Face
Amount†		Security		Value
U.S. Government Obligations — 8.5% (continued)
$	210,000		4.500% due 11/15/15	$	200,091
	90,000		4.500% due 2/15/16		85,655
	70,000		5.125% due 5/15/16		69,940
	2,360,000		4.500% due 2/15/36 (c)		2,116,811
		Total U.S. Government Obligations			6,790,173
		TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost — $7,393,190)			7,031,663
U.S. TREASURY INFLATION PROTECTED SECURITIES — 2.1%
		U.S. Treasury Bonds, Inflation Indexed:
	1,096,135		2.000% due 1/15/16 (c)		1,047,109
	680,010		2.000% due 1/15/26 (c)		622,794
		TOTAL U.S. TREASURY INFLATION PROTECTED SECURITIES (Cost — $1,727,282)			1,669,903

Shares
COMMON STOCKS — 0.0%
CONSUMER DISCRETIONARY — 0.0%
Household Durables — 0.0%
	122,658	Home Interiors of Gifts Inc. (h)(i)*	1,226
CONSUMER STAPLES — 0.0%
Food Products — 0.0%
	3,630	Aurora Foods Inc. (h)(i)*	0
FINANCIALS — 0.0%
Diversified Financial Services — 0.0%
	369	Outsourcing Solutions Inc. (i)*	1,567
INFORMATION TECHNOLOGY — 0.0%
Communications Equipment — 0.0%
	578	Motorola Inc.	11,647
Semiconductors & Semiconductor Equipment — 0.0%
	63	Freescale Semiconductor Inc., Class B Shares *	1,852
		TOTAL INFORMATION TECHNOLOGY	13,499
TELECOMMUNICATION SERVICES — 0.0%
Diversified Telecommunication Services — 0.0%
	66	McLeodUSA Inc., Class A Shares (i)*	0
		TOTAL COMMON STOCKS (Cost — $246,039)	16,292

See Notes to Financial Statements.

20     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
CONVERTIBLE PREFERRED STOCK — 0.0% TELECOMMUNICATION SERVICES — 0.0%
Wireless Telecommunication Services — 0.0%
	700	Crown Castle International Corp., 6.250% due 8/15/12 (Cost — $20,673)	$	39,025
	Warrants
WARRANTS — 0.0%
	60	Cybernet Internet Services International Inc., Expires 7/1/09 (h)(i)*		0
	50	GT Group Telecom Inc., Class B Shares, Expires 2/1/10 (e)(h)(i)*		0
	50	IWO Holdings Inc., Expires 1/15/11 (e)(h)(i)*		0
	60	Merrill Corp., Class B Shares, Expires 5/1/09 (e)(h)(i)*		0
	10	Pliant Corp., Expires 6/1/10 (e)(h)(i)*		0
	150	RSL Communications Ltd., Class A Shares, Expires 11/15/06 (h)(i)*		0
	1,000	United Mexican States, Series XW10, Expires 10/10/06*		4,300
		TOTAL WARRANTS (Cost — $23,752)		4,300
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $102,313,473)		100,107,487

Face
Amount
SHORT-TERM INVESTMENTS — 14.9%
Sovereign Bonds — 0.6%
$	500,000	Government of Canada, 4.962% due 9/20/06 (j) (Cost — $494,532)		494,115
U.S. Government Agency — 0.2%
	150,000	Federal National Mortgage Association (FNMA), Discount Notes, 5.053% due 9/25/06 (j)(k) (Cost — $148,223)		148,178
Repurchase Agreement — 14.1%
	11,194,000	Merrill Lynch, Pierce, Fenner & Smith Inc. repurchase agreement dated 6/30/06, 5.150% due 7/3/06; Proceeds at maturity — $11,198,804; (Fully collateralized by U.S. government agency obligation, 0.000% due 1/13/33; Market value — $11,418,367) (Cost — $11,194,000) (c)		11,194,000
		TOTAL SHORT-TERM INVESTMENTS (Cost — $11,836,755)		11,836,293
		TOTAL INVESTMENTS — 140.7% (Cost — $114,150,228#)		111,943,780
		Liabilities in Excess of Other Assets — (40.7)%		(32,389,854	)
		TOTAL NET ASSETS — 100.0%	$	79,553,926

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      21

Schedules of Investments (June 30, 2006) (unaudited) (continued)

*	Non-income producing security.
‡	All ratings are by Standard & Poor’s Ratings Service, unless otherwise noted.
†	Face amount denominated in U.S. dollars, unless otherwise noted.
(a)	This security is traded on a to-be-announced (“TBA”) basis (See Note 1).
(b)	All or a portion of this security was acquired under mortgage dollar roll agreement (See Notes 1 and 3).
(c)	All or a portion of this security is segregated for open futures contracts and mortgage dollar rolls.
(d)	Variable rate security. Interest rate disclosed is that which is in effect at June 30, 2006.
(e)	Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees, unless otherwise noted.
(f)	Rating by Moody’s Investors Service.
(g)	Security is currently in default.
(h)	Illiquid security.
(i)	Security is valued in good faith at fair value by or under the direction of the Board of Trustees (See Note 1).
(j)	Rate shown represents yield to maturity.
(k)	All or a portion of this security is held at the broker as collateral for open futures contracts.
**	Pilant Corp. emerged out of Chapter 11 Bankruptcy protection on July 19, 2006.
#	Aggregate cost for federal income tax purposes is substantially the same.
	See page 47 for definitions of ratings.
	Abbreviation used in this schedule:

      MXN — Mexican Peso

Schedule of Options Written (unaudited)

					Strike
Contracts		Security	Expiration Date		Price		Value
	8	U.S. Treasury Notes 10 Year Futures, Call		11/21/06		107		2,210
	8	U.S. Treasury Notes 10 Year Futures, Call		11/21/06		108		1,085
	8	U.S. Treasury Notes 10 Year Futures, Put		11/21/06		101		1,585
	8	U.S. Treasury Notes 10 Year Futures, Put		11/21/06		102		2,710
		TOTAL OPTIONS WRITTEN (Premiums received — $7,668)					$	7,590

See Notes to Financial Statements.

22     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

LEGG MASON VARIABLE EQUITY INDEX PORTFOLIO

Shares		Security	Value
COMMON STOCKS — 99.2%
CONSUMER DISCRETIONARY — 10.4%
Auto Components — 0.2%
	8,504	Cooper Tire & Rubber Co.	$	94,734
	24,647	Goodyear Tire & Rubber Co.*		273,582
	27,162	Johnson Controls Inc.		2,233,260
		Total Auto Components		2,601,576
Automobiles — 0.4%
	260,119	Ford Motor Co.		1,802,625
	78,795	General Motors Corp.		2,347,303
	37,429	Harley-Davidson Inc.		2,054,478
		Total Automobiles		6,204,406
Distributors — 0.1%
	24,058	Genuine Parts Co.		1,002,256
Diversified Consumer Services — 0.1%
	19,497	Apollo Group Inc., Class A Shares*		1,007,410
	46,332	H&R Block Inc.		1,105,482
		Total Diversified Consumer Services		2,112,892
Hotels, Restaurants & Leisure — 1.5%
	60,537	Carnival Corp.		2,526,814
	17,738	Darden Restaurants Inc.		698,877
	25,740	Harrah’s Entertainment Inc.		1,832,173
	46,084	Hilton Hotels Corp.		1,303,256
	47,142	International Game Technology		1,788,567
	45,292	Marriott International Inc., Class A Shares		1,726,531
	173,606	McDonald’s Corp.		5,833,162
	106,929	Starbucks Corp.*		4,037,639
	29,985	Starwood Hotels & Resorts Worldwide Inc.		1,809,295
	16,182	Wendy’s International Inc.		943,249
	37,603	Yum! Brands Inc.		1,890,303
		Total Hotels, Restaurants & Leisure		24,389,866
Household Durables — 0.6%
	10,588	Black & Decker Corp.		894,262
	16,909	Centex Corp.		850,523
	37,899	D.R. Horton Inc.		902,754
	20,403	Fortune Brands Inc.		1,448,817
	9,267	Harman International Industries Inc.		791,124
	10,266	KB HOME		470,696
	25,102	Leggett & Platt Inc.		627,048
	19,071	Lennar Corp., Class A Shares		846,180
	38,384	Newell Rubbermaid Inc.		991,459
	29,673	Pulte Homes Inc.		854,285

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      23

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Household Durables — 0.6% (continued)
	8,147	Snap-on Inc.	$	329,302
	9,876	Stanley Works		466,345
	10,860	Whirlpool Corp.		897,579
		Total Household Durables		10,370,374
Internet & Catalog Retail — 0.4%
	43,081	Amazon.com Inc.*		1,666,373
	161,097	eBay Inc.*		4,718,531
		Total Internet & Catalog Retail		6,384,904
Leisure Equipment & Products — 0.2%
	13,248	Brunswick Corp.		440,496
	40,019	Eastman Kodak Co.		951,652
	24,417	Hasbro Inc.		442,192
	54,241	Mattel Inc.		895,519
		Total Leisure Equipment & Products		2,729,859
Media — 3.4%
	108,028	CBS Corp., Class B Shares		2,922,157
	70,116	Clear Channel Communications Inc.		2,170,090
	294,368	Comcast Corp., Class A Shares*		9,637,608
	8,207	Dow Jones & Co. Inc.		287,327
	11,972	E.W. Scripps Co., Class A Shares		516,472
	33,318	Gannett Co. Inc.		1,863,476
	62,187	Interpublic Group of Cos. Inc.*		519,261
	49,992	McGraw-Hill Cos. Inc.		2,511,098
	5,895	Meredith Corp.		292,038
	19,599	New York Times Co., Class A Shares		480,960
	329,571	News Corp., Class A Shares		6,321,172
	23,769	Omnicom Group Inc.		2,117,580
	596,594	Time Warner Inc.		10,321,076
	28,470	Tribune Co.		923,282
	31,165	Univision Communications Inc., Class A Shares*		1,044,028
	100,457	Viacom Inc., Class B Shares*		3,600,379
	305,788	Walt Disney Co.		9,173,640
		Total Media		54,701,644
Multiline Retail — 1.2%
	15,796	Big Lots Inc.*		269,796
	8,478	Dillard’s Inc., Class A Shares		270,024
	43,909	Dollar General Corp.		613,848
	21,221	Family Dollar Stores Inc.		518,429
	77,076	Federated Department Stores Inc.		2,820,982
	32,718	J.C. Penney Co. Inc.		2,208,792
	47,431	Kohl’s Corp.*		2,804,121
	30,003	Nordstrom Inc.		1,095,109

See Notes to Financial Statements.

24     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Multiline Retail — 1.2% (continued)
	13,460	Sears Holdings Corp.*	$	2,084,146
	120,291	Target Corp.		5,878,621
		Total Multiline Retail		18,563,868
Specialty Retail — 2.0%
	20,984	AutoNation Inc.*		449,897
	7,559	AutoZone Inc.*		666,704
	39,321	Bed Bath & Beyond Inc.*		1,304,277
	56,090	Best Buy Co. Inc.		3,075,976
	20,978	Circuit City Stores Inc.		571,021
	76,759	Gap Inc.		1,335,607
	287,975	Home Depot Inc.		10,306,625
	47,705	Limited Brands Inc.		1,220,771
	108,087	Lowe’s Cos. Inc.		6,557,638
	40,085	Office Depot Inc.*		1,523,230
	9,787	OfficeMax Inc.		398,820
	18,669	RadioShack Corp.		261,366
	15,329	Sherwin-Williams Co.		727,821
	101,443	Staples Inc.		2,467,094
	19,631	Tiffany & Co.		648,216
	63,727	TJX Cos. Inc.		1,456,799
		Total Specialty Retail		32,971,862
Textiles, Apparel & Luxury Goods — 0.3%
	53,622	Coach Inc.*		1,603,298
	15,880	Jones Apparel Group Inc.		504,825
	14,576	Liz Claiborne Inc.		540,187
	26,379	NIKE Inc., Class B Shares		2,136,699
	12,236	V.F. Corp.		831,069
		Total Textiles, Apparel & Luxury Goods		5,616,078
		TOTAL CONSUMER DISCRETIONARY		167,649,585
CONSUMER STAPLES — 9.5%
Beverages — 2.1%
	107,668	Anheuser-Busch Cos. Inc.		4,908,584
	11,581	Brown-Forman Corp., Class B Shares		827,463
	285,544	Coca-Cola Co.		12,284,103
	42,227	Coca-Cola Enterprises Inc.		860,164
	27,730	Constellation Brands Inc., Class A Shares*		693,250
	8,104	Molson Coors Brewing Co., Class B Shares		550,100
	18,883	Pepsi Bottling Group Inc.		607,088
	230,229	PepsiCo Inc.		13,822,949
		Total Beverages		34,553,701

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      25

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Food & Staples Retailing — 2.4%
	65,621	Costco Wholesale Corp.	$	3,748,928
	113,835	CVS Corp.		3,494,734
	100,796	Kroger Co.		2,203,401
	63,016	Safeway Inc.		1,638,416
	28,739	SUPERVALU Inc.		882,279
	86,175	Sysco Corp.		2,633,508
	348,353	Wal-Mart Stores Inc.		16,780,164
	140,735	Walgreen Co.		6,310,557
	19,470	Whole Foods Market Inc.		1,258,541
		Total Food & Staples Retailing		38,950,528
Food Products — 1.2%
	90,806	Archer-Daniels-Midland Co.		3,748,472
	26,045	Campbell Soup Co.		966,530
	72,359	ConAgra Foods Inc.		1,599,857
	19,286	Dean Foods Co.*		717,246
	49,589	General Mills Inc.		2,561,768
	46,966	H.J. Heinz Co.		1,935,939
	25,014	Hershey Co.		1,377,521
	34,243	Kellogg Co.		1,658,388
	18,757	McCormick & Co. Inc., Non Voting Shares		629,297
	105,904	Sara Lee Corp.		1,696,582
	35,099	Tyson Foods Inc., Class A Shares		521,571
	30,930	Wm. Wrigley Jr. Co.		1,402,985
		Total Food Products		18,816,156
Household Products — 2.1%
	21,019	Clorox Co.		1,281,528
	71,705	Colgate-Palmolive Co.		4,295,130
	64,054	Kimberly-Clark Corp.		3,952,132
	457,182	Procter & Gamble Co.		25,419,319
		Total Household Products		34,948,109
Personal Products — 0.2%
	10,825	Alberto-Culver Co.		527,394
	62,734	Avon Products Inc.		1,944,754
	16,874	Estee Lauder Cos. Inc., Class A Shares		652,518
		Total Personal Products		3,124,666
Tobacco — 1.5%
	290,922	Altria Group Inc.		21,362,402
	11,925	Reynolds American Inc.		1,374,953
	22,494	UST Inc.		1,016,504
		Total Tobacco		23,753,859
		TOTAL CONSUMER STAPLES		154,147,019

See Notes to Financial Statements.

26     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
ENERGY — 10.1%
Energy Equipment & Services — 2.0%
	47,476	Baker Hughes Inc.	$	3,885,911
	44,792	BJ Services Co.		1,668,950
	71,882	Halliburton Co.		5,334,363
	43,224	Nabors Industries Ltd.*		1,460,539
	24,377	National-Oilwell Varco Inc.*		1,543,552
	19,193	Noble Corp.		1,428,343
	15,356	Rowan Cos. Inc.		546,520
	164,382	Schlumberger Ltd.		10,702,912
	45,266	Transocean Inc.*		3,635,765
	48,578	Weatherford International Ltd.*		2,410,440
		Total Energy Equipment & Services		32,617,295
Oil, Gas & Consumable Fuels — 8.1%
	63,882	Anadarko Petroleum Corp.		3,046,532
	46,024	Apache Corp.		3,141,138
	57,586	Chesapeake Energy Corp.		1,741,976
	308,662	Chevron Corp.		19,155,564
	229,971	ConocoPhillips		15,070,000
	25,387	CONSOL Energy Inc.		1,186,081
	61,300	Devon Energy Corp.		3,703,133
	96,376	El Paso Corp.		1,445,640
	33,780	EOG Resources Inc.		2,342,305
	842,534	Exxon Mobil Corp. (a)		51,689,461
	33,595	Hess Corp.		1,775,496
	31,627	Kerr-McGee Corp.		2,193,332
	14,522	Kinder Morgan Inc.		1,450,603
	50,495	Marathon Oil Corp.		4,206,233
	23,102	Murphy Oil Corp.		1,290,478
	59,667	Occidental Petroleum Corp.		6,118,851
	18,573	Sunoco Inc.		1,286,923
	85,746	Valero Energy Corp.		5,703,824
	82,918	Williams Cos. Inc.		1,936,964
	50,574	XTO Energy Inc.		2,238,911
		Total Oil, Gas & Consumable Fuels		130,723,445
		TOTAL ENERGY		163,340,740
FINANCIALS — 21.3%
Capital Markets — 3.4%
	34,048	Ameriprise Financial Inc.		1,520,924
	107,096	Bank of New York Co. Inc.		3,448,491
	16,803	Bear Stearns Cos. Inc.		2,353,764
	143,749	Charles Schwab Corp.		2,297,109
	59,411	E*TRADE Financial Corp.*		1,355,759
	11,672	Federated Investors Inc., Class B Shares		367,668
	21,206	Franklin Resources Inc.		1,840,893

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      27

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Capital Markets — 3.4% (continued)
	60,194	Goldman Sachs Group Inc.	$	9,054,984
	28,906	Janus Capital Group Inc.		517,417
	18,398	Legg Mason Inc.		1,830,969
	74,597	Lehman Brothers Holdings Inc.		4,859,995
	57,198	Mellon Financial Corp.		1,969,327
	128,734	Merrill Lynch & Co. Inc.		8,954,737
	149,227	Morgan Stanley		9,432,639
	25,739	Northern Trust Corp.		1,423,367
	46,303	State Street Corp.		2,689,741
	37,000	T. Rowe Price Group Inc.		1,398,970
		Total Capital Markets		55,316,754
Commercial Banks — 4.2%
	48,504	AmSouth Bancorp		1,282,931
	76,782	BB&T Corp.		3,193,363
	22,509	Comerica Inc.		1,170,243
	25,464	Commerce Bancorp Inc.		908,301
	18,035	Compass Bancshares Inc.		1,002,746
	77,533	Fifth Third Bancorp		2,864,844
	17,256	First Horizon National Corp.		693,691
	34,301	Huntington Bancshares Inc.		808,818
	56,337	KeyCorp		2,010,104
	10,984	M&T Bank Corp.		1,295,233
	31,511	Marshall & Ilsley Corp.		1,441,313
	75,838	National City Corp.		2,744,577
	64,810	North Fork Bancorporation Inc.		1,955,318
	41,238	PNC Financial Services Group Inc.		2,893,670
	63,911	Regions Financial Corp.		2,116,732
	50,826	SunTrust Banks Inc.		3,875,991
	44,917	Synovus Financial Corp.		1,202,877
	247,977	U.S. Bancorp		7,657,530
	224,098	Wachovia Corp.		12,119,220
	233,949	Wells Fargo & Co.		15,693,299
	14,773	Zions Bancorporation		1,151,408
		Total Commercial Banks		68,082,209
Consumer Finance — 1.0%
	171,901	American Express Co.		9,148,571
	42,221	Capital One Financial Corp.		3,607,784
	57,243	SLM Corp.		3,029,300
		Total Consumer Finance		15,785,655

See Notes to Financial Statements.

28     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Diversified Financial Services — 5.6%
	635,488	Bank of America Corp.	$	30,566,973
	27,773	CIT Group Inc.		1,452,250
	692,267	Citigroup Inc.		33,394,960
	484,082	JPMorgan Chase & Co.		20,331,444
	33,889	Moody’s Corp.		1,845,595
	38,589	Principal Financial Group Inc.		2,147,478
		Total Diversified Financial Services		89,738,700
Insurance — 4.5%
	45,190	ACE Ltd.		2,286,162
	69,281	AFLAC Inc.		3,211,174
	88,521	Allstate Corp.		4,844,754
	14,556	Ambac Financial Group Inc.		1,180,492
	361,885	American International Group Inc.		21,369,309
	44,396	Aon Corp.		1,545,869
	57,806	Chubb Corp.		2,884,519
	24,455	Cincinnati Financial Corp.		1,149,630
	50,445	Genworth Financial Inc., Class A Shares		1,757,504
	42,215	Hartford Financial Services Group Inc.		3,571,389
	39,909	Lincoln National Corp.		2,252,464
	56,568	Loews Corp.		2,005,336
	76,547	Marsh & McLennan Cos. Inc.		2,058,349
	18,602	MBIA Inc.		1,089,147
	105,695	MetLife Inc.		5,412,641
	108,737	Progressive Corp.		2,795,628
	68,350	Prudential Financial Inc.		5,310,795
	16,539	SAFECO Corp.		931,973
	97,004	St. Paul Travelers Cos. Inc.		4,324,438
	14,007	Torchmark Corp.		850,505
	41,191	UnumProvident Corp.		746,793
	25,144	XL Capital Ltd., Class A Shares		1,541,327
		Total Insurance		73,120,198
Real Estate Investment Trusts (REITs) — 1.0%
	13,757	Apartment Investment and Management Co., Class A Shares		597,742
	29,878	Archstone-Smith Trust		1,519,894
	12,820	Boston Properties Inc.		1,158,928
	51,010	Equity Office Properties Trust		1,862,375
	40,577	Equity Residential		1,815,009
	29,453	Kimco Realty Corp.		1,074,740
	25,577	Plum Creek Timber Co. Inc.		907,983
	34,024	ProLogis		1,773,331
	11,554	Public Storage Inc.		876,949
	25,643	Simon Property Group Inc.		2,126,830
	16,702	Vornado Realty Trust		1,629,280
		Total Real Estate Investment Trusts (REITs)		15,343,061

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      29

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Thrifts & Mortgage Finance — 1.6%
	84,362	Countrywide Financial Corp.	$	3,212,505
	134,949	Fannie Mae		6,491,047
	96,272	Freddie Mac		5,488,467
	35,856	Golden West Financial Corp.		2,660,515
	12,184	MGIC Investment Corp.		791,960
	52,431	Sovereign Bancorp Inc.		1,064,879
	133,854	Washington Mutual Inc.		6,101,065
		Total Thrifts & Mortgage Finance		25,810,438
		TOTAL FINANCIALS		343,197,015
HEALTH CARE — 12.2%
Biotechnology — 1.3%
	164,291	Amgen Inc.*		10,716,702
	26,275	Applera Corp. — Applied Biosystems Group		849,996
	47,908	Biogen Idec Inc.*		2,219,578
	36,272	Genzyme Corp.*		2,214,405
	63,394	Gilead Sciences Inc.*		3,750,389
	34,297	MedImmune Inc.*		929,449
		Total Biotechnology		20,680,519
Health Care Equipment & Supplies — 1.8%
	7,581	Bausch & Lomb Inc.		371,772
	91,032	Baxter International Inc.		3,346,336
	34,457	Becton, Dickinson & Co.		2,106,356
	34,495	Biomet Inc.		1,079,349
	169,282	Boston Scientific Corp.*		2,850,709
	14,587	C.R. Bard Inc.		1,068,644
	17,288	Fisher Scientific International Inc.*		1,262,888
	21,733	Hospira Inc.*		933,215
	168,082	Medtronic Inc.		7,886,408
	7,421	Millipore Corp.*		467,449
	17,733	PerkinElmer Inc.		370,620
	50,290	St. Jude Medical Inc.*		1,630,402
	40,467	Stryker Corp.		1,704,065
	23,235	Thermo Electron Corp.*		842,036
	14,440	Waters Corp.*		641,136
	34,554	Zimmer Holdings Inc.*		1,959,903
		Total Health Care Equipment & Supplies		28,521,288
Health Care Providers & Services — 2.7%
	78,996	Aetna Inc.		3,154,310
	29,387	AmerisourceBergen Corp.		1,231,903
	58,192	Cardinal Health Inc.		3,743,491
	61,640	Caremark Rx Inc.		3,073,987
	16,693	CIGNA Corp.		1,644,428
	22,361	Coventry Health Care Inc.*		1,228,513

See Notes to Financial Statements.

30     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Health Care Providers & Services — 2.7% (continued)
	20,249	Express Scripts Inc.*	$	1,452,663
	56,852	HCA Inc.		2,453,164
	33,455	Health Management Associates Inc., Class A Shares		659,398
	23,044	Humana Inc.*		1,237,463
	28,231	IMS Health Inc.		758,002
	17,373	Laboratory Corp. of America Holdings*		1,081,122
	11,186	Manor Care Inc.		524,847
	42,325	McKesson Corp.		2,001,126
	42,028	Medco Health Solutions Inc.*		2,407,364
	19,736	Patterson Cos. Inc.*		689,379
	22,640	Quest Diagnostics Inc.		1,356,589
	66,485	Tenet Healthcare Corp.*		464,065
	187,666	UnitedHealth Group Inc.		8,403,684
	88,808	WellPoint Inc.*		6,462,558
		Total Health Care Providers & Services		44,028,056
Pharmaceuticals — 6.4%
	212,636	Abbott Laboratories		9,273,056
	21,269	Allergan Inc.		2,281,313
	14,882	Barr Pharmaceuticals Inc.*		709,722
	273,907	Bristol-Myers Squibb Co.		7,083,235
	157,452	Eli Lilly & Co.		8,702,372
	45,129	Forest Laboratories Inc.*		1,746,041
	412,537	Johnson & Johnson		24,719,217
	34,090	King Pharmaceuticals Inc.*		579,530
	303,719	Merck & Co. Inc.		11,064,483
	29,496	Mylan Laboratories Inc.		589,920
	1,020,868	Pfizer Inc.		23,959,772
	206,824	Schering-Plough Corp.		3,935,861
	14,126	Watson Pharmaceuticals Inc.*		328,853
	187,521	Wyeth		8,327,808
		Total Pharmaceuticals		103,301,183
		TOTAL HEALTH CARE		196,531,046
INDUSTRIALS — 11.6%
Aerospace & Defense — 2.4%
	111,399	Boeing Co.		9,124,692
	56,242	General Dynamics Corp.		3,681,601
	16,930	Goodrich Corp.		682,110
	115,002	Honeywell International Inc.		4,634,580
	16,992	L-3 Communications Holdings Inc.		1,281,537
	49,270	Lockheed Martin Corp.		3,534,630
	47,894	Northrop Grumman Corp.		3,068,090
	62,075	Raytheon Co.		2,766,683
	23,837	Rockwell Collins Inc.		1,331,773

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      31

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Aerospace & Defense — 2.4% (continued)
	140,958	United Technologies Corp.	$	8,939,556
		Total Aerospace & Defense		39,045,252
Air Freight & Logistics — 1.1%
	42,509	FedEx Corp.		4,967,602
	8,328	Ryder System Inc.		486,605
	151,117	United Parcel Service Inc., Class B Shares		12,441,462
		Total Air Freight & Logistics		17,895,669
Airlines — 0.1%
	98,398	Southwest Airlines Co.		1,610,775
Building Products — 0.2%
	24,459	American Standard Cos. Inc.		1,058,341
	55,087	Masco Corp.		1,632,779
		Total Building Products		2,691,120
Commercial Services & Supplies — 0.7%
	33,741	Allied Waste Industries Inc.*		383,298
	15,293	Avery Dennison Corp.		887,911
	139,355	Cendant Corp.		2,270,093
	19,486	Cintas Corp.		774,763
	18,003	Equifax Inc.		618,223
	17,924	Monster Worldwide Inc.*		764,638
	30,806	Pitney Bowes Inc.		1,272,288
	30,266	R.R. Donnelley & Sons Co.		966,999
	23,934	Robert Half International Inc.		1,005,228
	75,947	Waste Management Inc.		2,724,978
		Total Commercial Services & Supplies		11,668,419
Construction & Engineering — 0.1%
	12,198	Fluor Corp.		1,133,560
Electrical Equipment — 0.5%
	23,545	American Power Conversion Corp.		458,892
	12,767	Cooper Industries Ltd., Class A Shares		1,186,310
	57,187	Emerson Electric Co.		4,792,843
	24,731	Rockwell Automation Inc.		1,780,879
		Total Electrical Equipment		8,218,924
Industrial Conglomerates — 4.1%
	105,039	3M Co.		8,484,000
	1,448,023	General Electric Co.		47,726,838
	18,125	Textron Inc.		1,670,763
	283,684	Tyco International Ltd.		7,801,310
		Total Industrial Conglomerates		65,682,911
Machinery — 1.6%
	93,249	Caterpillar Inc.		6,945,186

See Notes to Financial Statements.

32     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Machinery — 1.6% (continued)
	6,451	Cummins Inc.	$	788,635
	32,870	Danaher Corp.		2,114,198
	32,681	Deere & Co.		2,728,537
	28,407	Dover Corp.		1,404,158
	20,847	Eaton Corp.		1,571,864
	57,701	Illinois Tool Works Inc.		2,740,797
	45,840	Ingersoll-Rand Co., Ltd., Class A Shares		1,961,035
	25,902	ITT Industries Inc.		1,282,149
	8,565	Navistar International Corp.*		210,785
	23,027	PACCAR Inc.		1,896,964
	17,369	Pall Corp.		486,332
	16,763	Parker Hannifin Corp.		1,300,809
		Total Machinery		25,431,449
Road & Rail — 0.8%
	50,805	Burlington Northern Santa Fe Corp.		4,026,296
	30,872	CSX Corp.		2,174,624
	57,738	Norfolk Southern Corp.		3,072,816
	37,471	Union Pacific Corp.		3,483,304
		Total Road & Rail		12,757,040
Trading Companies & Distributors — 0.0%
	10,584	W. W. Grainger Inc.		796,234
		TOTAL INDUSTRIALS		186,931,353
INFORMATION TECHNOLOGY — 14.4%
Communications Equipment — 2.7%
	16,422	ADC Telecommunications Inc.*		276,875
	22,386	Andrew Corp.*		198,340
	57,740	Avaya Inc.*		659,391
	79,060	Ciena Corp.*		380,279
	850,510	Cisco Systems Inc.*		16,610,460
	27,626	Comverse Technology Inc.*		546,166
	217,002	Corning Inc.*		5,249,278
	229,046	JDS Uniphase Corp.*		579,486
	78,822	Juniper Networks Inc.*		1,260,364
	624,152	Lucent Technologies Inc.*		1,510,448
	344,118	Motorola Inc.		6,933,978
	233,258	QUALCOMM Inc.		9,346,648
	62,430	Tellabs Inc.*		830,943
		Total Communications Equipment		44,382,656
Computers & Peripherals — 3.4%
	118,495	Apple Computer Inc.*		6,768,434
	316,486	Dell Inc.*		7,725,423
	329,439	EMC Corp.*		3,613,946
	37,341	Gateway Inc.*		70,948

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      33

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Computers & Peripherals — 3.4% (continued)
	388,458	Hewlett-Packard Co.	$	12,306,349
	216,004	International Business Machines Corp.		16,593,427
	14,604	Lexmark International Inc., Class A Shares*		815,341
	25,542	NCR Corp.*		935,859
	52,129	Network Appliance Inc.*		1,840,154
	22,696	QLogic Corp.*		391,279
	27,214	SanDisk Corp.*		1,387,370
	487,310	Sun Microsystems Inc.*		2,022,337
		Total Computers & Peripherals		54,470,867
Electronic Equipment & Instruments — 0.3%
	59,326	Agilent Technologies Inc.*		1,872,329
	24,324	Jabil Circuit Inc.		622,694
	19,312	Molex Inc.		648,304
	70,995	Sanmina-SCI Corp.*		326,577
	127,401	Solectron Corp.*		435,711
	35,620	Symbol Technologies Inc.		384,340
	11,407	Tektronix Inc.		335,594
		Total Electronic Equipment & Instruments		4,625,549
Internet Software & Services — 1.1%
	28,714	Google Inc., Class A Shares*		12,040,641
	34,076	VeriSign Inc.*		789,541
	174,687	Yahoo! Inc.*		5,764,671
		Total Internet Software & Services		18,594,853
IT Services — 1.0%
	16,434	Affiliated Computer Services Inc., Class A Shares*		848,159
	80,302	Automatic Data Processing Inc.		3,641,696
	26,211	Computer Sciences Corp.*		1,269,661
	19,185	Convergys Corp.*		374,107
	72,246	Electronic Data Systems Corp.		1,738,239
	106,285	First Data Corp.		4,787,076
	24,605	Fiserv Inc.*		1,116,083
	46,723	Paychex Inc.		1,821,263
	18,614	Sabre Holdings Corp., Class A Shares		409,508
	47,701	Unisys Corp.*		299,562
		Total IT Services		16,305,354
Office Electronics — 0.1%
	127,923	Xerox Corp.*		1,779,409
Semiconductors & Semiconductor Equipment — 2.7%
	67,447	Advanced Micro Devices Inc.*		1,647,056
	49,735	Altera Corp.*		872,849
	49,858	Analog Devices Inc.		1,602,436
	217,258	Applied Materials Inc.		3,536,960
	63,817	Broadcom Corp., Class A Shares*		1,917,701

See Notes to Financial Statements.

34     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Semiconductors & Semiconductor Equipment — 2.7% (continued)
	56,532	Freescale Semiconductor Inc., Class B Shares*	$	1,662,041
	809,523	Intel Corp.		15,340,461
	27,737	KLA-Tencor Corp.		1,153,027
	42,365	Linear Technology Corp.		1,418,804
	54,560	LSI Logic Corp.*		488,312
	44,679	Maxim Integrated Products Inc.		1,434,643
	101,026	Micron Technology Inc.*		1,521,451
	46,548	National Semiconductor Corp.		1,110,170
	17,429	Novellus Systems Inc.*		430,496
	49,113	NVIDIA Corp.*		1,045,616
	28,019	PMC-Sierra Inc.*		263,378
	27,189	Teradyne Inc.*		378,743
	217,069	Texas Instruments Inc.		6,575,020
	47,857	Xilinx Inc.		1,083,961
		Total Semiconductors & Semiconductor Equipment		43,483,125
Software — 3.1%
	83,415	Adobe Systems Inc.*		2,532,479
	32,281	Autodesk Inc.*		1,112,403
	29,514	BMC Software Inc.*		705,385
	63,307	CA Inc.		1,300,959
	25,377	Citrix Systems Inc.*		1,018,633
	51,966	Compuware Corp.*		348,172
	42,661	Electronic Arts Inc.*		1,836,130
	23,803	Intuit Inc.*		1,437,463
	1,222,278	Microsoft Corp.		28,479,077
	48,299	Novell Inc.*		320,222
	542,563	Oracle Corp.*		7,861,738
	15,373	Parametric Technology Corp.*		195,391
	144,214	Symantec Corp.*		2,241,086
		Total Software		49,389,138
		TOTAL INFORMATION TECHNOLOGY		233,030,951
MATERIALS — 3.0%
Chemicals — 1.5%
	31,022	Air Products & Chemicals Inc.		1,982,926
	9,659	Ashland Inc.		644,256
	134,171	Dow Chemical Co.		5,236,694
	128,353	E.I. du Pont de Nemours & Co.		5,339,485
	11,253	Eastman Chemical Co.		607,662
	25,340	Ecolab Inc.		1,028,297
	15,755	Hercules Inc.*		240,421
	11,058	International Flavors & Fragrances Inc.		389,684
	37,627	Monsanto Co.		3,167,817
	22,924	PPG Industries Inc.		1,512,984
	45,017	Praxair Inc.		2,430,918

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      35

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Chemicals — 1.5% (continued)
	19,994	Rohm & Haas Co.	$	1,002,099
	9,315	Sigma-Aldrich Corp.		676,642
		Total Chemicals		24,259,885
Construction Materials — 0.1%
	13,910	Vulcan Materials Co.		1,084,980
Containers & Packaging — 0.2%
	14,584	Ball Corp.		540,191
	14,566	Bemis Co. Inc.		446,011
	19,923	Pactiv Corp.*		493,094
	11,369	Sealed Air Corp.		592,098
	15,153	Temple-Inland Inc.		649,609
		Total Containers & Packaging		2,721,003
Metals & Mining — 0.9%
	120,888	Alcoa Inc.		3,911,936
	12,153	Allegheny Technologies Inc.		841,474
	26,257	Freeport-McMoRan Copper & Gold Inc., Class B Shares		1,454,901
	62,542	Newmont Mining Corp.		3,310,348
	43,412	Nucor Corp.		2,355,101
	28,396	Phelps Dodge Corp.		2,333,015
	17,418	United States Steel Corp.		1,221,350
		Total Metals & Mining		15,428,125
Paper & Forest Products — 0.3%
	68,507	International Paper Co.		2,212,776
	14,691	Louisiana-Pacific Corp.		321,733
	25,029	MeadWestvaco Corp.		699,060
	34,305	Weyerhaeuser Co.		2,135,486
		Total Paper & Forest Products		5,369,055
		TOTAL MATERIALS		48,863,048
TELECOMMUNICATION SERVICES — 3.3%
Diversified Telecommunication Services — 2.6%
	541,800	AT&T Inc.		15,110,802
	252,006	BellSouth Corp.		9,122,617
	16,338	CenturyTel Inc.		606,957
	45,371	Citizens Communications Co.		592,091
	20,760	Embarq Corp.*		850,952
	218,557	Qwest Communications International Inc.*		1,768,126
	406,434	Verizon Communications Inc.		13,611,475
		Total Diversified Telecommunication Services		41,663,020

See Notes to Financial Statements.

36     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Wireless Telecommunication Services — 0.7%
	54,211	ALLTEL Corp.	$	3,460,288
	415,044	Sprint Nextel Corp.		8,296,730
		Total Wireless Telecommunication Services		11,757,018
		TOTAL TELECOMMUNICATION SERVICES		53,420,038
UTILITIES — 3.4%
Electric Utilities — 1.8%
	22,757	Allegheny Energy Inc.*		843,602
	54,881	American Electric Power Co. Inc.		1,879,674
	172,060	Duke Energy Corp.		5,053,402
	45,393	Edison International		1,770,327
	28,971	Entergy Corp.		2,049,698
	93,137	Exelon Corp.		5,292,976
	45,953	FirstEnergy Corp.		2,491,112
	56,322	FPL Group Inc.		2,330,604
	14,083	Pinnacle West Capital Corp.		562,053
	53,418	PPL Corp.		1,725,402
	35,244	Progress Energy Inc.		1,510,910
	103,384	Southern Co.		3,313,457
		Total Electric Utilities		28,823,217
Gas Utilities — 0.0%
	6,190	Nicor Inc.		256,885
	5,429	Peoples Energy Corp.		194,955
		Total Gas Utilities		451,840
Independent Power Producers & Energy Traders — 0.5%
	91,719	AES Corp.*		1,692,216
	24,932	Constellation Energy Group Inc.		1,359,293
	49,999	Dynegy Inc., Class A Shares*		273,494
	64,425	TXU Corp.		3,851,971
		Total Independent Power Producers & Energy Traders		7,176,974
Multi-Utilities — 1.1%
	28,609	Ameren Corp.		1,444,754
	43,397	CenterPoint Energy Inc.		542,463
	31,109	CMS Energy Corp.*		402,550
	34,242	Consolidated Edison Inc.		1,521,714
	48,359	Dominion Resources Inc.		3,616,770
	24,767	DTE Energy Co.		1,009,008
	24,376	KeySpan Corp.		984,790
	38,194	NiSource Inc.		834,157
	48,368	PG&E Corp.		1,899,895
	35,035	Public Service Enterprise Group Inc.		2,316,514
	36,197	Sempra Energy		1,646,240
	29,157	TECO Energy Inc.		435,606

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      37

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Multi-Utilities — 1.1% (continued)
	57,009	Xcel Energy Inc.	$	1,093,433
		Total Multi-Utilities		17,747,894
		TOTAL UTILITIES		54,199,925
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $1,483,649,844)		1,601,310,720

Face
Amount
SHORT-TERM INVESTMENTS — 1.0%
U.S. Government Obligation — 0.1%
$	1,475,000	U.S. Treasury Bills, 4.828% due 9/14/06 (b)(c) (Cost — $1,460,342)		1,457,215
Repurchase Agreement — 0.9%
	15,592,000	Interest in $331,346,000 joint tri-party repurchase agreement dated 6/30/06 with Greenwich Capital Markets Inc., 5.200% due 7/3/06; Proceeds at maturity — $15,598,757; (Fully collateralized by various U.S. government agency obligations, 0.000% to 6.331% due 9/1/24 to 5/1/38; Market value — $15,903,884) (a) (Cost — $15,592,000)		15,592,000
		TOTAL SHORT-TERM INVESTMENTS (Cost — $17,052,342)		17,049,215
		TOTAL INVESTMENTS — 100.2% (Cost — $1,500,702,186#)		1,618,359,935
		Liabilities in Excess of Other Assets — (0.2)%		(3,653,588	)
		TOTAL NET ASSETS — 100.0%	$	1,614,706,347

*	Non-income producing security.
(a)	All or a portion of this security is segregated for open futures contracts.
(b)	All or a portion of this security is held at the broker as collateral for open futures contracts.
(c)	Rate shown represents yield to maturity.
#	Aggregate cost for federal income tax purposes is substantially the same.

See Notes to Financial Statements.

38     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

LEGG MASON PARTNERS VARIABLE GROWTH AND INCOME PORTFOLIO

Shares		Security	Value
COMMON STOCKS — 98.6%
CONSUMER DISCRETIONARY — 10.7%
Hotels, Restaurants & Leisure — 2.5%
	4,580	McDonald’s Corp.	$	153,888
	1,540	Station Casinos Inc.		104,843
		Total Hotels, Restaurants & Leisure		258,731
Household Durables — 1.9%
	2,890	Newell Rubbermaid Inc.		74,649
	4,700	Toll Brothers Inc.*		120,179
		Total Household Durables		194,828
Media — 4.1%
	3,300	EchoStar Communications Corp., Class A Shares*		101,673
	8,800	News Corp., Class B Shares		177,584
	7,830	Time Warner Inc.		135,459
		Total Media		414,716
Specialty Retail — 2.2%
	2,790	Best Buy Co. Inc.		153,003
	3,090	Staples Inc.		75,149
		Total Specialty Retail		228,152
		TOTAL CONSUMER DISCRETIONARY		1,096,427
CONSUMER STAPLES — 10.2%
Beverages — 2.1%
	3,660	PepsiCo Inc.		219,747
Food & Staples Retailing — 2.8%
	5,850	Wal-Mart Stores Inc.		281,795
Food Products — 3.0%
	3,910	Kellogg Co.		189,361
	3,420	McCormick & Co. Inc., Non Voting Shares		114,741
		Total Food Products		304,102
Household Products — 1.5%
	2,750	Procter & Gamble Co.		152,900
Tobacco — 0.8%
	1,080	Altria Group Inc.		79,304
		TOTAL CONSUMER STAPLES		1,037,848
ENERGY — 9.0%
Energy Equipment & Services — 1.1%
	2,430	ENSCO International Inc.		111,829

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      39

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Oil, Gas & Consumable Fuels — 7.9%
	1,710	ConocoPhillips	$	112,056
	4,420	Exxon Mobil Corp.		271,167
	1,850	Nexen Inc.		104,599
	1,260	Suncor Energy Inc.		102,073
	3,360	Total SA, Sponsored ADR		220,147
		Total Oil, Gas & Consumable Fuels		810,042
		TOTAL ENERGY		921,871
FINANCIALS — 22.7%
Capital Markets — 4.0%
	1,420	Goldman Sachs Group Inc.		213,610
	2,810	Merrill Lynch & Co. Inc.		195,464
		Total Capital Markets		409,074
Commercial Banks — 2.8%
	4,290	Wells Fargo & Co.		287,773
Consumer Finance — 3.2%
	3,400	American Express Co.		180,948
	1,710	Capital One Financial Corp.		146,120
		Total Consumer Finance		327,068
Diversified Financial Services — 4.5%
	4,586	Bank of America Corp.		220,587
	5,755	JPMorgan Chase & Co.		241,710
		Total Diversified Financial Services		462,297
Insurance — 3.6%
	2,910	AFLAC Inc.		134,878
	1	Berkshire Hathaway Inc., Class A Shares*		91,659
	2,780	Chubb Corp.		138,722
		Total Insurance		365,259
Thrifts & Mortgage Finance — 4.6%
	3,500	Freddie Mac		199,535
	2,280	Golden West Financial Corp.		169,176
	7,700	Hudson City Bancorp Inc.		102,641
		Total Thrifts & Mortgage Finance		471,352
		TOTAL FINANCIALS		2,322,823
HEALTH CARE — 8.5%
Biotechnology — 1.9%
	2,968	Amgen Inc.*		193,603
Health Care Providers & Services — 2.1%
	1,980	Coventry Health Care Inc.*		108,781
	2,450	UnitedHealth Group Inc.		109,711
		Total Health Care Providers & Services		218,492

See Notes to Financial Statements.

40     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Pharmaceuticals — 4.5%
	4,040	Sanofi-Aventis, ADR	$	196,748
	5,090	Teva Pharmaceutical Industries Ltd., Sponsored ADR		160,793
	2,220	Wyeth		98,590
		Total Pharmaceuticals		456,131
		TOTAL HEALTH CARE		868,226
INDUSTRIALS — 12.3%
Aerospace & Defense — 4.2%
	2,910	Boeing Co.		238,358
	3,500	Orbital Sciences Corp.*		56,490
	3,080	Raytheon Co.		137,276
		Total Aerospace & Defense		432,124
Building Products — 2.0%
	6,800	Masco Corp.		201,552
Industrial Conglomerates — 4.8%
	11,730	General Electric Co.		386,620
	1,160	Textron Inc.		106,929
		Total Industrial Conglomerates		493,549
Machinery — 1.3%
	1,650	Parker Hannifin Corp.		128,040
		TOTAL INDUSTRIALS		1,255,265
INFORMATION TECHNOLOGY — 13.9%
Communications Equipment — 4.2%
	8,300	Cisco Systems Inc.*		162,099
	2,120	Motorola Inc.		42,718
	5,700	QUALCOMM Inc.		228,399
		Total Communications Equipment		433,216
Electronic Equipment & Instruments — 0.8%
	3,700	Dolby Laboratories Inc., Class A Shares*		86,210
Internet Software & Services — 0.9%
	2,630	Yahoo! Inc.*		86,790
IT Services — 1.2%
	3,010	Paychex Inc.		117,330
Semiconductors & Semiconductor Equipment — 1.8%
	5,340	ASML Holding NV, NY Registered Shares*		107,975
	2,490	Texas Instruments Inc.		75,422
		Total Semiconductors & Semiconductor Equipment		183,397

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      41

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
Software — 5.0%
	2,990	Adobe Systems Inc.*	$	90,776
	1,850	Electronic Arts Inc.*		79,624
	14,630	Microsoft Corp.		340,879
		Total Software		511,279
		TOTAL INFORMATION TECHNOLOGY		1,418,222
MATERIALS — 6.0%
Chemicals — 2.8%
	3,730	E.I. du Pont de Nemours & Co.		155,168
	3,080	Ecolab Inc.		124,986
		Total Chemicals		280,154
Metals & Mining — 3.2%
	11,101	Barrick Gold Corp.		328,590
		TOTAL MATERIALS		608,744
TELECOMMUNICATION SERVICES — 3.2%
Wireless Telecommunication Services — 3.2%
	1,620	ALLTEL Corp.		103,405
	11,152	Sprint Nextel Corp.		222,928
		TOTAL TELECOMMUNICATION SERVICES		326,333
UTILITIES — 2.1%
Multi-Utilities — 2.1%
	4,810	Sempra Energy		218,759
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $8,363,921)		10,074,518

Face
Amount
SHORT-TERM INVESTMENT — 1.3%
Repurchase Agreement — 1.3%
$	136,000	Interest in $457,185,000 joint tri-party repurchase agreement dated 6/30/06 with Merrill Lynch, Pierce, Fenner & Smith Inc., 5.200% due 7/3/06; Proceeds at maturity — $136,059; (Fully collateralized by U.S. Treasury Note, 4.125% due 8/15/08; Market value — $138,720) (Cost — $136,000)		136,000
		TOTAL INVESTMENTS — 99.9% (Cost — $8,499,921#)		10,210,518
		Other Assets in Excess of Liabilities — 0.1%		5,114
		TOTAL NET ASSETS — 100.0%	$	10,215,632

*	Non-income producing security.
#	Aggregate cost for federal income tax purposes is substantially the same.
	Abbreviation used in this schedule:

      ADR — American Depositary Receipt

See Notes to Financial Statements.

42     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

LEGG MASON PARTNERS VARIABLE AGGRESSIVE GROWTH PORTFOLIO

Shares		Security	Value
COMMON STOCKS — 91.8%
CONSUMER DISCRETIONARY — 16.9%
Media — 16.7%
	71,320	Cablevision Systems Corp., New York Group, Class A Shares	$	1,529,814
	4,826	CBS Corp., Class B Shares		130,543
	4,117	Comcast Corp., Class A Shares*		134,791
	103,525	Comcast Corp., Special Class A Shares*		3,393,549
	11,540	Discovery Holding Co., Class A Shares*		168,830
	2,479	Liberty Global Inc., Series A Shares*		53,299
	2,514	Liberty Global Inc., Series C Shares*		51,713
	7,020	Liberty Media Holding Corp. — Capital Group, Series A Shares*		588,065
	35,100	Liberty Media Holding Corp. — Interactive Group, Series A Shares*		605,826
	34,750	Sirius Satellite Radio Inc.*		165,063
	180,200	Time Warner Inc.		3,117,460
	4,826	Viacom Inc., Class B Shares*		172,964
	43,000	Walt Disney Co.		1,290,000
	5,600	World Wrestling Entertainment Inc.		94,584
		Total Media		11,496,501
Specialty Retail — 0.2%
	9,700	Charming Shoppes Inc.*		109,028
	700	J Crew Group Inc.*		19,215
		Total Specialty Retail		128,243
		TOTAL CONSUMER DISCRETIONARY		11,624,744
ENERGY — 12.6%
Energy Equipment & Services — 8.1%
	7,600	Core Laboratories NV*		463,904
	31,650	Grant Prideco Inc.*		1,416,337
	74,500	Weatherford International Ltd.*		3,696,690
		Total Energy Equipment & Services		5,576,931
Oil, Gas & Consumable Fuels — 4.5%
	64,600	Anadarko Petroleum Corp.		3,080,774
	255	Bill Barrett Corp.*		7,551
		Total Oil, Gas & Consumable Fuels		3,088,325
		TOTAL ENERGY		8,665,256
EXCHANGE TRADED FUND — 1.8%
	31,600	Nasdaq-100 Index Tracking Stock		1,224,816

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      43

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
FINANCIALS — 10.1%
Capital Markets — 9.4%
	6,000	Cohen & Steers Inc.	$	141,600
	49,100	Lehman Brothers Holdings Inc.		3,198,865
	44,800	Merrill Lynch & Co. Inc.		3,116,288
		Total Capital Markets		6,456,753
Diversified Financial Services — 0.3%
	4,500	CIT Group Inc.		235,305
Thrifts & Mortgage Finance — 0.4%
	17,849	New York Community Bancorp Inc.		294,687
		TOTAL FINANCIALS		6,986,745
HEALTH CARE — 27.3%
Biotechnology — 16.4%
	6,420	Alkermes Inc.*		121,466
	44,900	Amgen Inc.*		2,928,827
	67,350	Biogen Idec Inc.*		3,120,326
	5,300	Genentech Inc.*		433,540
	47,948	Genzyme Corp.*		2,927,225
	28,428	ImClone Systems Inc.*		1,098,458
	8,200	Isis Pharmaceuticals Inc.*		49,610
	866	Micromet Inc.*		3,706
	33,546	Millennium Pharmaceuticals Inc.*		334,454
	4,800	Nabi Biopharmaceuticals*		27,552
	4,860	Nanogen Inc.*		9,234
	6,410	Vertex Pharmaceuticals Inc.*		235,311
	1,265	ViaCell Inc.*		5,756
		Total Biotechnology		11,295,465
Health Care Equipment & Supplies — 0.2%
	3,400	Biosite Inc.*		155,244
Health Care Providers & Services — 3.7%
	57,520	UnitedHealth Group Inc.		2,575,746
Pharmaceuticals — 7.0%
	5,600	BioMimetic Therapeutics Inc.*		37,128
	78,080	Forest Laboratories Inc.*		3,020,915
	13,100	Johnson & Johnson		784,952
	24,900	King Pharmaceuticals Inc.*		423,300
	3,500	Pfizer Inc.		82,145
	6,442	Teva Pharmaceutical Industries Ltd., Sponsored ADR		203,503
	14,000	Valeant Pharmaceuticals International		236,880
		Total Pharmaceuticals		4,788,823
		TOTAL HEALTH CARE		18,815,278

See Notes to Financial Statements.

44     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
INDUSTRIALS — 8.7%
Aerospace & Defense — 3.3%
	30,100	L-3 Communications Holdings Inc.	$	2,270,142
Industrial Conglomerates — 4.1%
	103,634	Tyco International Ltd.		2,849,935
Machinery — 1.3%
	31,500	Pall Corp.		882,000
		TOTAL INDUSTRIALS		6,002,077
INFORMATION TECHNOLOGY — 14.3%
Communications Equipment — 2.7%
	14,700	C-COR Inc.*		113,484
	66,600	Motorola Inc.		1,341,990
	18,900	Nokia Oyj, Sponsored ADR		382,914
		Total Communications Equipment		1,838,388
Computers & Peripherals — 2.5%
	3,500	LaserCard Corp.*		45,815
	31,500	Quantum Corp.*		82,530
	23,100	SanDisk Corp.*		1,177,638
	17,819	Seagate Technology*		403,422
		Total Computers & Peripherals		1,709,405
Electronic Equipment & Instruments — 0.2%
	5,750	Excel Technology Inc.*		172,040
Semiconductors & Semiconductor Equipment — 7.7%
	42,750	Broadcom Corp., Class A Shares*		1,284,638
	6,500	Cirrus Logic Inc.*		52,910
	8,400	Cree Inc.*		199,584
	6,700	DSP Group Inc.*		166,495
	4,173	Freescale Semiconductor Inc., Class B Shares*		122,686
	26,725	Intel Corp.		506,439
	167,555	Micron Technology Inc.*		2,523,378
	17,700	RF Micro Devices Inc.*		105,669
	5,400	Standard Microsystems Corp.*		117,882
	17,600	Teradyne Inc.*		245,168
		Total Semiconductors & Semiconductor Equipment		5,324,849
Software — 1.2%
	5,800	Advent Software Inc.*		209,206
	11,300	Autodesk Inc.*		389,398
	3,800	Microsoft Corp.		88,540
	2	Move Inc.*		8
	4,300	RSA Security Inc.*		116,917
		Total Software		804,069
		TOTAL INFORMATION TECHNOLOGY		9,848,751

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      45

Schedules of Investments (June 30, 2006) (unaudited) (continued)

Shares		Security	Value
TELECOMMUNICATION SERVICES — 0.1%
Diversified Telecommunication Services — 0.1%
	2,416	AT&T Inc.	$	67,382
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $55,393,421)		63,235,049

Face
Amount
SHORT-TERM INVESTMENT — 6.4%
REPURCHASE AGREEMENT — 6.4%
$	4,412,000	Interest in $275,425,000 joint tri-party repurchase agreement dated 6/30/06 with Banc of America Securities LLC, 5.200% due 7/3/06; Proceeds at maturity — $4,413,912; (Fully collateralized by various U.S. government agency obligations & Treasury Note, 0.000% to 6.000% due 12/27/06 to 5/15/11; Market value — $4,500,251) (Cost — $4,412,000)		4,412,000
		TOTAL INVESTMENTS — 98.2% (Cost — $59,805,421#)		67,647,049
		Other Assets in Excess of Liabilities — 1.8%		1,248,467
		TOTAL NET ASSETS — 100.0%	$	68,895,516

*	Non-income producing security.
#	Aggregate cost for federal income tax purposes is substantially the same.
	Abbreviation used in this schedule:

      ADR — American Depositary Receipt

See Notes to Financial Statements.

46     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Bond Ratings (unaudited)

The definitions of the applicable rating symbols are set forth below:

Standard & Poor’s Ratings Service (“Standard & Poor’s”) — Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standings within the major rating categories.

AAA	—	Bonds rated “AAA” have the highest rating assigned by Standard & Poor’s. Capacity to pay interest and repay principal is extremely strong.
AA	—	Bonds rated “AA” have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in a small degree.
A	—	Bonds rated “A” have a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.
BBB	—	Bonds rated “BBB” are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than in higher rated categories.
BB, B, CCC, CC and C	—	Bonds rated “BB”, “B”, “CCC”, “CC” and “C” are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” represents the lowest degree of speculation and “C” the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
D	—	Bonds rated “D” are in default and payment of interest and/or repayment of principal is in arrears.
Moody’s Investors Service (“Moody’s”) — Numerical modifiers 1, 2 and 3 may be applied to each generic rating from “Aa” to “Caa”, where 1 is the highest and 3 the lowest ranking within its generic category.
Aaa	—	Bonds 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 edge.” 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 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 which make the long-term risks appear somewhat larger than in “Aaa” securities.
A	—	Bonds 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 which suggest a susceptibility to impairment some time in the future.
Baa	—	Bonds 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 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 therefore not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B	—	Bonds rated “B” generally lack characteristics of desirable investments. 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 rated “Caa” are of poor standing. These may be in default, or present elements of danger may exist with respect to principal or interest.
Ca	—	Bonds rated “Ca” represent obligations which are speculative in a high degree. Such issues are often in default or have other marked short-comings.
C	—	Bonds 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.
NR	—	Indicates that the bond is not rated by Standard & Poor’s or Moody’s.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      47

Statements of Assets and Liabilities (June 30, 2006) (unaudited)

		Legg Mason
		Partners						Legg Mason			Legg Mason
		Variable			Legg Mason			Partners			Partners
		Diversified			Partners			Variable			Variable
		Strategic			Variable			Growth and			Aggressive
		Income			Equity Index			Income			Growth
		Portfolio			Portfolio			Portfolio			Portfolio
ASSETS:
	Investments, at cost	$	102,956,228		$	1,485,110,186		$	8,363,921		$	55,393,421
	Repurchase agreements, at cost		11,194,000			15,592,000			136,000			4,412,000
	Investments, at value	$	100,749,780		$	1,602,767,935		$	10,074,518		$	63,235,049
	Repurchase agreements, at value		11,194,000			15,592,000			136,000			4,412,000
	Cash		983			604			99			677
	Receivable for securities sold		2,364,337			195,123			23,220			21
	Dividends and interest receivable		752,663			1,826,493			12,081			18,099
	Receivable from broker — variation margin on open futures contracts		22,750			—			—			—
	Deposits with brokers for open futures contracts		14,620			—			—			—
	Receivable for Fund shares sold		—			98,880			—			1,334,360
	Prepaid expenses		14,966			7,670			40			—
	Total Assets		115,114,099			1,620,488,705			10,245,958			69,000,206
LIABILITIES:
	Payable for securities purchased		35,309,088			108,174			—			14,000
	Payable for Fund shares repurchased		156,261			4,845,510			8,301			24,681
	Investment management fee payable		42,948			330,799			5,467			40,504
	Deferred dollar roll income		11,226			—			—			—
	Options written, at value (premium received $7,668)		7,590			—			—			—
	Deferred compensation payable		2,081			3,241			1,638			1,436
	Trustees’ fees payable		609			3,843			610			45
	Payable to broker — variation margin on open futures contracts		—			45,743			—			—
	Distribution fees payable		—			22,936			—			3,237
	Administration fee payable		—			79,392			—			—
	Accrued expenses		30,370			342,720			14,310			20,787
	Total Liabilities		35,560,173			5,782,358			30,326			104,690
	Total Net Assets	$	79,553,926		$	1,614,706,347		$	10,215,632		$	68,895,516
NET ASSETS:
	Par value (Note 6)	$	8,880		$	51,837		$	1,996		$	2,931
	Paid-in capital in excess of par value		87,538,690			1,484,604,182			8,679,958			61,446,636
	Undistributed net investment income		2,211,074			13,125,856			20,060			—
	Accumulated net investment loss		—			—			—			(77,663	)
	Accumulated net realized loss on investments, futures contracts, options written and foreign currency transactions		(7,953,879	)		(1,095,484	)		(196,979	)		(318,016	)
	Net unrealized appreciation (depreciation) on investments, futures contracts, options written and foreign currencies		(2,250,839	)		118,019,956			1,710,597			7,841,628
	Total Net Assets	$	79,553,926		$	1,614,706,347		$	10,215,632		$	68,895,516
Shares Outstanding:
	Class I shares		8,880,016			44,586,113			1,996,415			1,430,190
	Class II shares		—			7,251,310			—			1,500,958
Net Asset Value:
	Class I shares	$	8.96		$	31.15		$	5.12		$	23.65
	Class II shares		—		$	31.14			—		$	23.37

See Notes to Financial Statements.

48     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Statements of Operations (For the six months ended June 30, 2006) (unaudited)

			Legg Mason						Legg
			Partners						Mason			Legg Mason
			Variable			Legg Mason			Partners			Partners
			Diversified			Partners			Variable			Variable
			Strategic			Variable			Growth and			Aggressive
			Income			Equity Index			Income			Growth
			Portfolio			Portfolio			Portfolio			Portfolio
INVESTMENT INCOME:
	Dividends		$	1,756		$	15,734,910		$	81,072		$	152,071
	Interest			2,513,341			445,737			3,700			87,848
	Less: Foreign taxes withheld			—			—			(1,437	)		(1,443	)
	Total Investment Income			2,515,097			16,180,647			83,335			238,476
EXPENSES:
	Investment management fee (Note 2)			273,348			2,092,506			34,925			246,948
	Audit and tax			9,528			12,674			7,001			7,602
	Custody fees			7,578			19,987			2,347			1,354
	Legal fees			7,421			6,266			8,106			8,901
	Shareholder reports (Note 4)			3,183			39,200			7,166			9,510
	Trustees’ fees (Note 2)			1,422			16,526			914			735
	Insurance			1,129			15,863			119			543
	Transfer agent fees (Note 4)			31			100			35			78
	Distribution fees (Note 4)			—			290,546			—			38,891
	Administration fees			—			502,201			—			—
	Miscellaneous expenses			1,135			96,103			616			954
	Total Expenses			304,775			3,091,972			61,229			315,516
	Less: Fee waivers and/or expense reimbursements (Notes 2 and 8)			(3,525	)		(40,279	)		(246	)		(1,358	)
	Net Expenses			301,250			3,051,693			60,983			314,158
Net Investment Income (Loss)				2,213,847			13,128,954			22,352			(75,682	)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS, OPTIONS WRITTEN AND FOREIGN CURRENCY TRANSACTIONS (NOTES 1 AND 3):
	Net Realized Gain (Loss) From:
		Investment transactions		(718,917	)		15,171,257			513,543			263,343
		Futures contracts		(81,759	)		(1,133,136	)		—			—
		Options written		10,063			—			—			—
		Foreign currency transactions		(3,791	)		—			(6	)		—
	Net Realized Gain (Loss)			(794,404	)		14,038,121			513,537			263,343
	Change in Net Unrealized Appreciation/ Depreciation From:
		Investments		(1,868,607	)		16,093,991			(441,541	)		474,839
		Futures contracts		(62,319	)		362,207			—			—
		Options written		78			—			—			—
		Foreign currencies		4,693			—			—			—
	Change in Net Unrealized Appreciation/ Depreciation			(1,926,155	)		16,456,198			(441,541	)		474,839
	Increase From Payment by Affiliate (Note 2)			—			—			7,657			—
Net Gain (Loss) on Investments, Futures Contracts, Options Written and Foreign Currency Transactions				(2,720,559	)		30,494,319			79,653			738,182
Increase (Decrease) in Net Assets From Operations			$	(506,712	)	$	43,623,273		$	102,005		$	662,500

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      49

Statements of Changes in Net Assets

For the six months ended June 30, 2006 (unaudited)

and the year ended December 31, 2005

Legg Mason Partners Variable
Diversified Strategic Income Portfolio		2006			2005
OPERATIONS:
	Net investment income	$	2,213,847		$	4,630,520
	Net realized gain (loss)		(794,404	)		1,922,397
	Change in net unrealized appreciation/depreciation		(1,926,155	)		(4,089,216	)
	Increase (Decrease) in Net Assets From Operations		(506,712	)		2,463,701
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 1 AND 5):
	Net investment income		—			(5,001,106	)
	Decrease in Net Assets From Distributions to Shareholders		—			(5,001,106	)
FUND SHARE TRANSACTIONS (NOTE 6):
	Net proceeds from sale of shares		281,879			5,234,458
	Reinvestment of distributions		—			5,001,106
	Cost of shares repurchased		(9,742,754	)		(18,480,976	)
	Decrease in Net Assets From Fund Share Transactions		(9,460,875	)		(8,245,412	)
Decrease in Net Assets			(9,967,587	)		(10,782,817	)
NET ASSETS:
	Beginning of period		89,521,513			100,304,330
	End of period*	$	79,553,926		$	89,521,513
* Includes undistributed (overdistributed) net investment income of:		$	2,211,074		$	(2,773	)

See Notes to Financial Statements.

50     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Statements of Changes in Net Assets (continued)

For the six months ended June 30, 2006 (unaudited)

and the year ended December 31, 2005

Legg Mason Partners Variable Equity Index Portfolio		2006			2005
OPERATIONS:
	Net investment income	$	13,128,954		$	24,366,477
	Net realized gain		14,038,121			17,202,892
	Change in net unrealized appreciation/depreciation		16,456,198			31,886,377
	Increase in Net Assets From Operations		43,623,273			73,455,746
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 1 AND 5):
	Net investment income		(117,713	)		(24,301,557	)
	Decrease in Net Assets From Distributions to Shareholders		(117,713	)		(24,301,557	)
FUND SHARE TRANSACTIONS (NOTE 6):
	Net proceeds from sale of shares		45,842,330			79,504,116
	Reinvestment of distributions		117,713			24,301,557
	Cost of shares repurchased		(153,076,801	)		(126,400,333	)
	Decrease in Net Assets From Fund Share Transactions		(107,116,758	)		(22,594,660	)
Increase (Decrease) in Net Assets			(63,611,198	)		26,559,529
NET ASSETS:
	Beginning of period		1,678,317,545			1,651,758,016
	End of period*	$	1,614,706,347		$	1,678,317,545
* Includes undistributed net investment income of:		$	13,125,856		$	114,615

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      51

Statements of Changes in Net Assets (continued)

For the six months ended June 30, 2006 (unaudited)
and the year ended December 31, 2005

Legg Mason Partners Variable Growth and Income Portfolio		2006			2005
OPERATIONS:
	Net investment income	$	22,352		$	38,849
	Net realized gain		513,537			371,237
	Change in net unrealized appreciation/depreciation		(441,541	)		(22,620	)
	Increase from payment by affiliate		7,657			—
	Increase in Net Assets From Operations		102,005			387,466
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 1 AND 5):
	Net investment income		—			(40,002	)
	Decrease in Net Assets From Distributions to Shareholders		—			(40,002	)
FUND SHARE TRANSACTIONS (NOTE 6):
	Net proceeds from sale of shares		466,436			966,534
	Reinvestment of distributions		—			40,002
	Cost of shares repurchased		(1,448,990	)		(2,016,392	)
	Decrease in Net Assets From Fund Share Transactions		(982,554	)		(1,009,856	)
Decrease in Net Assets			(880,549	)		(662,392	)
NET ASSETS:
	Beginning of period		11,096,181			11,758,573
	End of period*	$	10,215,632		$	11,096,181
* Includes undistributed (overdistributed) net investment income of:		$	20,060		$	(2,292	)

See Notes to Financial Statements.

52     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Statements of Changes in Net Assets (continued)

For the six months ended June 30, 2006 (unaudited)

and the year ended December 31, 2005

Legg Mason Partners Variable Aggressive Growth Portfolio		2006			2005
OPERATIONS:
	Net investment loss	$	(75,682	)	$	(190,759	)
	Net realized gain		263,343			18,120
	Change in net unrealized appreciation/depreciation		474,839			5,564,067
	Increase in Net Assets From Operations		662,500			5,391,428
FUND SHARE TRANSACTIONS (NOTE 6):
	Net proceeds from sale of shares		11,082,018			17,389,739
	Cost of shares repurchased		(4,153,270	)		(3,934,857	)
	Increase in Net Assets From Fund Share Transactions		6,928,748			13,454,882
Increase in Net Assets			7,591,248			18,846,310
NET ASSETS:
	Beginning of period		61,304,268			42,457,958
	End of period*	$	68,895,516		$	61,304,268
* Includes accumulated net investment loss of:		$	(77,663	)	$	(1,981	)

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      53

Financial Highlights

For a share of each class of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:

Legg Mason
Partners Variable		Class I Shares(1)
Diversified Strategic
Income Portfolio		2006(2)			2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period			$9.01			$9.30			$9.15			$8.69			$9.13			$9.70
Income (Loss) From Operations:
	Net investment income		0.24			0.46			0.48			0.52			0.53			0.65
	Net realized and unrealized gain (loss)		(0.29	)		(0.22	)		0.14			0.50			(0.11	)		(0.36	)
Total Income (Loss) From Operations			(0.05	)		0.24			0.62			1.02			0.42			0.29
Less Distributions From:
	Net investment income		—			(0.53	)		(0.47	)		(0.56	)		(0.86	)		(0.86	)
Total Distributions			—			(0.53	)		(0.47	)		(0.56	)		(0.86	)		(0.86	)
Net Asset Value, End of Period			$8.96			$9.01			$9.30			$9.15			$8.69			$9.13
Total Return(3)			(0.55	)%		2.56	%		6.74	%		11.73	%		4.84	%		3.17	%
Net Assets, End of Period (000s)			$79,554			$89,522			$100,304			$94,572			$78,009			$79,399
Ratios to Average Net Assets:
	Gross expenses		0.72	%(4)		0.77	%		0.76	%		0.76	%		0.87	%		0.76	%
	Net expenses		0.72	(4)(5)		0.77			0.76	(5)		0.76			0.87			0.76
	Net investment income		5.26	(4)		4.86			5.15			5.73			5.82			6.86
Portfolio Turnover Rate			113	%(6)		83	%(6)		57	%(6)		54	%(6)		149	%		118	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	For the six months ended June 30, 2006 (unaudited).
(3)	Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.
(4)	Annualized.
(5)	Reflects fee waivers and/or expense reimbursements.
(6)	Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 358%, 538%, 382% and 256%, respectively.

See Notes to Financial Statements.

54     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:

Legg Mason		Class I Shares(1)
Partners Variable
Equity Index Portfolio		2006(2)			2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period			$30.38			$29.50			$27.11			$21.41			$28.21			$32.40
Income (Loss) From Operations:
	Net investment income		0.25			0.45			0.47			0.34			0.32			0.34
	Net realized and unrealized gain (loss)		0.52			0.89			2.38			5.68			(6.57	)		(4.26	)
Total Income (Loss) From Operations			0.77			1.34			2.85			6.02			(6.25	)		(3.92	)
Less Distributions From:
	Net investment income		(0.00	)(3)		(0.46	)		(0.46	)		(0.32	)		(0.55	)		(0.27	)
Total Distributions			(0.00	)(3)		(0.46	)		(0.46	)		(0.32	)		(0.55	)		(0.27	)
Net Asset Value, End of Period			$31.15			$30.38			$29.50			$27.11			$21.41			$28.21
Total Return(4)			2.54	%		4.52	%		10.52	%		28.11	%		(22.17	)%		(12.12	)%
Net Assets, End of Period (millions)			$1,389			$1,444			$1,425			$1,218			$831			$897
Ratios to Average Net Assets:
	Gross expenses		0.33	%(5)		0.34	%		0.34	%		0.34	%		0.31	%		0.23	%
	Net expenses		0.33	(5)(6)		0.34			0.34	(6)		0.34			0.31			0.23
	Net investment income		1.60	(5)		1.51			1.69			1.44			1.32			1.17
Portfolio Turnover Rate			4	%		7	%		1	%		0	%		2	%		2	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	For the six months ended June 30, 2006 (unaudited).
(3)	Amount represents less than $0.01 per share.
(4)	Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.
(5)	Annualized.
(6)	Reflects fee waivers and/or expense reimbursements.

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      55

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:

Legg Mason		Class II Shares(1)
Partners Variable
Equity Index Portfolio		2006(2)			2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period			$30.40			$29.52			$27.13			$21.43			$28.17			$32.36
Income (Loss) From Operations:
	Net investment income		0.21			0.37			0.42			0.28			0.24			0.27
	Net realized and unrealized gain (loss)		0.53			0.89			2.36			5.66			(6.54	)		(4.26	)
Total Income (Loss) From Operations			0.74			1.26			2.78			5.94			(6.30	)		(3.99	)
Less Distributions From:
	Net investment income		(0.00	)(3)		(0.38	)		(0.39	)		(0.24	)		(0.44	)		(0.20	)
Total Distributions			(0.00	)(3)		(0.38	)		(0.39	)		(0.24	)		(0.44	)		(0.20	)
Net Asset Value, End of Period			$31.14			$30.40			$29.52			$27.13			$21.43			$28.17
Total Return(4)			2.44	%		4.25	%		10.24	%		27.74	%		(22.37	)%		(12.36	)%
Net Assets, End of Period (millions)			$226			$234			$227			$132			$86			$97
Ratios to Average Net Assets:
	Gross expenses		0.59	%(5)		0.60	%		0.59	%		0.60	%		0.56	%		0.49	%
	Net expenses		0.58	(5)(6)		0.60			0.59	(6)		0.60			0.56			0.49
	Net investment income		1.35	(5)		1.26			1.50			1.18			0.97			0.91
Portfolio Turnover Rate			4	%		7	%		1	%		0	%		2	%		2	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	For the six months ended June 30, 2006 (unaudited).
(3)	Amount represents less than $0.01 per share.
(4)	Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.
(5)	Annualized.
(6)	Reflects fee waivers and/or expense reimbursements.

See Notes to Financial Statements.

56     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:

Legg Mason
		Class I Shares
Partners Variable
Growth and Income Portfolio		2006(1)(2)			2005(1)			2004(1)			2003(1)			2002			2001
Net Asset Value, Beginning of Period			$5.07			$4.91			$4.57			$3.52			$4.90			$7.92
Income (Loss) From Operations:
	Net investment income		0.01			0.02			0.04			0.01			0.00	(3)		0.03
	Net realized and unrealized gain (loss)		0.04			0.16			0.34			1.05			(1.14	)		(1.04	)
Total Income (Loss) From Operations			0.05			0.18			0.38			1.06			(1.14	)		(1.01	)
Less Distributions From:
	Net investment income		—			(0.02	)		(0.04	)		(0.01	)		(0.02	)		(0.12	)
	Net realized gains		—			—			—			—			(0.22	)		(1.89	)
Total Distributions			—			(0.02	)		(0.04	)		(0.01	)		(0.24	)		(2.01	)
Net Asset Value, End of Period			$5.12			$5.07			$4.91			$4.57			$3.52			$4.90
Total Return(4)			0.99	%		3.63	%		8.38	%		30.16	%		(23.35	)%		(13.14	)%
Net Assets, End of Period (000s)			$10,216			$11,096			$11,759			$9,870			$6,777			$11,087
Ratios to Average Net Assets:
	Gross expenses		1.14	%(5)		1.17	%		1.09	%		1.27	%		1.36	%		0.94	%
	Net expenses		1.13	(5)(6)		1.17			1.07	(6)		1.27			1.36			0.94
	Net investment income		0.42	(5)		0.35			0.95			0.36			0.04			0.31
Portfolio Turnover Rate			21	%		54	%		83	%		63	%		46	%		81	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	For the six months ended June 30, 2006 (unaudited).
(3)	Amount represents less than $0.01 per share.
(4)	Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.
(5)	Annualized.
(6)	Reflects fee waivers and/or expense reimbursements.

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      57

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:

Legg Mason
Partners Variable		Class I Shares(1)
Aggressive Growth
Portfolio		2006(2)			2005			2004			2003			2002			2001(3)
Net Asset Value, Beginning of Period			$23.33			$21.23			$19.46			$13.89			$25.98			$178.99
Income (Loss) From Operations:
	Net investment loss		(0.01	)		(0.06	)		(0.09	)		(0.19	)		(0.25	)		(0.50	)
	Net realized and unrealized gain (loss)		0.33			2.16			1.86			5.76			(8.18	)		(9.85	)
Total Income (Loss) From Operations			0.32			2.10			1.77			5.57			(8.43	)		(10.35	)
Less Distributions From:
	Net realized gains		—			—			—			—			(3.66	)		(142.66	)
Total Distributions			—			—			—			—			(3.66	)		(142.66	)
Net Asset Value, End of Period			$23.65			$23.33			$21.23			$19.46			$13.89			$25.98
Total Return(4)			1.37	%		9.89	%		9.10	%		40.10	%		(32.65	)%		(5.32	)%
Net Assets, End of Period (000s)			$33,824			$33,220			$21,706			$11,684			$5,975			$12,745
Ratios to Average Net Assets:
	Gross expenses		0.84	%(5)		0.93	%		1.04	%		1.56	%		1.56	%		1.18	%
	Net expenses		0.83	(5)(6)		0.93			1.04	(6)		1.56			1.56			1.18
	Net investment loss		(0.11	)(5)		(0.26	)		(0.47	)		(1.16	)		(1.25	)		(0.97	)
Portfolio Turnover Rate			4	%		0	%		4	%		3	%		4	%		0	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	For the six months ended June 30, 2006 (unaudited).
(3)	Per share amounts have been restated to reflect a 1 for 7 reverse stock split which was effective on September 7, 2001.
(4)	Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.
(5)	Annualized.
(6)	Reflects fee waivers and/or expense reimbursements.

See Notes to Financial Statements.

58     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended
December 31, unless otherwise noted:

Legg Mason
Partners Variable		Class II Shares(1)
Aggressive Growth
Portfolio		2006(2)			2005			2004			2003(3)
Net Asset Value, Beginning of Period			$23.08			$21.05			$19.35			$15.64
Income (Loss) From Operations:
	Net investment loss		(0.04	)		(0.11	)		(0.14	)		(0.13	)
	Net realized and unrealized gain		0.33			2.14			1.84			3.84
Total Income From Operations			0.29			2.03			1.70			3.71
Net Asset Value, End of Period			$23.37			$23.08			$21.05			$19.35
Total Return(4)			1.26	%		9.64	%		8.79	%		23.72	%
Net Assets, End of Period (000s)			$35,072			$28,084			$20,752			$5,419
Ratios to Average Net Assets:
	Gross expenses		1.09	%(5)		1.18	%		1.28	%		1.64	%(5)
	Net expenses		1.09	(5)(6)		1.18			1.28	(6)		1.64	(5)
	Net investment loss		(0.36	)(5)		(0.51	)		(0.70	)		(1.25	)(5)
Portfolio Turnover Rate			4	%		0	%		4	%		3	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	For the six months ended June 30, 2006 (unaudited).
(3)	For the period May 12, 2003 (inception date) to December 31, 2003.
(4)	Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.
(5)	Annualized.
(6)	Reflects fee waivers and/or expense reimbursements.

See Notes to Financial Statements.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      59

Notes to Financial Statements (unaudited)

1. Organization and Significant Accounting Policies

Legg Mason Partners Variable Diversified Strategic Income Portfolio (“Diversified Strategic Income Portfolio”), Legg Mason Partners Variable Equity Index Portfolio (“Equity Index Portfolio”), Legg Mason Partners Variable Growth and Income Portfolio (“Growth and Income Portfolio”) and Legg Mason Partners Variable Aggressive Growth Portfolio (“Aggressive Growth Portfolio”) (formerly known as Diversified Strategic Income Portfolio, Equity Index Portfolio, Salomon Brothers Variable Growth & Income Fund and Salomon Brothers Variable Aggressive Growth Fund, respectively) (the “Funds”) are separate diversified investment funds of Legg Mason Partners Variable Portfolios II (formerly known as Greenwich Street Series Fund) (the “Trust”). The Trust, a Massachusetts business trust, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.

   The following are significant accounting policies consistently followed by the Funds and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.

   (a) Investment Valuation. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various other relationships between securities. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Funds calculate their net asset value, the Funds may value these investments at fair value as determined in accordance with the procedures approved by the Funds’ Board of Trustees. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.

   (b) Repurchase Agreements. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian take possession of the underlying collateral securities, the market value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.

   (c) Financial Futures Contracts. Certain Funds may enter into financial futures contracts typically to hedge a portion of the portfolios. Upon entering into a financial futures contract, the Funds are required to deposit cash or securities as initial margin. Additional securities are also segregated up to the current market value of the financial futures contracts. Subsequent payments, known as variation margin, are made or received

60     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

by the Funds each day, depending on the daily fluctuation in the value of the underlying financial instruments. The Funds recognize an unrealized gain or loss equal to the daily variation margin. When the financial futures contracts are closed, a realized gain or loss is recognized equal to the difference between the proceeds from (or cost of) the closing transactions and the Funds’ basis in the contracts.

   The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. In addition, investing in financial futures contracts involves the risk that the Funds could lose more than the original margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

   (d) Written Options. When a Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the option written. If the option expires, the Fund realizes a gain from investments equal to the amount of the premium received. When a written call option is exercised, the difference between the premium and the amount for effecting a closing purchase transaction, including brokerage commission, is also treated as a realized gain or loss. When a written put option is exercised, the amount of the premium received reduces the cost of the security purchased by the Fund.

   A risk in writing a covered call option is that the Fund may forego the opportunity of profit if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. The risk in writing a call option is that the Fund is exposed to the risk of loss if the market price of the underlying security increases. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.

   (e) Forward Foreign Currency Contracts. The Funds may enter into forward foreign currency contracts to hedge against foreign currency exchange rate risk on their non-U.S. dollar denominated securities or to facilitate settlement of foreign currency denominated portfolio transactions. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The contract is marked-to-market daily and the change in value is recorded by the Funds as an unrealized gain or loss. When a forward foreign currency contract is extinguished, through either delivery or offset by entering into another forward foreign currency contract, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was extinguished.

   Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statements of Assets and Liabilities. The Funds bear the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      61

Notes to Financial Statements (unaudited) (continued)

   (f) Securities Traded on a To-Be-Announced Basis. Certain Funds may trade securities on a to-be-announced (“TBA”) basis. In a TBA transaction, the Funds commit to purchasing or selling securities which have not yet been issued by the issuer and for which specific information is not known, such as the face amount and maturity date and the underlying pool of investments in U.S. government agency mortgage pass-through transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Funds, normally 15 to 45 days later. Beginning on the date the Funds enter into a TBA transaction, cash, U.S. government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.

   (g) Mortgage Dollar Rolls. The Diversified Strategic Income Portfolio enters into dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities to settle on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. The Fund is compensated by a fee paid by the counterparty, often in the form of a drop in the repurchase price of the securities. Dollar rolls are accounted for as financing arrangements; the fee is accrued into interest income ratably over the term of the dollar roll and any gain or loss on the roll is deferred and realized upon disposition of the rolled security.

   The risk of entering into a mortgage dollar roll is that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of proceeds of the dollar roll may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.

   (h) Credit and Market Risk. Certain Funds invest in high yield instruments that are subject to certain credit and market risks. The yields of high yield obligations reflect, among other things, perceived credit and market risks. The Fund’s investment in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading.

   (i) Security Transactions and Investment Income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Funds determine the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults on an expected interest payment, the Funds’ policy is to generally halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default.

62     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

   (j) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

   The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

   Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities, at the date of valuation, resulting from changes in exchange rates.

   Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

   (k) REIT Distributions. The character of distributions received from Real Estate Investment Trusts (“REITs”) held by the Fund is generally comprised of net investment income, capital gains, and return of capital. It is the policy of the Fund to estimate the character of distributions received from underlying REITs based on historical data provided by the REITs. After each calendar year end, REITs report the true tax character of these distributions. Differences between the estimated and actual amounts reported by the REITs are reflected in the Fund’s records in the year in which they are reported by the REITs.

   (l) Distributions to Shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Funds are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

   (m) Class Accounting. Investment income, common expenses and realized/ unrealized gain (loss) on investments are allocated to the various classes of the Funds on the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that class.

   (n) Federal and Other Taxes. It is the Funds’ policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Funds intend to distribute substantially all of its income and net realized gains on investments, if any, to shareholders

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      63

Notes to Financial Statements (unaudited) (continued)

each year. Therefore, no federal income tax provision is required in the Funds’ financial statements. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

   (o) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. During the current period, Equity Index Portfolio’s Accumulated Realized Gain and Cost of Investments have been increased by $41,990 as a result of return of capital distributions paid by REITs. These adjustments have no effect on net assets or net asset values per share.

2. Investment Management Agreement and Other Transactions with Affiliates

For the period of this report, Salomon Brothers Asset Management Inc. (“SBAM”), Smith Barney Fund Management LLC (“SBFM”) and TIMCO Asset Management, Inc. (“TIMCO”) (collectively, the “Manager”), indirect wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”), acted as the investment managers of the Funds. Citigroup Asset Management Ltd. (“CAM Ltd.”), also a wholly-owned subsidiary of Legg Mason, was the sub adviser to Diversified Strategic Income Portfolio. Under the investment management agreements, the Funds paid the Manager a management fee for advisory and administrative services in accordance with the following breakpoint schedules:

Diversified Strategic Income Portfolio:

	Management
Average Daily Net Assets	Fee Rate
First $1.0 billion		0.650	%
Next $1.0 billion		0.625
Next $3.0 billion		0.600
Next $5.0 billion		0.575
Over $10.0 billion		0.550

Growth and Income Portfolio:

	Management
Average Daily Net Assets	Fee Rate
First $1.0 billion		0.650	%
Next $1.0 billion		0.600
Next $1.0 billion		0.550
Next $1.0 billion		0.500
Over $4.0 billion		0.450

64     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

Aggressive Growth Portfolio:

	Management
Average Daily Net Assets	Fee Rate
First $1.0 billion		0.750	%
Next $1.0 billion		0.725
Next $3.0 billion		0.700
Next $5.0 billion		0.675
Over $10.0 billion		0.650

   The Equity Index Portfolio pays TIMCO an advisory fee calculated at an annual rate of 0.25% of the Fund’s average daily net assets and pays SBFM an administration fee calculated at an annual rate of 0.06% of the Fund’s average daily net assets. These fees are calculated daily and paid monthly.

   During the six months ended June 30, 2006, the Manager waived a portion of its fee in the amount of $1,988, $37,210, $246 and $1,358, for the Diversified Strategic Income Portfolio, Equity Index Portfolio, Growth and Income Portfolio and Aggressive Growth Portfolio, respectively. In addition, during the six months ended June 30, 2006 the Fund was reimbursed for expenses in the amount of $1,537 and $3,069, for the Diversified Strategic Income Portfolio and Equity Index Portfolio, respectively.

   During the six months ended June 30, 2006, the Manager reimbursed the Growth and Income Fund in the amount of $7,657 for losses incurred resulting from an investment transaction error.

   Citigroup Global Markets Inc. (“CGM”) and Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, serve as co-distributors of the Funds.

   The Funds have adopted an unfunded, non-qualified deferred compensation plan (the “Plan”) which allows non-interested trustees (“Trustees”) to defer the receipt of all or a portion of the trustees’ fees earned until a later date specified by the Trustees. The deferred fees earn a return based on notional investments selected by the Trustees. The balance of the deferred fees payable may change depending upon the investment performance. Any gains or losses incurred in the deferred balances are reported in the Statements of Operations under Trustees’ fees. Under the Plan, deferred fees are considered a general obligation of the Funds and any payments made pursuant to the Plan will be made from the Funds’ general assets. The Board of Trustees voted to discontinue offering the Plan to its members effective January 1, 2007. This change will have no effect on fees previously deferred.

   As of June 30, 2006, the Diversified Strategic Income Portfolio, Equity Index Portfolio, Growth and Income Portfolio and Aggressive Growth Portfolio have accrued $2,081, $3,241, $1,638 and $1,436 as deferred compensation, respectively.

   Certain officers and one Trustee of the Trust are employees of Legg Mason or its affiliates and do not receive compensation from the Trust.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      65

Notes to Financial Statements (unaudited) (continued)

3. Investments

During the six months ended June 30, 2006, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments and mortgage dollar rolls) were as follows:

					U.S. Government &
	Investments				Agency Obligations
	Purchases		Sales		Purchases		Sales
Diversified Strategic Income Portfolio	$	38,967,770	$	12,894,129	$	85,547,895	$	96,191,466
Equity Index Portfolio		73,540,215		183,665,153		—		—
Growth and Income Portfolio		2,240,444		3,296,289		—		—
Aggressive Growth Portfolio		7,594,965		2,428,627		—		—

   At June 30, 2006, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

						Net Unrealized
	Gross Unrealized		Gross Unrealized			Appreciation/
	Appreciation		Depreciation			Depreciation
Diversified Strategic Income Portfolio	$	571,103	$	(2,777,551	)	$	(2,206,448	)
Equity Index Portfolio		321,784,229		(204,126,480	)		117,657,749
Growth and Income Portfolio		1,946,691		(236,094	)		1,710,597
Aggressive Growth Portfolio		11,792,006		(3,950,378	)		7,841,628

   At June 30, 2006, the Funds had the following open futures contracts:

Diversified Strategic	Number of		Expiration		Basis		Market		Unrealized
Income Portfolio	Contracts		Date		Value		Value		Gain (Loss)
Contracts to Buy:
U.S. Treasury 2 Year Notes		36		9/06	$	7,323,883	$	7,300,125	$	(23,758	)
U.S. Treasury 5 Year Notes		25		9/06		2,595,586		2,585,156		(10,430	)
U.S. Treasury 10 Year Notes		27		9/06		2,845,564		2,831,203		(14,361	)
										(48,549	)
Contracts to Sell:
Euro Dollar		3		9/06	$	712,010	$	708,150	$	3,860
U.S. Treasury Bond		1		9/06		106,979		106,656		323
										4,183
Net Unrealized Loss on Open Futures Contracts									$	(44,366	)

66     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

	Number of		Expiration		Basis		Market		Unrealized
Equity Index Portfolio	Contracts		Date		Value		Value		Gain
Contracts to Buy:
S & P 500 Index		55		9/06	$	17,229,543	$	17,591,750	$	362,207

During the six months ended June 30, 2006, the Diversified Strategic Income Portfolio entered into mortgage dollar roll transactions in the aggregate amount of $237,861,119. For the six months ended June 30, 2006, the Fund recorded interest income of $175,633 related to such mortgage rolls. At June 30, 2006, the Fund had outstanding net contracts to repurchase mortgage-backed securities of $30,759,039 for scheduled settlements on July 13, 18, 20, and August 14 and 17, 2006.

   During the six months ended June 30, 2006, written option transactions for the Diversified Strategic Income Portfolio were as follows:

	Number of Contracts			Premiums
Options written, outstanding December 31, 2005		—			—
Options written		192		$	55,646
Options closed		(160	)		(47,978	)
Options expired		—			—
Options written, outstanding June 30, 2006		32		$	7,668

4. Class Specific Expenses

Certain Funds have adopted a Rule 12b-1 distribution plan and under that plan the Equity Index Portfolio and Aggressive Growth Portfolio each pay a distribution fee with respect to

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      67

Notes to Financial Statements (unaudited) (continued)

its Class II shares calculated at the annual rate 0.25% of the average daily net assets attributable to Class II shares. Distribution fees are accrued daily and paid monthly.

   For the six months ended June 30, 2006, class specific expenses were as follows:

	Distribution		Transfer Agent		Shareholder
	Fees		Fees		Fees
Equity Index Portfolio
Class I		—	$	45	$	29,214
Class II	$	290,546		55		9,986
Total	$	290,546	$	100	$	39,200
Aggressive Growth Portfolio
Class I		—	$	40	$	4,900
Class II	$	38,891		38		4,610
Total	$	38,891	$	78	$	9,510

5. Distributions to Shareholders by Class

	Six Months Ended		Year Ended
	June 30, 2006		December 31, 2005
Diversified Strategic Income Portfolio
Net Investment Income		—	$	5,001,106
Equity Index Portfolio
Class I	$	103,676	$	21,430,279
Class II		14,037		2,871,278
Total	$	117,713	$	24,301,557
Growth and Income Portfolio
Class I		—	$	40,002

For the six months ended June 30, 2006 and the year ended December 31, 2005, the Aggressive Growth Portfolio did not make any distributions.

6. Shares of Beneficial Interest

At June 30, 2006, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.001 per share. The Equity Index Portfolio, Growth and Income Portfolio and Aggressive Growth Portfolio have the ability to issue multiple classes of shares. Each share of a class represents an identical interest and has the same rights, except that each class bears certain direct expenses, including those specifically related to the distribution of its shares.

   On August 30, 2002, the Aggressive Growth Portfolio and the Growth and Income Portfolio created a separate class of shares designated as Class II shares. Prior to that date, these Funds issued one class of shares, which, as of August 30, 2002, has been designated Class I shares. As of June 30, 2006, Growth and Income Portfolio had not issued any Class II shares.

68     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

   Transactions in shares of each Fund were as follows:

		Six Months Ended						Year Ended
		June 30, 2006						December 31, 2005
		Shares			Amount			Shares			Amount
Diversified Strategic Income Portfolio
	Shares sold		17,041,846		$	281,879			559,692		$	5,234,458
	Shares issued on reinvestment		—			—			552,927			5,001,106
	Shares repurchased		(18,092,900	)		(9,742,754	)		(1,970,148	)		(18,480,976	)
	Net Decrease		(1,051,054	)	$	(9,460,875	)		(857,529	)	$	(8,245,412	)
Equity Index Portfolio — Class I
	Shares sold		1,332,426		$	41,923,625			1,783,407		$	52,469,338
	Shares issued on reinvestment		3,397			103,676			699,911			21,430,279
	Shares repurchased		(4,298,868	)		(135,331,999	)		(3,243,069	)		(96,663,549	)
	Net Decrease		(2,963,045	)	$	(93,304,698	)		(759,751	)	$	(22,763,932	)
Equity Index Portfolio — Class II
	Shares sold		124,927		$	3,918,705			917,995		$	27,034,778
	Shares issued on reinvestment		460			14,037			93,715			2,871,278
	Shares repurchased		(564,738	)		(17,744,802	)		(1,001,831	)		(29,736,784	)
	Net Increase (Decrease)		(439,351	)	$	(13,812,060	)		9,879		$	169,272
Growth and Income Portfolio — Class I
	Shares sold		88,282		$	466,436			199,677		$	966,534
	Shares issued on reinvestment		—			—			7,828			40,002
	Shares repurchased		(278,517	)		(1,448,990	)		(414,168	)		(2,016,392	)
	Net Decrease		(190,235	)	$	(982,554	)		(206,663	)	$	(1,009,856	)
Aggressive Growth Portfolio — Class I
	Shares sold		97,249		$	2,372,182			473,718		$	10,157,123
	Shares repurchased		(91,027	)		(2,204,322	)		(72,209	)		(1,562,217	)
	Net Increase		6,222		$	167,860			401,509		$	8,594,906
Aggressive Growth Portfolio — Class II
	Shares sold		366,197		$	8,709,836			342,024		$	7,232,616
	Shares repurchased		(82,163	)		(1,948,948	)		(110,836	)		(2,372,640	)
	Net Increase		284,034		$	6,760,888			231,188		$	4,859,976

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      69

Notes to Financial Statements (unaudited) (continued)

7. Capital Loss Carryforward

As of December 31, 2005, the Fund had the following net capital loss carryforwards remaining:

	Diversified
Year of	Strategic Income			Equity Index			Growth and			Aggressive
Expiration	Portfolio			Portfolio			Income Portfolio			Growth Portfolio
12/31/2008	$	(449,197	)		—			—			—
12/31/2009		(4,543,816	)		—			—			—
12/31/2010		(2,118,955	)	$	(7,879,134	)		—		$	(577,590	)
12/31/2011		—			—		$	(625,649	)		—
	$	(7,111,968	)	$	(7,879,134	)	$	(625,649	)	$	(577,590	)

   These amounts will be available to offset any future taxable capital gains.

8. Regulatory Matters

On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and CGM relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).

   The SEC order finds that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the fund’s investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also finds that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

   The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup

70     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan submitted for the approval of the SEC. At this time, there is no certainty as to how the above-described proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. The order also required that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provided that a portion of such fees might be subsequently distributed in accordance with the terms of the order. On April 3, 2006, an aggregate amount of approximately $9 million was distributed to the affected Funds.

   The order required SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGM would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Fund’s Board selected a new transfer agent for the Fund. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

   Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.

   On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason.

9. Legal Matters

Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGM and SBFM (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC described in Note 8. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the investment manager for the Smith Barney family of funds, rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses.

   On October 5, 2005, a motion to consolidate the five actions and any subsequently filed, related action was filed. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future. As of the date of this report, the Fund’s investment manager believes that resolution of the pending lawsuit will not have a material effect on the financial position or results of operations of the Fund or the ability of the Fund’s investment manager and its affiliates to continue to render services to the Funds under their respective contracts.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      71

Notes to Financial Statements (unaudited) (continued)

* * *

   Beginning in June 2004, class action lawsuits alleging violations of the federal securities laws were filed against CGM and a number of its then affiliates, including SBFM and SBAM, which were then investment adviser or manager to certain of the Funds (the “Managers”), substantially all of the mutual funds then managed by the Managers (the “Defendant Funds”), and Board Members of the Defendant Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGM created various undisclosed incentives for its brokers to sell Smith Barney and Salomon Brothers funds. In addition, according to the complaints, the Managers caused the Defendant Funds to pay excessive brokerage commissions to CGM for steering clients towards proprietary funds. The complaints also alleged that the defendants breached their fiduciary duty to the Defendant 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 Defendant Funds failed to adequately disclose certain of the allegedly wrongful conduct. The complaints sought injunctive relief and compensatory and punitive damages, rescission of the Defendant Funds’ contracts with the Managers, recovery of all fees paid to the Managers 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. On May 27, 2005, all of the Defendants filed motions to dismiss the Complaint. On July 26, 2006, the court issued a decision and order (1) finding that plaintiffs lacked standing to sue on behalf of the shareholders of the Funds in which none of the plaintiffs had invested and dismissing those Funds from the case (although stating that they could be brought back into the case if standing as to them could be established), and (2) other than one stayed claim, dismissing all of the causes of action against the remaining Defendants, with prejudice, except for the cause of action under Section 36(b) of the Investment Company Act, which the court granted plaintiffs leave to replead as a derivative claim.

10. Other Matters

On September 16, 2005, the staff of the SEC informed SBFM and SBAM that the staff is considering recommending that the SEC institute administrative proceedings against SBFM and SBAM for alleged violations of Section 19(a) and 34(b) of the Investment Company Act (and related Rule 19a-1). The notification is a result of an industry wide inspection by the SEC and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. Section 19(a) and related Rule 19a-1 of the Investment Company Act generally require funds that are making dividend and distribution payments to provide shareholders with a written statement disclosing the source of the dividends and distributions, and, in particular, the portion of the payments made from each of net investment income, undistributed net profits and/or paid-in capital. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM or SBAM.

72     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

   Although there can be no assurance, SBFM and SBAM believe that this matter is not likely to have a material adverse effect on the Funds.

11. Subsequent Events

(The following applies to all Funds, except the Equity Index Portfolio)

The Funds’ Board has approved the appointment of Legg Mason Partners Fund Advisor, LLC (“LMPFA”), as each Fund’s investment manager effective August 1, 2006. The Funds’ Board has also approved the appointment of Western Asset Management Co. (“Western Asset”), and Western Asset Management Co. Ltd. (“Western Asset Limited”), as the Diversified Strategic Income Portfolio’s subadvisers effective August 1, 2006. Additionally, the Funds’ Board has approved the appointment of CAM North America, LLC (“CAM N.A.”) as the Growth and Income Portfolio’s and Aggressive Growth Portfolio’s subadviser effective August 1, 2006. The portfolio managers who are responsible for the day-to-day management of the Funds remain the same immediately prior to and immediately after the date of these changes. LMPFA, Western Asset, Western Asset Limited, and CAM N.A. are wholly-owned subsidiaries of Legg Mason.

   LMPFA will provide administrative and certain oversight services to the Funds. LMPFA will delegate to the subadvisers the day-to-day portfolio management of the Funds, except for certain Funds, the management of cash and short-term instruments. The Funds’ investment management fee will remain unchanged. For its services, LMPFA will pay each subadviser 70% of the net management fee that it receives from the Fund, except Western Asset will pay Western Asset Limited a subadvisory fee of 0.30% on the assets managed by Western Asset Limited. For the Diversified Strategic Income Portfolio, as compensation for services performed by Western Asset Limited, Western Asset pays Western Asset Limited out of the subadvisory fee it receives.

   The Funds’ Board has also approved the reorganization of the Growth and Income Portfolio and the Aggressive Growth Portfolio (“the Acquired Funds”) pursuant to which the Funds’ assets would be acquired, and their liabilities assumed, by the Legg Mason Partners Variable Appreciation Portfolio and the Legg Mason Partners Variable Portfolios III — Legg Mason Partners Variable Aggressive Growth Portfolio (the “Acquiring Funds”), respectively, in exchange for shares of the Acquiring Funds. The Acquired Funds would then be liquidated, and shares of the Acquiring Funds would be distributed to shareholders of the Acquired Funds.

   Under the reorganization, the Acquired Funds shareholders would receive shares of the Acquiring Funds with the same aggregate net asset value as their shares of the Acquired Funds. It is anticipated that as a result of the reorganization, shareholders of the Acquired Funds would recognize no gain or loss for Federal income tax purposes. The reorganization is subject to the satisfaction of certain condition, including approval by the Acquired Funds’ shareholders.

Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report      73

Notes to Financial Statements (unaudited) (continued)

   Proxy materials describing the reorganizations are expected to be sent to Acquired Fund shareholders later in 2006. If Acquiring Funds’ shareholders approve the reorganizations, they are expected to occur during 2007.

   (The following applies to all Funds)

   The Funds’ Board has also approved a number of other initiatives designed to streamline and restructure the fund complex, and has authorized seeking shareholder approval for those initiatives where shareholder approval is required. As a result, each Fund’s shareholders will be asked to elect a new Board, approve matters that will result in the Funds being grouped for organizational and governance purposes with other funds in the fund complex, and domicile the Funds as a Maryland business trust, with all funds operating under uniform charter documents. Each Fund’s shareholders also will be asked to approve investment matters, including standardized fundamental investment policies.

   Proxy materials describing these matters are expected to be sent to shareholders later in 2006. If shareholder approval is obtained, these matters generally are expected to be implemented during 2007.

12. Recent Accounting Pronouncement

During June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation 48 (“FIN 48” or the “Interpretation”), Accounting for Uncertainty in Income Taxes — an interpretation of FASB statement 109. FIN 48 supplements FASB Statement 109 by defining the confidence level that a tax position must meet in order to be recognized in the financial statements. FIN 48 prescribes a comprehensive model for how a fund should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the fund has taken or expects to take on a tax return. FIN 48 requires that the tax effects of a position be recognized only if it is “more likely than not” to be sustained based solely on its technical merits. Management must be able to conclude that the tax law, regulations, case law, and other objective information regarding the technical merits sufficiently support the position’s sustainability with a likelihood of more than 50 percent. FIN 48 is effective for fiscal periods beginning after December 15, 2006, which for these Funds will be January 1, 2007. At adoption, the financial statements must be adjusted to reflect only those tax positions that are more likely than not to be sustained as of the adoption date. Management of the Funds is currently evaluating the impact that FIN 48 will have on the financial statements.

74     Legg Mason Partners Variable Portfolios II 2006 Semi-Annual Report

Board Approval of Management and
Subadvisory Agreements (unaudited)

At a meeting held in person on June 28, the Funds’ Board, including a majority of the Board Members who are not “interested persons” of the Funds or Legg Mason Partners Fund Advisor, LLC (the “Manager”) or any sub-investment adviser or proposed sub-investment adviser as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”), approved a new management agreement (the “New Management Agreement”) between the Funds and the Manager. The Funds’ Board, including a majority of the Independent Board Members, also approved one or more new subadvisory agreements between the Manager and each of CAM North America LLC, Western Asset Management Co. and Western Asset Management Co. Ltd., (each a “Subadviser”) (each a “New Subadvisory Agreement”). The New Management Agreement and the New Subadvisory Agreements replaced the Funds’ prior management agreement with Salomon Brothers Asset Management Inc., Smith Barney Fund Management LLC and TIMCO Asset, Management, Inc., respectively manager and the prior subadvisory agreement with the Subadviser and were entered into in connection with an internal reorganization of the Manager’s and the prior manager’s and the Subadvisers’ parent organization, Legg Mason. In approving the New Management Agreement and New Subadvisory Agreements, the Board, including the Independent Board Members, considered the factors discussed below, among other things.

   The Board noted that the Manager will provide administrative and certain oversight services to the Funds, and that the Manager will delegate to each of the Subadvisers the day-to-day portfolio management of the Funds. The Board Members reviewed the qualifications, backgrounds and responsibilities of the senior personnel that will provide oversight and general management services and the portfolio management team that would be primarily responsible for the day-to-day management of the Funds. The Board Members noted that the portfolio management team was expected to be the same as then managing the Funds.

   The Board Members received and considered information regarding the nature, extent and quality of services expected to be provided to the Funds by the Manager under the New Management Agreement and by the Subadvisers under the New Subadvisory Agreements. The Board Members’ evaluation of the services expected to be provided by the Manager and the Subadvisers took into account the Board Members’ knowledge and familiarity gained as Fund Board Members, including as to the scope and quality of Legg Mason’s investment management and other capabilities and the quality of its administrative and other services. The Board Members considered, among other things, information and assurances provided by Legg Mason as to the operations, facilities and organization of the Manager and the Subadvisers and the qualifications, backgrounds and responsibilities of their senior personnel. The Board Members further considered the financial resources available to the Manager, the Subadvisers and Legg Mason. The Board Members concluded that, overall, the nature, extent and quality of services expected to be provided under the New Management Agreement and the New Subadvisory Agreements were acceptable.

Legg Mason Partners Variable Portfolios II      75

Board Approval of Management and
Subadvisory Agreements (unaudited) (continued)

   The Board Members also received and considered performance information for the Funds as well as comparative information with respect to a peer group of funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board Members were provided with a description of the methodology Lipper used to determine the similarity of the Funds to the funds included in the Performance Universe. The Board Members noted that they had received and discussed with management, at periodic intervals, information comparing each Fund’s performance against, among other things, their benchmarks. Based on the Board Members’ review, which included careful consideration of the factors noted above, the Board Members concluded that the performance of the Fund, under the circumstances, supported approval of the New Management Agreement and New Subadvisory Agreements.

   The Board Members reviewed and considered the management fees that would be payable by the Funds to the Manager in light of the nature, extent and quality of the management services expected to be provided by the Manager. Additionally, the Board Members received and considered information comparing the Funds’ management fees and overall expenses with those of comparable funds in both the relevant expense group and a broader group of funds, each selected and provided by Lipper. The Board Members also reviewed and considered the subadvisory fee that would be payable by the Manager to the Subadviser in light of the nature, extent and quality of the management services expected to be provided by the Subadvisers. The Board Members noted that the Manager, and not the Funds, will pay the subadvisory fee to each Subadviser. The Board Members determined that the Funds’ management fees and the Funds’ subadvisory fees were reasonable in light of the nature, extent and quality of the services expected to be provided to the Funds under the New Management Agreement and the New Subadvisory Agreements.

   The Board Members received and considered a pro-forma profitability analysis of Legg Mason and its affiliates in providing services to the Funds, including information with respect to the allocation methodologies used in preparing the profitability data. The Board Members recognized that Legg Mason may realize economies of scale based on its internal reorganization and synergies of operations. The Board Members noted that it was not possible to predict with a high degree of confidence how Legg Mason’s and its affiliates’ profitability would be affected by its internal reorganization and by other factors including potential economies of scale, but that based on their review of the pro forma profitability analysis, their most recent prior review of the profitability of the predecessor manager and its affiliates from their relationship with the Fund and other factors considered, they determined that the management fee was reasonable. The Board Members noted that they expect to receive profitability information on an annual basis.

   In their deliberations, the Board Members also considered, and placed significant importance on, information that had been received and conclusions that had been reached by the Board in connection with the Board’s most recent approval of the Funds’ prior management agreement and the prior subadvisory agreements, in addition to information

76     Legg Mason Partners Variable Portfolios II

Board Approval of Management and
Subadvisory Agreements (unaudited) (continued)

provided in connection with the Board’s evaluation of the terms and conditions of the New Management Agreement and the New Subadvisory Agreements.

   The Board Members considered Legg Mason’s advice and the advice of its counsel that the New Management Agreement and the New Subadvisory Agreements were being entered into in connection with an internal reorganization within Legg Mason, that did not involve an actual change of control or management. The Board Members further noted that the terms and conditions of the New Management Agreement are substantially identical to those of the Funds’ previous management agreement except for the identity of the Manager, and that the initial term of the New Management Agreement (after which it will continue in effect only if such continuance is specifically approved at least annually by the Board, including a majority of the Independent Board Members) was the same as that under the prior management agreement. They noted, in addition, that the terms and conditions of the New Subadvisory Agreements are likewise unchanged from those of the prior subadvisory agreements.

   In light of all of the foregoing, the Board, including the Independent Board Members, approved the New Management Agreement and the New Subadvisory Agreements. No single factor reviewed by the Board Members was identified as the principal factor in determining whether to approve the New Management Agreement and the New Subadvisory Agreements. The Independent Board Members were advised by separate independent legal counsel throughout the process. The Independent Board Members also discussed the proposed approval of the New Management Agreement and the New Subadvisory Agreements in private sessions with their independent legal counsel at which no representatives of the Manager or Subadvisers were present.

Legg Mason Partners Variable Portfolios II      77

(This page intentionally left blank.)

Legg Mason Partners
Variable Portfolios II

TRUSTEES
Dwight B. Crane Burt N. Dorsett R. Jay Gerken, CFA   Chairman Elliot S. Jaffe Stephen E. Kaufman Cornelius C. Rose, Jr.
INVESTMENT MANAGER
Legg Mason Partners
	Fund Advisor, LLC
TIMCO Asset Management, Inc.
SUBADVISERS
CAM North America, LLC Western Asset Management Co. Western Asset Management Co.   Ltd.
DISTRIBUTORS
Citigroup Global Markets Inc.
Legg Mason Investor Services, LLC
CUSTODIAN
State Street Bank and Trust Company
TRANSFER AGENT
PFPC Inc. 4400 Computer Drive Westborough, Massachusetts 01581
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP 345 Park Avenue New York, New York 10154

This report is submitted for the general information of shareholders of the Legg Mason Partners Variable Portfolios II – Legg Mason Partners Variable Diversified Strategic Income, Legg Mason Partners Variable Equity Index, Legg Mason Partners Variable Growth and Income and Legg Mason Partners Variable Aggressive Growth Portfolios, and is not for use with the general public.

This report must be preceded or accompanied by a free prospectus. Investors should consider the Funds’ investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Funds. Please read the prospectus carefully before investing.

www.leggmason.com/InvestorServices

^©2006 Legg Mason
Investors Services, LLC
Member NASD, SIPC

FD03434  8/06 SR06-98

Legg Mason Partners
Variable Portfolios II
Legg Mason Partners
  Variable Diversified
  Strategic Income Portfolio

Legg Mason Partners
  Variable Equity Index
  Portfolio

Legg Mason Partners
  Variable Growth and
  Income Portfolio

Legg Mason Partners
  Variable Aggressive
  Growth Portfolio

The Funds are separate investment funds of the Legg Mason Partners Variable Portfolios II, a Massachusetts business trust.

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Funds, shareholders can call 1-800-451-2010.

Information on how the Funds voted proxies relating to portfolio securities during the prior 12 month period ended June 30th of each year, and a description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge upon request, by calling 1-800-451-2010, (2) on the Fund’s website at www.leggmason.com/InvestorServices.com and (3) on the SEC’s website at www.sec.gov. Proxy voting reports for the period ending June 30, 2005 will continue to be listed under the Trust’s former Greenwich Street Series Fund, name.

EX-99.17.H

Filed pursuant to Rule 497(c)
File Nos. 33-11716
811-05018

EXPERIENCE

PROSPECTUS

February 28, 2006

Shares of each portfolio are offered to insurance company separate accounts which fund certain variable annuity and variable life insurance contracts and to qualified retirement and pension plans. This prospectus should be read together with the prospectus for the contracts.

The Securities and Exchange Commission has not approved or disapproved these securities or determined whether this prospectus is accurate or complete. Any statement to the contrary is a crime.

Smith Barney

Premier Selections

All Cap Growth Portfolio

INVESTMENT PRODUCTS: NOT FDIC INSURED Ÿ NO BANK GUARANTEE Ÿ MAY LOSE VALUE

Under a licensing agreement between Citigroup and Legg Mason, the name of the fund, the names of any classes of shares of the fund, and the name of the investment adviser of the fund, as well as all logos, trademarks and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason. Citi Marks include, but are not limited to, “Smith Barney,” “Salomon Brothers,” “Citi,” and “Citigroup Asset Management.” Legg Mason and its affiliates, as well as the investment adviser, are not affiliated with Citigroup.

All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement.

Smith Barney

Premier Selections

All Cap Growth Portfolio

Contents

You should know:

An investment in the fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency.

Investments, risks and performance	2
More on the portfolio’s investments	9
Management	11
Share transactions	14
Distributions, dividends and taxes	17
Share price	18
Financial highlights	20

Investments, risks and performance

The Smith Barney Premier Selections All Cap Growth Portfolio is made up of a Large Cap Growth segment, Mid Cap Growth segment and a Small Cap Growth segment.

Investment objective

Long-term capital growth.

Key investments

Large Cap Growth segment

This segment invests primarily in equity securities of companies with large market capitalizations. Large capitalization companies are those whose market capitalizations are within the market capitalization range of companies in the Russell 1000 Growth Index at the time of this segment’s investment. The size of the companies in the Index changes with market conditions and the composition of the Index.

Mid Cap Growth segment

This segment invests primarily in equity securities of medium sized companies. Medium sized companies are those whose market capitalizations are within the market capitalization range of companies in the S&P MidCap 400 Index at the time of this segment’s investment. The size of the companies in the Index changes with market conditions and the composition of the Index.

Small Cap Growth segment

This segment invests primarily in equity securities of companies with small market capitalizations. Small capitalization companies are those whose market capitalizations are within the market capitalization range of companies in the Russell 2000 Growth Index at the time of this segment’s investment. The size of the companies in the Index changes with market conditions and the composition of the Index.

All segments

Foreign investments

The fund may invest up to 25% of its assets (at the time of investment) in foreign securities. The fund may invest directly in foreign issuers or invest in depositary receipts.

Selection process

The fund’s strategy is to combine the efforts of three segment managers and to invest in the stock selections considered most attractive in the opinion of each segment manager. Each segment manager builds a portfolio of stocks which the segment manager believes will offer superior long-term capital growth potential. The target allocations are 40% to the Large Cap Growth segment and 30% to each of the Mid Cap and Small Cap Growth segments. In connection with the execution of purchases and sales, each segment may hold temporarily more or fewer assets than represented by its designated segment of the fund’s assets. The amount to be invested by the fund in any particular security will be determined by Smith Barney Fund Management LLC, the fund’s manager, based on the recommendation of the segment managers.

2         Smith Barney Mutual Funds

In order to maintain approximately the target allocations of the fund’s assets among the three segments, the manager will:

n Divide all daily cash inflows (purchases and reinvested distributions) and outflows (redemptions and expense items) among the three segments, as appropriate

n Rebalance the allocation of securities in the fund’s portfolio at any time the percentage of the fund’s portfolio invested in any of Large Cap, Mid Cap or Small Cap Growth segment’s securities diverges by at least 10% from the target allocation for a period of more than 10 days

As a consequence of its efforts to maintain assets at targeted percentages, the manager will allocate assets and rebalance when necessary by (1) allocating cash inflow to portfolio segments that are below their targeted percentages, or (2) by selling securities in a portfolio segment that exceeds its targeted percentage with proceeds being reallocated to a portfolio segment that is below its targeted percentage. Reallocations may result in additional transaction costs to the extent the sales of securities as part of these reallocations result in higher portfolio turnover. In addition, if one segment manager buys a security during a time frame when another segment manager sells it, the net position of the fund in the security may be approximately the same as it would have been with a single segment manager and no such sale and purchase. The manager will consider these costs in determining the allocation and reallocation of assets. Where possible, in these instances, the manager will seek to avoid transaction costs.

Large Cap Growth segment

The Large Cap Growth segment manager emphasizes individual security selection while diversifying this segment of the fund’s investments across industries, which may help to reduce risk. The segment manager attempts to identify established large capitalization companies with the highest growth potential. The segment manager then analyzes each company in detail, ranking its management, strategy and competitive market position. Finally, the segment manager attempts to identify the best values available among the growth companies identified.

In selecting individual companies for investment, the Large Cap Growth segment manager considers:

n Favorable earnings prospects

n Technological innovation

n Industry dominance

n Competitive products and services

n Global scope

n Long term operating history

n Consistent and sustainable long-term growth in dividends and earnings per share

n Strong cash flow

n High return on equity

n Strong financial condition

n Experienced and effective management

Premier Selections All Cap Growth Portfolio         3

Mid Cap Growth segment

The Mid Cap Growth segment manager focuses on medium capitalization companies that exhibit attractive growth characteristics. The segment manager selects individual “growth” stocks for investment in two ways: by identifying those companies thought to have the most favorable growth prospects and by identifying those companies in the Mid Cap Growth segment’s size range which have favorable valuations relative to their growth characteristics. This strategy is commonly known as “growth at a reasonable price” and offers investors style diversification. In selecting individual companies for investment, the segment manager considers:

n Growth characteristics, including high historic growth rates and high relative growth compared with companies in the same industry or sector

n Increasing profits and sales

n Competitive advantages that could be more fully exploited by a company

n Skilled management committed to long-term growth

n Potential for a long-term investment by this segment of the fund

The Mid Cap Growth segment manager uses fundamental research to find stocks with strong growth potential and also uses quantitative analysis to determine whether these stocks are relatively undervalued or overvalued compared to stocks with similar fundamental characteristics. The segment manager’s valuations determine whether and when this segment of the fund will purchase or sell the stocks it identifies through fundamental research.

Small Cap Growth segment

The Small Cap Growth segment manager focuses on small capitalization companies that exhibit attractive growth characteristics. The segment manager selects individual stocks for investment by identifying those companies thought to have the most favorable growth prospects. In selecting individual companies for investment, the segment manager considers:

n Growth characteristics, including high historic growth rates and high forecasted growth of sales and profits and a high return on equity

n Innovative companies at the cutting edge of positive and dynamic demographic and economic trends

n Products and services that give a company a competitive advantage

n Skilled management committed to long-term growth

n Potential for a long-term investment by this segment of the fund

The Small Cap Growth segment manager uses a disciplined investment process to identify small growth companies believed to be financially sound and that exhibit the potential to become much larger and more successful. Elements of this process include fundamental research, evaluation of key management and screening techniques.

Principal risks of investing in the fund

Investors could lose money on their investments in the fund, or the fund may not perform as well as other investments, if:

n Stock prices decline generally, or stocks perform poorly relative to other types of investments

n An adverse company specific event, such as an unfavorable earnings report, negatively affects the stock price of a company in which the fund invests

n Large cap stocks fall out of favor with investors

4         Smith Barney Mutual Funds

n The segment manager’s judgment about the attractiveness, growth prospects or potential appreciation of a particular stock proves to be incorrect

n Mid or small cap stocks fall out of favor with investors. Because 30% of the fund’s assets are invested primarily in mid cap companies and 30% of the fund’s assets are invested primarily in small cap companies, an investment in the fund may be more volatile and more susceptible to loss than an investment in a fund which invests primarily in large cap companies. Mid and small cap companies may have more limited product lines, markets and financial resources than large cap companies. They may have shorter operating histories and less mature businesses. While mid cap companies generally have more established businesses than small cap companies, the prices of mid cap stocks tend to be more volatile than the prices of large cap stocks. In addition, small cap stocks may be less liquid than large cap stocks

n Key economic trends become materially unfavorable, such as rising interest rates and levels of inflation or slowdown of economic growth

n The fund’s investments in securities of foreign issuers involve greater risk than investments in securities of U.S. issuers. Because the value of a depositary receipt is dependent upon the market price of an underlying foreign security, depositary receipts are subject to most of the risks associated with investing in foreign securities directly. Foreign countries generally have markets that are less liquid and more volatile than markets in the U.S. In some foreign countries, less information is available about foreign issuers and markets because of less rigorous accounting and regulatory standards than in the U.S. Currency fluctuations could erase investment gains or add to investment losses

The fund’s growth-oriented investment style may increase the risks of investing in the fund. Growth securities typically are quite sensitive to market movements because their market prices tend to reflect future expectations. When it appears those expectations will not be met, the prices of growth securities typically fall. Growth securities may also be more volatile than other investments because they often do not pay dividends. The fund may underperform certain other stock funds (those emphasizing value stocks, for example) during periods when growth stocks are out of favor.

Who may want to invest

The fund may be an appropriate investment if you:

n Are seeking to participate in the long-term growth potential of a broad segment of the stock market

n Are seeking diversification

n Are looking for an investment with potentially greater return but higher risk than fixed income investments

n Are willing to accept the risks of the stock market

n Are looking for an investment with potentially greater return but higher risk than a fund that invests primarily in large cap companies

n Are seeking to participate in the long-term potential of small cap growth companies and

n Are willing to accept the special risks and potential long-term rewards of investing in smaller companies with limited track records

Premier Selections All Cap Growth Portfolio         5

Performance information

The following shows summary performance information for the fund in a bar chart and an Average Annual Total Returns table. The information provides an indication of the risks of investing in the fund by showing changes in its performance from year to year and by showing how the fund’s average annual returns compare with the returns of broad-based securities market indexes. The bar chart and the Average Annual Total Returns table do not reflect the impact of any fees that are paid by the separate accounts or qualified plans through which shares of the fund are sold. If they did, the returns would be lower than those shown. Effective May 1, 2001, the fund changed its investment policies from those of a mid cap fund investing in medium sized companies to a fund investing in each of the Large Cap Growth, Mid Cap Growth and Small Cap Growth segments. The bar chart and Average Annual Total Returns Table include the performance of the fund both before and after this change in investment policies. The fund’s past performance is not necessarily an indication of how the fund will perform in the future and there can be no assurance that the fund’s performance investing in all three segments will be similar to its performance from investing solely in medium sized companies.

Calendar Year Total Returns

Highest and Lowest Quarter Returns (for periods shown in the bar chart)

Highest: 18.11% in 4th Quarter 2001 Lowest: (20.75)% in 3rd Quarter 2001

6         Smith Barney Mutual Funds

Average Annual Total Returns (for periods ended 12/31/05)

	1 Year		5 Years		Since Inception		Inception Date
Fund	6.31	%	(1.59	)%	4.26	%	09/15/99
S&P MidCap 400 Index(1)	12.56	%	8.60	%	11.42	%	*
Russell 1000 Growth Index(2)	5.26	%	(3.58	)%	(3.76	)%	*
Russell 2000 Growth Index(3)	4.15	%	2.28	%	2.15	%	*

⁽¹⁾ The S&P MidCap 400 Index is a market-value weighted index consisting of 400 domestic stocks chosen for market size, liquidity, and industry group representation.

⁽²⁾ The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

⁽³⁾ The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.

* Index comparison begins on 09/15/99. It is not possible to invest directly in an index. An index does not reflect deductions for fees, expenses or taxes.

Fee table

This table sets forth the fees and expenses you may pay if you invest in fund shares. The fee information here does not include the fees and expenses charged by the separate accounts or qualified plans through which shares of the fund are sold. For those fees, you should review the prospectus for your variable annuity or variable life insurance contract or the information provided by your qualified plan.

Shareholder Fees

(fees paid directly from your investment) None

Annual Fund Operating Expenses

(expenses deducted from fund assets)
Management fee*	0.75	%
Distribution and service (12b-1) fees	None
Other expenses	0.19	%
Total annual fund operating expenses**	0.94	%

* Effective October 1, 2005, the Fund has a management fee schedule that reduces the fee payable on assets in excess of $1 billion as follows: 0.750% on assets up to $1 billion, 0.725% on assets between $1 billion and $2 billion, 0.700% on assets between $2 billion and $5 billion, 0.675% on assets between $5 billion and $10 billion, and 0.650% on assets over $10 billion.

** Because of a voluntary expense limitation, total ordinary operating expenses are not expected to exceed 0.95%. This expense limitation may be modified or terminated at any time .

Premier Selections All Cap Growth Portfolio         7

Example

This example helps you compare the costs of investing in the fund with the costs of investing in other mutual funds. Your actual costs may be higher or lower. The example does not take into account the fees and expenses charged by the separate accounts or qualified plans through which shares of the fund are sold. The example assumes:

n You invest $10,000 in the fund for the period shown

n Your investment has a 5% return each year — the assumption of a 5% return is required by the Securities and Exchange Commission (“SEC”) for purposes of this example and is not a prediction of the fund’s future performance

n The fund’s operating expenses (before fee waivers and/or expense reimbursements, if any) remain the same

Number of Years You Own Your Shares

1 year		3 years		5 years		10 years
$	96	$	300	$	520	$	1155

8         Smith Barney Mutual Funds

More on the portfolio’s investments

Equity securities

Equity securities include exchange traded and over-the-counter common and preferred stocks, debt securities convertible into equity securities, baskets of equity securities such as exchange traded funds, and warrants and rights relating to equity securities. Equity securities may also include investments in real estate investment trusts (REITs), which are pooled investment vehicles that invest in real estate or real estate loans or interests.

Securities of foreign issuers

The fund may invest up to 25% of its assets, in foreign securities, including those of issuers in emerging market countries.

Investments in securities of foreign entities and securities denominated in foreign currencies involve special risks. These include possible political and economic instability and the possible imposition of exchange controls or other restrictions on investments. Since the fund may invest in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency rates relative to the U.S. dollar will affect the U.S. dollar value of the fund’s assets. Twenty-five European countries participate in the European Economic and Monetary Union and 12 of those countries have adopted the euro as their sole currency. Monetary and economic union on this scale has not been attempted before, and there is uncertainty whether participating countries will remain committed to the European Economic and Monetary Union in the face of changing economic conditions. Emerging market investments offer the potential for significant gains but also involve greater risks than investing in more developed countries. Political or economic stability, lack of market liquidity and government actions such as currency controls or seizure of private business or property may be more likely in emerging markets.

Derivative transactions

The fund may, but need not, use derivative contracts, such as futures and options on securities, securities indices or currencies; options on these futures; forward currency contracts; and interest rate or currency swaps for any of the following purposes:

n To hedge against the economic impact of adverse changes in the market value of portfolio securities because of changes in stock market prices, currency exchange rates or interest rates

n As a substitute for buying or selling securities

n As a cash flow management technique

n To enhance a fund’s return

A derivative contract will obligate or entitle the fund to deliver or receive an asset or cash payment based on the change in value of one or more securities, currencies or indices. Even a small investment in derivative contracts can have a big impact on the fund’s stock market, currency and interest rate exposure. Therefore, using derivatives can disproportionately increase losses and reduce opportunities for gains when stock prices, currency rates or interest rates are changing. The fund may not fully benefit from or may lose money on derivatives if changes in their value do not correspond accurately or as anticipated to changes in the value of the fund’s holdings. The other parties to certain derivative

Premier Selections All Cap Growth Portfolio         9

contracts present the same types of default risk as issuers of fixed income securities. Derivatives can also make a fund less liquid and harder to value, especially in declining markets.

Short sales

The fund may engage in short sales. Losses from short sales may be unlimited.

Portfolio turnover

The fund may engage in active and frequent trading to achieve its principal investment strategies. Frequent trading also increases transaction costs, which could detract from the fund’s performance. The “Financial highlights” section of this prospectus shows the fund’s historical portfolio turnover rate.

Short-term and defensive investments

While the fund intends to be substantially fully invested in equity securities, each fund may maintain a portion of its assets (normally not more than 10%) in money market instruments and/or cash to pay expenses and meet redemption requests.

Also, the fund may depart from its principal investment strategies in response to adverse market, economic or political conditions by taking temporary defensive positions in any type of money market and short-term debt instruments or cash. If the fund takes a temporary defensive position, it may be unable to achieve its investment objective.

Goals/policies

The fund’s goal and investment policies generally may be changed by the trustees without shareholder approval.

The fund has a policy to invest primarily in equity securities of companies that have large market capitalizations, companies with medium-sized market capitalizations and companies with small market capitalizations. The policy may be changed with at least 60 days’ prior notice to shareholders.

Master/feeder option

The fund may in the future seek to achieve its investment objective by investing its assets in one or more investment companies. Shareholders of the fund will be given at least 30 days’ prior notice of any such investment.

The fund may also use other strategies and invest in other securities that are described, along with its risks, in the Statement of Additional Information (“SAI”). However, the fund might not use all of the strategies and techniques or invest in all of the types of securities described in this prospectus or in the SAI. Also note that there are many other factors that could adversely affect your investment and that could prevent the fund from achieving its goals, which are not described here.

Portfolio holdings

A description of the fund’s policies and procedures with respect to the disclosure of the fund’s portfolio securities are described in the SAI.

10         Smith Barney Mutual Funds

Management

The fund’s investment manager is Smith Barney Fund Management LLC (“SBFM” or the “manager”). The manager’s address is 399 Park Avenue, New York, New York 10022. The manager selects the fund’s investments, oversees its operations, and provides administrative services.

On June 23, 2005, Citigroup Inc. (“Citigroup”) entered into an agreement to sell substantially all of its asset management business, Citigroup Asset Management (“CAM”), which includes the manager, to Legg Mason, Inc. (“Legg Mason”). The transaction took place on December 1, 2005. As a result, the manager, previously an indirect wholly-owned subsidiary of Citigroup, became a wholly-owned subsidiary of Legg Mason.

Legg Mason, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202, is a financial services holding company. As of December 31, 2005, Legg Mason’s asset management operation had aggregate assets under management of approximately $850.8 billion.

Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, and Citigroup Global Markets Inc. (“CGMI”) serve as the fund’s distributors. A distributor may make payments for distribution and/or shareholder servicing activities out of its past profits and other available sources. The distributor may also make payments for marketing, promotional or related expenses. The amount of these payments is determined by the distributor and may be substantial. The manager or an affiliate may make similar payments under similar arrangements.

The payments described above are often referred to as “revenue sharing payments.” The recipients of such payments may include the fund’s distributors, affiliates of the manager, broker-dealers, financial institutions and other financial intermediaries through which investors may purchase shares of the fund. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to recommend or sell shares of the fund to you. Please contact your financial intermediary for details about revenue sharing payments it may receive.

The portfolio managers

The portfolio managers are primarily responsible for the day-to-day operation of the fund. The table also shows the business experience of each portfolio manager during the past five years.

Smith Barney Premier Selections All Cap Growth – Large Cap Growth Segment

Alan Blake has been primarily responsible for managing the Large Cap Growth segment of the fund since 2001. Mr. Blake is a Managing Director and a Senior Portfolio Manager of CAM. He has been with CAM or its predecessor companies since 1991.

Smith Barney Premier Selections All Cap Growth – Mid Cap Growth Segment

A team of individuals has managed the day-to-day operations of the Mid Cap Growth segment of the fund since May 11, 2005. The members of the team are Brian M. Angerame, Derek J. Deutsch and Peter C. Stournaras.

Brian Angerame is a Director and Portfolio Manager for the manager with day-to-day responsibility for managing the Mid Cap Growth segment, including initiating buy/sell

Premier Selections All Cap Growth Portfolio         11

orders. He is sector manager with coverage of consumer discretionary, consumer staples, and industrials. He joined the manager in 2000. Mr. Angerame worked as a consumer analyst with CAM prior to assuming the role of portfolio manager.

Derek Deutsch is a Director and Portfolio Manager for the manager with day-to-day responsibility for managing the Mid Cap Growth segment, including initiating buy/sell orders and coordinating with research personnel. He is sector manager with coverage of healthcare and information technology. He joined CAM in 1999. Mr. Deutsch worked as a healthcare analyst with CAM prior to assuming the role of portfolio manager.

Peter Stournaras is a Director and Portfolio Manager for the manager with day-to-day responsibility for managing the Mid Cap Growth segment, including initiating buy/sell orders and conducting quantitative analysis for the fund. He joined CAM in 1998. Mr. Stournaras worked as the Head of Quantitative Equity Analysis on the Global Equities Platform of CAM prior to assuming the role of portfolio manager.

Smith Barney Premier Selections All Cap Growth – Small Cap Growth Segment

Timothy Woods, CFA has been primarily responsible for managing the Small Cap Growth segment of the fund since 2001. Mr. Woods is a Managing Director of Citigroup Global Markets, and a Senior Portfolio Manager of CAM. He joined CAM in 1999.

The SAI provides additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities of the fund.

Management fee

For the fiscal year ended October 31, 2005, the manager received a fee of 0.75% of the fund’s average daily net assets. Effective October 1, 2005, the manager receives fees for its services at the following rates based on assets under management: 0.750% on assets up to $1 billion, 0.725% on assets between $1 billion and $2 billion, 0.700% on assets between $2 billion and $5 billion, 0.675% on assets between $5 billion and $10 billion, and 0.650% on assets over $10 billion.

A discussion regarding the basis for the Board of Trustees’ approval of the fund’s management agreement is available in the fund’s Annual Report for the fiscal year ended October 31, 2005.

Recent developments

On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and CGMI relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).

The SEC order finds that SBFM and CGMI willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGMI knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money

12         Smith Barney Mutual Funds

than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the fund’s investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGMI. The order also finds that SBFM and CGMI willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGMI do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

The SEC censured SBFM and CGMI and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan prepared and submitted for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.

The order required SBFM to recommend a new transfer agent contract to the Funds’ boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGMI would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Fund’s Board selected a new transfer agent for the Fund. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.

On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason, Inc.

Premier Selections All Cap Growth Portfolio         13

Share transactions

Availability of shares

Individuals may not purchase shares directly from the fund. You should read the prospectus for your insurance company’s variable contract to learn how to purchase a variable contract based on the fund.

The fund may sell its shares directly to separate accounts established and maintained by insurance companies for the purpose of funding variable annuity and variable life insurance contracts and to certain qualified pension and retirement plans. The variable insurance products and qualified plans may or may not make investments in the fund. Shares of the fund are sold at net asset value.

The interests of different variable insurance products and qualified plans investing in the fund could conflict due to differences of tax treatment and other considerations. The funds currently do not foresee any disadvantages to investors arising from the fact that each fund may offer its shares to different insurance company separate accounts that serve as the investment medium for their variable annuity and variable life products and to qualified plans. Nevertheless, the Board of Trustees intends to monitor events to identify any material irreconcilable conflicts which may arise, and to determine what action, if any, should be taken in response to these conflicts. If a conflict were to occur, one or more insurance companies’ separate accounts or qualified plans might be required to withdraw their investments in the fund.

The sale of shares may be suspended or terminated if required by law or regulatory authority or if it is in the best interests of the fund’s shareholders. The fund reserves the right to reject any specific purchase order.

Redemption of shares

Redemption requests may be placed by separate accounts of participating insurance companies and by qualified plans. The redemption price of the shares of the fund will be the net asset value next determined after receipt by the fund or its agent of a redemption request in good order. The value of redeemed shares may be more or less than the price paid for the shares. Sales proceeds will normally be forwarded to the selling insurance company or qualified plan on the next business day after receipt of a redemption request in good order but in no event later than 3 days following receipt of instructions. The fund may suspend sales or postpone payment dates during any period in which any of the following conditions exist:

n the New York Stock Exchange is closed;

n trading on the New York Stock Exchange is restricted;

n an emergency exists as a result of which disposal by the fund of securities is not reasonably practicable or it is not reasonably practicable for a fund to fairly determine the value of its net assets; or

n as permitted by SEC order in extraordinary circumstances.

Frequent purchases and sales of fund shares

Frequent purchases and redemptions of mutual fund shares may interfere with the efficient management of a fund’s portfolio by its portfolio manager, increase portfolio transaction costs, and have a negative effect on a fund’s long term shareholders. For example, in order

14         Smith Barney Mutual Funds

to handle large flows of cash into and out of a fund, the portfolio manager may need to allocate more assets to cash or other short-term investments or sell securities, rather than maintaining full investment in securities selected to achieve the fund’s investment objective. Frequent trading may cause a fund to sell securities at less favorable prices. Transaction costs, such as brokerage commissions and market spreads, can detract from the fund’s performance. In addition, the return received by long term shareholders may be reduced when trades by other shareholders are made in an effort to take advantage of certain pricing discrepancies, when, for example, it is believed that the fund’s share price, which is determined at the close of the New York Stock Exchange on each trading day, does not accurately reflect the value of the fund’s portfolio securities. Funds investing in foreign securities have been particularly susceptible to this form of arbitrage, but other funds could also be affected.

Because of the potential harm to the fund and its long term shareholders, the Board of Trustees of the fund has approved policies and procedures that are intended to discourage and prevent excessive trading and market timing abuses through the use of various surveillance techniques. Under these policies and procedures, the fund may limit additional exchanges or purchases of fund shares by shareholders who are believed by the manager to be engaged in these abusive trading activities. The intent of the policies and procedures is not to inhibit legitimate strategies, such as asset allocation, dollar cost averaging, or similar activities that may nonetheless result in frequent trading of fund shares. For this reason, the Board of Trustees has not adopted any specific restrictions on purchases and sales of fund shares, but the fund reserves the right to reject any exchange or purchase of fund shares with or without prior notice to the account holder. In cases where surveillance of a particular account establishes what the manager believes to be obvious market timing, the manager will seek to block future purchases and exchanges of fund shares by that account. Where surveillance of a particular account indicates activity that the manager believes could be either abusive or for legitimate purposes, the fund may permit the account holder to justify the activity.

The fund’s shares are offered exclusively to insurance company separate accounts that fund certain insurance contracts, and insurance companies typically hold shares for a number of insurance contracts in a single account. Although the policies and procedures discussed above apply to any account, including such insurance companies separate accounts, the fund’s ability to monitor trading in these accounts may be severely limited due to the lack of access to an individual investor’s trading activity when orders are placed through these types of accounts. There may also be operational and technological limitations on the ability of the fund’s service providers to identify or terminate frequent trading activity within the various types of omnibus accounts.

The fund’s policies also require personnel such as portfolio managers and investment staff to report any abnormal or otherwise suspicious investment activity, and prohibit short-term trades by such personnel for their own account in mutual funds managed by the manager and its affiliates, other than money market funds. Additionally, the fund has adopted policies and procedures to prevent the selective release of information about the fund’s portfolio holdings, as such information may be used for market-timing and similar abusive practices.

Premier Selections All Cap Growth Portfolio         15

The fund’s policies provide for ongoing assessment of the effectiveness of current policies and surveillance tools, and the fund’s Board of Trustees reserves the right to modify these or adopt additional policies and restrictions in the future. Shareholders should be aware, however, that any surveillance techniques currently employed by the fund or other techniques that may be adopted in the future, may not be effective, particularly where the trading takes place through certain types of omnibus accounts. As noted above, if the fund is unable to detect and deter trading abuses, the fund’s performance, and its long term shareholders, may be harmed. In addition, because the fund has not adopted any specific limitations or restrictions on the trading of fund shares, shareholders may be harmed by the extra costs and portfolio management inefficiencies that result from frequent trading of fund shares, even when the trading is not for abusive purposes. The fund will provide advance notice to shareholders and prospective investors of any specific restrictions on the trading of fund shares that the Board of Trustees may adopt in the future.

16         Smith Barney Mutual Funds

Distributions, dividends and taxes

Dividends and distributions

Annual distributions of income and capital gain normally take place at the end of the year in which the income or gain is realized or the beginning of the next year.

The fund normally pays dividends and distributes capital gains, if any, as follows:

Income Dividend Distributions	Capital Gain Distributions	Distributions Mostly From
Annually	Annually	Capital Gain

Taxes

The fund intends to qualify and be taxed as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). In order to qualify to be taxed as a regulated investment company, the fund must meet certain income and diversification tests and distribution requirements. As a regulated investment company meeting these requirements, the fund will not be subject to federal income tax on its net investment income and net capital gains that it distributes to its shareholders. Distributions made by the fund to an insurance company separate account, and exchanges and redemptions of fund shares made by a separate account ordinarily do not cause the corresponding contract holder to recognize income or gain for federal income tax purposes. See the accompanying contract prospectus for information regarding the federal income tax treatment of the separate accounts and the holders of the contracts.

In order to enable contracts investing in the fund to comply with the diversification requirements applicable to “suggested asset accounts” under the Code, the fund intends to structure its portfolio in a manner that complies with those requirements. The applicable Treasury Regulations generally provide that, as of the end of each calendar quarter or within 30 days thereafter, no more than 55% of the total assets of an account may be represented by any one investment, no more than 70% by any two investments, no more than 80% by any three investments, and no more than 90% by any four investments. For this purpose all securities of the same issuer are considered a single investment, but in the case of government securities, each government agency or instrumentality is considered to be a separate issuer. So long as the fund qualifies as a “regulated investment company,” each separate account investing in the fund will be entitled to “look through” to the fund’s portfolio in order to satisfy the diversification requirements. If the fund should fail to comply with these regulations or fail to qualify as a regulated investment company under the Code, contracts invested in the fund would not be treated as annuity, endowment or life insurance contracts under the Code.

Premier Selections All Cap Growth Portfolio         17

Share price

You may buy, exchange or redeem shares at their net asset value, next determined after receipt of your request in good order, plus any applicable sales charge. For each class of shares, net asset value is the value of its assets minus its liabilities divided by the number of shares outstanding. Net asset value is calculated separately for each class of shares. The fund calculates its net asset value every day the NYSE is open. This calculation is done when regular trading closes on the NYSE (normally 4:00 p.m., Eastern time). The NYSE is closed on certain holidays listed in the SAI.

The Board of Trustees has approved procedures to be used to value the fund’s securities for the purposes of determining the fund’s net asset value. The valuation of the securities of the fund is determined in good faith by or under the direction of the Board of Trustees. The Board of Trustees has delegated certain valuation functions for the fund to the manager.

The fund generally values its securities based on market prices determined at the close of regular trading on the NYSE. The fund’s currency valuations, if any, are done as of when the London stock exchange closes, which is usually at 12 noon Eastern time. For equity securities that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of securities not traded on an exchange, or if such closing prices are not otherwise available, the market price is typically determined by independent third party pricing vendors approved by the fund’s Board of Trustees using a variety of pricing techniques and methodologies. The market price for debt obligations is generally the price supplied by an independent third party pricing service approved by the fund’s Board of Trustees, which may use a matrix, formula or other objective method that takes into consideration market indices, yield curves and other specific adjustments. Short-term debt obligations that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. If vendors are unable to supply a price, or if the price supplied is deemed by the manager to be unreliable, the market price may be determined using quotations received from one or more brokers/dealers that make a market in the security. When such prices or quotations are not available, or when the manager believes that they are unreliable, the manager will price securities using fair value procedures approved by the Board of Trustees. Because the fund invests in securities of small capitalization companies — some of which may be thinly traded, for which market quotations may not be readily available or may be unreliable — the fund may use fair valuation procedures more frequently than funds that invest primarily in securities that are more liquid, such as securities of large capitalization domestic issuers. The fund may also use fair value procedures if the manager determines that a significant event has occurred between the time at which a market price is determined and the time at which the fund’s net asset value is calculated. In particular, the value of foreign securities may be materially affected by events occurring after the close of the market on which they are valued, but before the fund prices its shares. The fund uses a fair value model developed by an independent third party pricing service to price foreign equity securities on days when there is a certain percentage change in the value of a domestic equity security index, as such percentage may be determined by the manager from time to time.

18         Smith Barney Mutual Funds

Valuing securities at fair value involves greater reliance on judgment than valuation of securities based on readily available market quotations. A fund that uses fair value to price securities may value those securities higher or lower than another fund using market quotations or its own fair value methodologies to price the same securities. There can be no assurance that the fund could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the fund determines its net asset value.

The fund may invest in securities that are listed on foreign exchanges that trade on weekends and other days when the fund does not price its shares. Therefore, the value of the fund’s shares may change on days when you will not be able to purchase or redeem the fund’s shares.

In order to buy, redeem or exchange shares at that day’s price, an insurance company separate account or a qualified plan must place its order with the fund or its agent before the NYSE closes. If the NYSE closes early, the order must be placed prior to the actual closing time. Otherwise, the investor will receive the next business day’s price.

Premier Selections All Cap Growth Portfolio         19

Financial highlights

The financial highlights tables are intended to help you understand the performance of the fund for the past 5 years. Certain information reflects financial results for a single share. Total returns represent the rate that a shareholder would have earned (or lost) on a fund share assuming reinvestment of all dividends and distributions. The information in the following tables for the Smith Barney Premier Selections All Cap Growth Portfolio has been derived from the fund’s financial statements, which have been audited by KPMG LLP, independent registered public accounting firm, whose report, along with the fund’s financial statements, is included in the annual report (available upon request).

For a share of each class of beneficial interest outstanding throughout each year ended October 31:
	2005			2004			2003			2002			2001
Net asset value, beginning of year		$11.23			$11.45			$8.96			$10.73			$14.48
Income (loss) from operations:
Net investment income (loss)		0.02			(0.02	)		(0.01	)		(0.03	)		0.02
Net realized and unrealized gain (loss)		1.10			(0.20	)		2.50			(1.73	)		(3.69	)
Total income (loss) from operations		1.12			(0.22	)		2.49			(1.76	)		(3.67	)
Less distributions from:
Net investment income		—			—			—			(0.01	)		(0.04	)
Net realized gains		—			—			—			—			(0.04	)
Total distributions		—			—			—			(0.01	)		(0.08	)
Net asset value, end of year		$12.35			$11.23			$11.45			$8.96			$10.73
Total return(1)		9.97	%		(1.92	)%		27.79	%		(16.44	)%		(25.45	)%
Net assets, end of year (000s)	$	53,308		$	59,080		$	34,884		$	28,628		$	34,384
Ratios to average net assets:
Gross expenses		0.94	%		0.95	%		0.90	%		1.11	%		1.08	%
Net expenses(2)		0.94			0.94	(3)		0.90			0.95	(3)		0.95	(3)
Net investment income (loss)		0.11			(0.25	)		(0.08	)		(0.25	)		0.16
Portfolio turnover rate		43	%		46	%		66	%		58	%		116	%

⁽¹⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽²⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets of the fund will not exceed 0.95%.

⁽³⁾ The investment manager voluntarily waived a portion of its fees.

20         Smith Barney Mutual Funds

(Investment Company Act file no. 811-05018)

FD03130 02/06

Smith Barney Investment Series

Smith Barney Premier Selections All Cap Growth Portfolio

Additional Information

Shareholder Reports Annual and semiannual reports to shareholders provide additional information about the fund’s investments. These reports discuss the market conditions and investment strategies that significantly affected the fund’s performance during its last fiscal year.

Statement of Additional Information The statement of additional information provides more detailed information about the fund. It is incorporated by reference into (is legally part of) this Prospectus.

You can make inquiries about the fund, or obtain shareholder reports or the statement of additional information (without charge) by calling Shareholder Services at 1-800-451-2010, or by writing to the funds at 125 Broad Street, New York, New York 10004.

Information about the fund (including the SAI) can be reviewed and copied at the Securities and Exchange Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Reports and other information about the funds are available on the EDGAR Database on the Commission’s Internet site at http://www.sec.gov. Copies of this information may be obtained for a duplicating fee by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the Commission’s Public Reference Section, Washington, D.C. 20549-0102.

If someone makes a statement about the fund that is not in this prospectus, you should not rely upon that information. Neither the fund nor the distributors are offering to sell shares of the funds to any person to whom the fund may not lawfully sell their shares.

Filed pursuant to Rule 497(c)

File Nos. 33-11716

811-05018

February 28, 2006

STATEMENT OF ADDITIONAL INFORMATION

Smith Barney Investment Series

125 Broad Street

New York, NY 10004

1-800-451-2010

Smith Barney Premier Selections All Cap Growth Portfolio	Smith Barney Growth and Income Portfolio
	SB Government Portfolio

Smith Barney Investment Series (the “Trust”) currently offers seven separate investment portfolios, three of which are described in this Statement of Additional Information (“SAI”) (the investment portfolios described herein are listed above and 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, 2006 for the Portfolios and the prospectus dated February 28, 2006 for Salomon Brothers Class B shares of SB Government Portfolio, as supplemented from time to time, and should be read in conjunction therewith.

The prospectuses 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 prospectuses in its entirety.

Under a licensing agreement between Citigroup and Legg Mason, the name of the Portfolios, the names of any classes of shares of the Portfolios, and the name of the investment adviser of the Portfolios, as well as all logos, trademarks and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason. Citi Marks include, but are not limited to, “Smith Barney,” “Salomon Brothers,” “Citi,” and “Citigroup Asset Management.” Legg Mason and its affiliates, as well as the investment adviser, are not affiliated with Citigroup.

All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement.

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

1

TABLE OF CONTENTS

	Page
General Information	3
Goals and Investment Policies	3
Investment Practices and Associated Risks	6
Additional Risk Factors	20
Investment Restrictions	25
Trustees and Officers	27
Investment Management Agreement	39
Distributors	42
Portfolio Turnover	43
Disclosure of Portfolio Holdings	44
Portfolio Managers	46
Portfolio Transactions and Brokerage	50
Determination of Net Asset Value	52
Taxes	53
Additional Information about the Portfolios	55
Financial Statements	59
Appendix A—Ratings of Bonds, Notes and Commercial Paper	A-1
Appendix B—Description of Proxy Voting Policies and Procedures	B-1

This Statement of Additional Information is NOT a prospectus and is authorized for distribution to prospective investors only if preceded or accompanied by an effective prospectus.

2

GENERAL INFORMATION

Smith Barney Fund Management LLC (“SBFM” or the “manager”), a limited liability company formed September 21, 1999, 399 Park Avenue, New York, NY 10022, manages the assets of the Portfolios. The manager is a wholly-owned subsidiary of Legg Mason, Inc. (“Legg Mason”).

Legg Mason Investor Services, LLC (“LMIS”) and Citigroup Global Markets Inc. (“CGMI”, and with LMIS, the “Distributors”) are the distributors of the Portfolios’ shares.

GOALS AND INVESTMENT POLICIES

The following disclosures supplement disclosures set forth in the prospectuses 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.

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.

Each of the Portfolios is permitted to seek its investment objective by investing all or a portion of its assets in one or more investment companies to the extent not prohibited by the Investment Company Act of 1940, as amended (“1940 Act”), the rules and regulations thereunder, and exemptive orders granted under the 1940 Act.

SMITH BARNEY PREMIER SELECTIONS ALL CAP GROWTH PORTFOLIO

Smith Barney Premier Selections All Cap Growth Portfolio (the “All Cap Growth Portfolio”) seeks long-term capital growth. The All Cap Growth Portfolio is made up of a Large Cap Growth segment, a Mid Cap Growth segment and a Small Cap Growth segment.

Large Cap Growth Segment.    This segment invests primarily in equity securities of companies with large market capitalizations. Large capitalization companies are those whose market capitalizations are within the market capitalization range of companies in the Russell 1000 Growth Index at the time of this segment’s investment. The size of the companies in the Index changes with market conditions and the composition of the Index. As of December 31, 2005, the largest market capitalization of a company in the Index was approximately $386.9 billion and the smallest market capitalization was approximately $1.8 billion.

Mid Cap Growth Segment.    This segment invests primarily in equity securities of medium-sized companies. Medium-sized companies are those whose market capitalizations are within the market capitalization range of companies in the S&P Mid Cap 400 Index at the time of this segment’s investment. The size of the companies in the Index changes with market conditions and the composition of the Index. As of December 31, 2005, the largest market capitalization of a company in the Index was approximately $14.58 billion and the smallest market capitalization was approximately $420 million. 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.

Small Cap Growth Segment.    This segment invests primarily in equity securities of companies with small market capitalizations. Small capitalization companies are those whose market capitalizations are within the

3

market capitalization range of companies in the Russell 2000 Growth Index at the time of this segment’s investment. The size of the companies in the Index changes with market conditions and the composition of the Index. As of December 31, 2005, the largest market capitalization of a company in the Index was approximately $1.8 billion and the smallest market capitalization was approximately $182.6 million. Please see “Risk Factors—Small Capitalization Companies” below for more information about the risks of investing in companies with small market capitalizations.

All Segments.    The All Cap Growth 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 A. 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 futures and 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 25% of its total assets in securities of foreign issuers. Since the Portfolio may take substantial risks in seeking its goal of long-term capital growth, it is not suitable for investors unable or unwilling to assume such risks.

SMITH BARNEY GROWTH AND INCOME PORTFOLIO

Smith Barney Growth and Income Portfolio (the “Growth and Income Portfolio”) seeks reasonable growth and income. The Growth and Income Portfolio seeks to achieve its investment objective primarily through investments in equity securities that provide dividend or interest income, including common and preferred stocks and securities convertible into common and preferred stocks.

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 Appendix A. 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 and 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. Since the Portfolio may take substantial risks in seeking its goal of reasonable growth and income, it is not suitable for investors unable or unwilling to assume such risks.

SB GOVERNMENT PORTFOLIO

SB Government Portfolio (the “Government Portfolio”) seeks high current return consistent with preservation of capital. Under normal market conditions, the Portfolio invests at least 80% of its net assets in debt securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities and related securities. 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

4

of which are backed only by the credit of the issuer itself. Although this policy relating to U.S. government securities may be changed without shareholder approval, the Government Portfolio will provide its shareholders with at least 60 days prior notice of any change in this policy.

The Portfolio may enter into repurchase agreements with domestic banks or broker-dealers deemed creditworthy by the manager 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 interest paid on the Portfolio’s securities and potentially one or more of the following additional sources:

• 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

5

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 AND ASSOCIATED RISKS

This section contains a discussion of certain investment practices and certain of the risks associated with these practices, and supplements the description of each Portfolio’s investments and risks contained in the Prospectus. The Portfolios indicated may engage in these and any other practices not prohibited by their investment restrictions. The selection of investments and the utilization of investment techniques depends on, among other things, the manager’s investment strategies for the Portfolios, conditions and trends in the economy and financial markets and investments being available on terms that, in the manager’s opinion, make economic sense. For further information about risks associated with these practices, see “Additional Risk Factors” below.

EQUITY SECURITIES

The Portfolios, except Government Portfolio, may 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 depository receipts for those securities.

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

Common stocks do not represent an obligation of the issuer. The issuance of debt securities or preferred stock by an issuer will create prior claims which could adversely affect the rights of holders of common stock with respect to the assets of the issuer upon liquidation or bankruptcy.

Preferred Stocks.    Each Portfolio (except Government Portfolio) may invest in preferred stocks. Preferred stocks, like common stocks, represent an equity ownership in an issuer, but generally have a priority claim over common stocks, but not over debt, with respect to dividend payments and upon the liquidation or bankruptcy of the issuer. Therefore, preferred stock is subject to the credit risk of the issuer, but because of its subordinate position to debt obligations of the issuer, the deterioration of the credit of an issuer is likely to cause greater decreases in the value of preferred stock than in more senior debt obligations. The market value of preferred

6

stocks with no conversion rights and fixed dividend rates, like fixed income securities, tends to move inversely with interest rates, with the price determined by the dividend rate. However, because most preferred stocks do not have a fixed maturity date (although they may have call features giving the issuer the right to call the securities under certain circumstances or redemption features giving the holder the right to cause the issuer to repurchase the securities under certain circumstances), these securities generally will fluctuate more in value when interest rates change than, for example, debt issued by the same issuer. Some preferred stocks may pay dividends at an adjustable rate, based on an auction, an index or other formula. In the absence of credit deterioration, adjustable rate preferred stocks tend to have less price volatility than fixed rate preferred stocks.

Unlike common stocks, preferred stocks do not typically have voting rights. Some preferred stocks have convertible features. See “Convertible Securities” below.

Convertible Securities (All Portfolios except Government Portfolio).    Each Portfolio (except Government Portfolio) may invest in convertible debt and preferred stocks. Convertible debt securities and preferred stock entitle the holder to acquire the issuer’s common 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. 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. In general, the market value of a convertible security is the greater of its investment value as a fixed income security or its conversion value (the value of the underlying common stock if the security is converted). A 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, a division of McGraw-Hill Companies, Inc. (“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.

Warrants (All Portfolios except Government Portfolio).    Each Portfolio (except Government 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. Because investing in warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security, warrants involve leverage and are considered speculative investments. At the time of issuance of a warrant, the cost is generally substantially less than the cost of the underlying security itself, and therefore, the investor is able to gain exposure to the underlying security with a relatively low capital investment. Price movements in the underlying security are generally magnified in the price movements of the warrant, although changes in the market value of the warrant may not necessarily correlate to the prices of the underlying security. 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 (except Government 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. A Portfolio’s investments in REITs are subject to the risks associated with particular properties and with the real estate market in general, including the risks of a general downturn in real estate values. REITs are dependent upon management skills, may not be 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”). Like mutual funds, REITs have expenses, including advisory and administration fees paid by REIT shareholders, and, as a result, an investor is subject to a duplicate level of fees if a Portfolio invests in REITs.

7

Illiquid and Restricted Securities.    Each Portfolio may invest up to 15% of the value of its assets in illiquid or 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 this 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. This 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 Growth and Income Portfolio may invest up to 20% of the value of their total assets and the All Cap Growth 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. These securities may be denominated in foreign currencies.

Each Portfolio may also purchase foreign securities in the form of American Depository Receipts (“ADRs”), European Depository Receipts (“EDRs”), Global Depository Receipts (“GDRs”) or other securities representing underlying shares of foreign companies. EDRs are receipts issued in Europe which evidence ownership of underlying securities issued by foreign corporations. ADRs are receipts typically issued by an American bank or trust company which evidence a similar ownership arrangement. Generally, ADRs, which are issued in registered form, are designed for use in the United States securities markets and EDRs, which are issued in bearer form, are designed for use in European securities markets. GDRs are tradeable both in the U.S. and Europe and are designed for use throughout the world.

ADRs 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 depository’s transaction fees, whereas under an unsponsored arrangement, the foreign issuer assumes no obligation and the depository’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 All Cap 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. Because zero coupon bonds do not pay current interest in cash, these securities are subject to greater credit risk and greater fluctuation in value in response to changes in market interest rates than debt obligations that pay interest currently.

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

8

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 owed 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

9

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 based on the outstanding principal for providing its guarantee, and the GNMA Certificate issuer is paid an annual servicing fee 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” or “Freddie Mac”) is a publicly-traded stockholder-owned corporation that was created by Congress in 1970 to promote development of a nationwide secondary market in conventional residential mortgages. It receives no federal funding. Freddie Mac 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. Although Freddie Mac guarantees timely monthly payment of interest of PCs and the ultimate payment of principal, the obligations of Freddie Mac are not guaranteed by and are not debt or obligations of the U.S. or any federal agency or instrumentality other than Freddie Mac.

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 guaranteed 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 (All Portfolios).    The Portfolios may purchase or sell U.S. Government securities on a “when-issued” or “delayed delivery” basis (“Forward Commitments”). These transactions occur when

10

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. 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.

When a Portfolio agrees to purchase when-issued or delayed-delivery securities, it will set aside cash or liquid securities equal to the amount of the commitment in a segregated account on the Portfolio’s books. Normally, the Portfolio will set aside portfolio securities to satisfy a purchase commitment, and in such a case the Portfolio may be required subsequently to place additional assets in the segregated account in order to ensure that the value of the account remains equal to the amount of the Portfolio’s commitment. The assets contained in the segregated account will be marked-to-market daily. It may be expected that the Portfolio’s net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash.

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. Certificates of deposits (“CDs”) are short-term, negotiable obligations of commercial banks. Time deposits (“TDs”) are non-negotiable deposits maintained in banking institutions for specified periods of time at stated interest rates. Bankers’ acceptances are time drafts drawn on commercial banks by borrowers, usually in connection with international transactions.

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.

11

DERIVATIVE INSTRUMENTS

Options, Futures Contracts and Related Options (All Portfolios)

Selling Call and Put Options (All Portfolios).    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. All Cap Growth Portfolio and Growth and Income Portfolio may sell call options only on a covered basis. Government Portfolio may sell 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 covered 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 would sell 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 would 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.

12

Purchasing Call and Put Options (All Portfolios).    A Portfolio may purchase call options to protect (i.e., 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 (i.e., 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 Indices (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. Indices 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. Accordingly, successful use by a Portfolio of options on stock indices will be subject to the manager’s ability to predict correctly movements in the direction of the stock market generally or of a particular industry or market segment. This requires different skills and techniques than predicting changes in the price of individual stocks. 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. Under the rules of the Commodity Futures Trading Commission (“CFTC”), 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.

13

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, among other indices. Differences in the stocks included in the indices 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 indices of foreign stocks are also being developed. Investments in foreign stock index futures and options thereon, like 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.

Single Stock Futures.    Recent legislation permits the trading on U.S. exchanges of standardized futures contracts on individual equity securities, such as common stocks, exchange traded funds and American Depository Receipts, as well as narrow-based securities indices, generally called security futures contracts or “SFCs”. As with other futures contracts, a SFC involves an agreement to purchase or sell in the future a specific quantity of shares of a security or the component securities of the index. The initial margin requirements (typically 20 percent) are generally higher than with other futures contracts. Trading SFCs involves many of the same risks as trading other futures contracts, including the risks involved with leverage, and loses are potentially unlimited. Under certain market conditions, for example if trading is halted due to unusual trading activity in either the SFC or the underlying security due to recent news events involving the issuer of the security, it may be difficult or impossible for a fund to liquidate its position or manage risk by entering into an offsetting position. In addition, the prices of SFCs may not correlate as anticipated with the prices of the underlying security. And unlike options on securities in which a fund may invest, where the fund has the right, but not the obligation, to buy or sell a security prior to the expiration date, if the fund has a position in a SFC, the fund has both the right and the obligation to buy or sell the security at a future date, or otherwise offset its position.

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 for the benefit of the broker an amount of appropriate securities 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 margin deposits, 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.

14

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 (“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 the 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.

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 is intended to serve the same purpose as the actual purchase of the futures contract.

Forward Currency Contracts and Options on Currency (All Portfolios except Government 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

15

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. 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

16

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 a 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 a 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 written by a 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 a Portfolio will require the Portfolio to segregate liquid securities equal to the exercise price. Except when a 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 or 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 a Portfolio, including those on securities, currency, financial instruments or indices, and Options Clearing Corporation (“OCC”)-issued and exchange-listed index options will generally provide for cash settlement, although the Portfolio may 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. If a Portfolio enters into OTC options transactions, it will be subject to counterparty risk.

In the case of a futures contract or an option on a futures contract, a Portfolio must deposit initial margin and, in some instances, daily variation margin, typically with third parties such as a clearing organization, in addition to segregating assets with its custodian 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. A 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 a Portfolio’s net obligation, if any.

17

Hedging and other strategic transactions may be covered by means other than those described above when consistent with applicable regulatory policies. A 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. A 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, a 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 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 the Portfolio’s custodian, subcustodian or other 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 (All Portfolios).    Each Portfolio may enter into reverse repurchase agreements with broker/dealers and other financial institutions. Such agreements involve the sale of portfolio securities by the Portfolio with an agreement to repurchase the securities at an agreed-upon price, date and interest payment and are considered to be borrowings by the Portfolio. The Portfolio may attempt 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 involve leverage and 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. A Portfolio’s liquidity and ability to manage its assets may be adversely affected when it sets aside cash or securities to cover such commitments. Reverse repurchase agreements involve

18

the risk that the market value of the securities sold by the Portfolio may decline below the repurchase price of those securities, that the assets purchased with the proceeds of the agreement decline in value, or that the buyer under a reverse repurchase agreement files for bankruptcy or becomes insolvent.

ETFs or Exchange Traded Funds (All Portfolios except Government Portfolio).    Each Portfolio may invest in shares of open-end mutual funds or unit investment trusts that are traded on a stock exchange, called exchange-traded funds or ETFs. Typically, an ETF seeks to track the performance of an index, such as the S&P 500 or the NASDAQ 100, by holding in its portfolio either the same securities that comprise the index, or a representative sample of the index. Investing in an ETF will give a Portfolio exposure to the securities comprising the index on which the ETF is based, and the Portfolio will gain or lose value depending on the performance of the index.

Unlike shares of typical mutual funds or unit investment trusts, shares of ETFs are designed to be traded throughout a trading day based on market values, and not at net asset value. For this reason, shares could trade at either a premium or discount to net asset value. Currently, the Portfolios intend to invest only in ETFs that track equity market indices. The portfolios held by these ETFs are publicly disclosed on each trading day, and an approximation of actual net asset value is disseminated throughout the trading day. Because of this transparency, the trading prices of these index-based ETFs tend to closely track the actual net asset value of the underlying portfolios. Recently launched ETFs, which are not structured as investment companies, invest in gold bouillon. In the future, as new products become available, the Portfolios may invest in ETFs that are based on fixed-income indices, or that are actively managed. Actively managed ETFs will likely not have the transparency of index-based ETFs, and therefore, may be more likely to trade at a discount or premium to actual net asset values. Gains or losses on a Portfolio’s investment in ETFs will depend on the purchase and sale price of the ETF, rather than on changes in the underlying net asset value of the ETF.

Short Sales (All Portfolios except Government Portfolio).    Each Portfolio may from time to time make short sales of securities. Short sales are transactions in which a Portfolio sells a security it does not own in anticipation of a decline in the market value of that security. To complete such a transaction, the Portfolio must borrow the security to make delivery to the buyer. The Portfolio then is obligated to replace the security borrowed by purchasing it at the market price at or prior to the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Portfolio. Until the security is replaced, the Portfolio is required to repay the lender any dividends or interest paid during the period of the loan. To borrow the security, the Portfolio also may be required to pay a premium, which would increase the cost of the security sold. A portion of the net proceeds of the short sale may be retained by the broker (or by the Portfolio’s custodian in a special custody account), to the extent necessary to meet margin requirements, until the short position is closed out. The Portfolio will also incur transaction costs in effecting short sales. Each Portfolio may also enter into short sales “against the box”. 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. There are certain transaction costs associated with short sales against the box, but the Portfolio endeavors to offset these costs with the income from the investment of the cash proceeds of short sales. The Portfolios do not intend to 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.

Each Portfolio will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Portfolio replaces the borrowed security. The Portfolio will realize a gain if the security declines in price between those dates. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of the premiums, dividends, interest or expenses the Portfolio may be required to pay in connection with a short sale. An increase in the value of a security sold short by a Portfolio over the price at which it was sold short will result in a loss to the Portfolio, and there can be no assurance that the Portfolio will be able to close out the position at any particular time or at an acceptable price. Where short sales are not against the box, losses may be unlimited.

19

Loans of Portfolio Securities (All Portfolios).    Consistent with applicable regulatory requirements and in order to generate income, each Portfolio may lend its securities to broker-dealers and other institutional borrowers. Such loans will usually be made only to member banks of the U.S. Federal Reserve System and to member firms of the NYSE. Loans of securities would be secured continuously by collateral in cash, cash equivalents, or U.S. Treasury obligations maintained on a current basis at an amount at least equal to the market value of the securities loaned. The cash collateral would be invested in high quality short-term instruments. Either party has the right to terminate a loan at any time on customary industry settlement notice (which will not usually exceed three business days). During the existence of a loan, the Portfolio would continue to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned and with respect to cash collateral would also receive compensation based on investment of cash collateral (subject to a rebate payable to the borrower and the lending agent). Where the borrower provides the Portfolio with collateral consisting of U.S. Treasury obligations, the borrower is also obligated to pay the Portfolio a fee for use of the borrowed securities. The Portfolio would not, however, have the right to vote any securities having voting rights during the existence of the loan, but would call the loan in anticipation of an important vote to be taken among holders of the securities or of the giving or withholding of their consent on a material matter affecting the investment. As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower fail financially. However, the loans would be made only to entities deemed by the portfolio manager to be of good standing, and when, in the judgment of the portfolio manager, the consideration which can be earned currently from loans of this type justifies the attendant risk. In addition, the Portfolio could suffer loss if the borrower terminates the loan and the Portfolio is forced to liquidate investments in order to return the cash collateral to the buyer.

ADDITIONAL RISK FACTORS

The prospectuses and the “INVESTMENT PRACTICES AND ASSOCIATED RISKS” section of this Statement of Additional Information discuss certain of the risk factors associated with the investment policies and strategies employed by the Portfolios. The following discussion supplements these descriptions of 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.

Equity Securities.    Equity securities have historically been more volatile than most debt securities in response to market risk. Market risk is the risk that the price of securities will rise or fall due to changing economic, political or market conditions. The value of some securities held by the Portfolios may be quite volatile.

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;

Income Risk.    When interest rates decline, a Portfolio’s income may decline;

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; and

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

20

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 anticipated, 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 a nationally recognized statistical ratings organization (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 a greater 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 these high yield bonds, commonly referred to as “junk 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 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 not be widely followed by the investment community, 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 a 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 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.

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 a 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

21

and no return is earned thereon. The inability of a 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, a 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 is 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 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 a 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.

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. In Latin America, countries have faced currency devaluation and defaults on public debt creating national economic crises. 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.

22

Many of a Portfolio’s investments in the bonds of issuers in 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. Please also see the description in the “INVESTMENT PRACTICES AND ASSOCIATED RISKS” section of this Statement of Additional Information of certain derivative instruments in which a Portfolio might invest for more information about those instruments and the risks on investing in them.

Leverage and associated price volatility.    The use of certain derivatives may involve leverage for a Portfolio because they create an obligation, or indebtedness, to someone other than the Portfolio’s investors and enable a Portfolio to participate in gains and losses on an amount that exceeds its initial investment. Derivatives may magnify a Portfolio’s gain or loss from an investment in much the same way that incurring indebtedness does;

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 or 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 a 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.

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. As a result, these instruments may be more difficult to value.

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

23

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, a 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.

As with options on debt securities, the holder of an option may terminate the position by selling an option of the same series. There is no guarantee that such closing transactions can be effected. A Portfolio 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 Portfolios will not purchase options on Futures Contracts on any exchange unless and until, in the manager’s opinion, the market for such options has 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 Portfolios 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.

Special Risks of Options.    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

24

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 Trust and other clients advised by affiliates of CGMI 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 Portfolios’ 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.

Economic and Monetary Union (EMU).     Twenty-five European countries participate in the European Economic and Monetary Union (EMU) and 12 of those countries have adopted the Euro as their sole currency. 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, any 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. High portfolio turnover involves correspondingly greater transaction costs, including any brokerage commissions, which are borne directly by the respective Portfolio.

INVESTMENT RESTRICTIONS

Each Portfolio has adopted the following policies which may not be changed without approval by holders of a majority of the outstanding voting securities of the Portfolio, which as used in this Statement of Additional Information means the vote of the lesser of (i) voting securities representing 67% or more of the voting power of the Portfolio present at a meeting at which the holders of voting securities representing more than 50% of the

25

voting power of the Portfolio are present or represented by proxy, or (ii) voting securities representing more than 50% of the voting power of the Portfolio. The term “voting securities” as used in this paragraph has the same meaning as in the Investment Company Act of 1940, as amended (the “1940 Act”).

A Portfolio may not:

(1) borrow money except to the extent such borrowing is not prohibited by the 1940 Act and exemptive orders granted under such Act;

(2) underwrite securities issued by other persons, except that all or any portion of the assets of the Portfolio may be invested in one or more investment companies, to the extent not prohibited by the 1940 Act and exemptive orders granted under such Act, and except insofar as the Portfolio may technically be deemed an underwriter under the Securities Act of 1933, as amended, in selling a portfolio security;

(3) purchase or sell real estate (excluding securities secured by real estate or interests therein and securities of companies, such as real estate investment trusts, which deal in real estate or interests therein), interests in oil, gas or mineral leases, commodities or commodity contracts (excluding currencies and any type of option, futures contract and forward contract) in the ordinary course of its business. The Portfolio reserves the freedom of action to hold and to sell real estate, mineral leases, commodities or commodity contracts (including currencies and any type of option, futures contract and forward contract) acquired as a result of the ownership of securities;

(4) issue any senior securities except to the extent not prohibited by the 1940 Act and exemptive orders granted under such Act. For purposes of this restriction, collateral arrangements with respect to any type of swap, option, forward contract and futures contract and collateral arrangements with respect to initial and variation margin are not deemed to be the issuance of a senior security;

(5) make loans except to the extent not prohibited by the 1940 Act and exemptive orders granted under such Act; or

(6) purchase any securities of an issuer in a particular industry if as a result 25% or more of its total assets (taken at market value at the time of purchase) would be invested in securities of issuers whose principal business activities are in the same industry.

The Portfolios have also adopted the following nonfundamental investment restriction that may be changed by the Trust’s Board of Trustees at any time. Accordingly a Portfolio may not:

invest more than 15% of its net assets (taken at market value) in illiquid or restricted securities (meaning securities which cannot be sold within seven days at the value carried on the Portfolio’s books).

If a percentage restriction or a rating restriction (other than a restriction as to borrowing) on investment or utilization of assets set forth above or referred to in the prospectuses is adhered to at the time an investment is made or assets are so utilized, a later change in circumstance is not considered a violation of policy.

26

TRUSTEES AND OFFICERS

The Portfolios are supervised by the Board of Trustees of the Trust, at least 75% of whom are not affiliated with the manager. The Trustees and officers of the Trust, their ages, their principal occupations during the past five years (their titles may have varied during that period), the number of investment companies in the fund complex the Trustees oversee, and other board memberships they hold are set forth below. The address of each Trustee is c/o Jay Gerken, 399 Park Avenue, New York, NY 10022. Each Trustee and officer holds office for his or her lifetime, unless that individual resigns, retires or is otherwise removed.

An asterisk in the table below identifies those Trustees and officers who are “interested persons” (as defined in the 1940 Act) of the Trust. Each Trustee and officer of the Trust noted as an interested person is interested by virtue of that individual’s position with Citigroup Asset Management (“CAM”) or its affiliates described in the table below.

Name and Year of Birth	Position(s) with Fund	Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past Five Years
Interested Trustee:
R. Jay Gerken* Born 1951	President, Chairman and Chief Executive Officer	Since 2002	Managing Director, CAM; Chairman, President and Chief Executive Officer of Smith Barney Fund Management (“SBFM”) and Citi Fund Management Inc. (“CFM”); President and Chief Executive Officer of certain mutual funds associated with CAM; formerly, Chairman, President and Chief Executive Officer of Travelers Investment Adviser, Inc. (“TIA”) (from 2002 to 2005); Portfolio Manager of Smith Barney Allocation Series Inc. (from 1996 to 2001) and Smith Barney Growth and Income Fund (from 1996 to 2001); Chairman of the Board, Trustee or Director of 183 funds in the CAM fund complex.	183	None

27

Name and Year of Birth	Position(s) with Fund	Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past Five Years
Non-Interested Trustees:
Elliott J. Berv Born 1943	Trustee	Since 2001	President and Chief Executive Officer, Catalyst (consulting) (since 1984); Chief Executive Officer, Rocket City Enterprises (media) (from 2000 to 2005); Chief Executive Officer, Landmark City (real estate development) (from 2001 to 2004); Executive Vice President and Chief Operations Officer, DigiGym Systems (on-line personal training systems) (from 2001 to 2004); Chief Executive Officer, Motocity USA (motorsport racing) (from 2004 to 2005).	37	Board Member, American Identity Corp. (doing business as Morpheus Technologies) (biometric information management) (since 2001); Director, Lapoint Industries (industrial filter company) (since 2002); Director, Alzheimer’s Association (New England Chapter) (since 1998).
Donald M. Carlton Born 1937	Trustee	Since 1997	Consultant, URS Corporation (engineering) (since 1999); former Chief Executive Officer, Radian International L.L.C. (engineering) (from 1996 to 1998); Member of the Management Committee, Signature Science (research and development) (since 2000).	37	Director, Temple-Inland (forest products) (since 2003); Director, American Electric Power Co. (electric utility) (since 1999); Director, National Instruments Corp. (technology) (since 1994); former Director, Valero Energy (petroleum refining) (from 1999 to 2003).
A. Benton Cocanougher Born 1938	Trustee	Since 1991	Dean Emeritus and Professor, Texas A&M University (since 2004); former Interim Chancellor, Texas A&M University System (from 2003 to 2004); former Special Advisor to the President, Texas A&M University (from 2002 to 2003); former Dean Emeritus and Wiley Professor, Texas A&M University (from 2001 to 2002); former Dean and Professor of Marketing, College and Graduate School of Business of Texas A&M University (from 1987 to 2001).	37	None

28

Name and Year of Birth	Position(s) with Fund	Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past Five Years
Mark T. Finn Born 1943	Trustee	Since 2001	Adjunct Professor, College of William & Mary (since 2002); Principal/Member, Balvan Partners (investment management) (since 2002); Chairman, Chief Executive Officer and Owner, Vantage Consulting Group, Inc. (investment advisory and consulting firm) (since 1998); former Vice Chairman and Chief Operating Officer, Lindner Asset Management Company (mutual fund company) (from 1988 to 2001); former General Partner and Shareholder, Greenwich Ventures LLC (investment partnership) (from 1996 to 2001); former President, Secretary, and Owner, Phoenix Trading Co. (commodity trading advisory firm) (from 1997 to 2000).	37	Former President and Director, Delta Financial, Inc. (investment advisory firm) (from 1983 to 1999).
Stephen Randolph Gross Born 1947	Trustee	Since 1986	Chairman, HLB Gross Collins, PC (accounting and consulting firm) (since 1979); Treasurer, Coventry Limited, Inc. (Senior Living Facilities) (since 1985); former Managing Director, Fountainhead Ventures, L.L.C. (technology accelerator) (1998 to 2003); former Treasurer, Hank Aaron Enterprises (fast food franchise) (from 1985 to 2001); former Partner, Capital Investment Advisory Partners (leveraged buyout consulting) (from 2000 to 2002); former Secretary, Carint N.A. (manufacturing) (from 1998 to 2002).	37	Director, Andersen Calhoun (assisted living) (since 1987); former Director, Yu Save, Inc. (internet company) (from 1998 to 2000); former Director, Hotpalm.com, Inc. (wireless applications) (from 1998 to 2000); former Director, United Telesis, Inc. (telecommunications) (from 1997 to 2002); former Director, ebank Financial Services, Inc. (from 1997 to 2004).

29

Name and Year of Birth	Position(s) with Fund	Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past Five Years
Diana R. Harrington Born 1940	Trustee	Since 2001	Professor, Babson College (since 1992).	37	None
Susan B. Kerley Born 1951	Trustee	Since 2001	Consultant, Strategic Management Advisors, LLC (investment consulting) (since 1990).	37	Chairman and Independent Board Member of Eclipse Fund, Inc. and Eclipse Funds (which trade as Mainstay Funds) (currently supervises 16 investment companies in the fund complex)(since 1991).
Alan G. Merten Born 1941	Trustee	Since 1990	President, George Mason University (since 1996).	37	Director, Xybernaut Corporation (information technology) (since 2004); Director, Digital Net Holdings, Inc. (since 2003); Director, Comshare, Inc. (information technology) (from 1985 to 2003).
R. Richardson Pettit Born 1942	Trustee	Since 1990	Professor of Finance, University of Houston (since 1977); Independent Consultant (since 1984).	37	None
Officers:
Andrew Shoup* CAM 125 Broad Street New York, NY 10004 Born 1956	Senior Vice President and Chief Administrative Officer	Since 2003	Director, CAM; Chief Administrative Officer of certain mutual funds associated with CAM; Head of International Funds Administration of CAM (from 2001 to 2003); Director of Global Funds Administration of CAM (from 2000 to 2001); Head of Citibank U.S. Funds Administration of CAM (from 1998 to 2000).	N/A	N/A

30

Name and Year of Birth	Position(s) with Fund	Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past Five Years
Frances Guggino* CAM 125 Broad Street New York, NY 10004 Born 1957	Chief Financial Officer and Treasurer	Since 2004	Director, CAM; Treasurer and/or Controller of certain funds associated with CAM (since 1991).	N/A	N/A
Brian M. Angerame* CAM 125 Broad Street New York, NY 10004 Born 1972	Vice President and Investment Officer	Since 2005	Director, CAM.	N/A	N/A
Guy Bennett* CAM 125 Broad Street New York, NY 10004 Born 1958	Vice President and Investment Officer	Since 2006	Portfolio Manager, SBFM (since 2006); Portfolio Manager, Batterymarch Financial Management, Inc. (since 2001).	N/A	N/A
Alan Blake* CAM 125 Broad Street New York, NY 10004 Born 1949	Vice President and Investment Officer	Since 2001	Managing Director, CAM.	N/A	N/A
Kevin Caliendo* CAM 125 Broad Street New York, NY 10004 Born 1970	Vice President and Investment Officer	Since 2003	Director, CAM (since 2002); Equity analyst and convertible portfolio manager, healthcare, SAC Capital Advisors, LLC (from 1998 to 2001); Convertible Bond Analyst, Wachovia Securities (from 1998 to 2001).	N/A	N/A
Derek J. Deutsch* CAM 125 Broad Street New York, NY 10004 Born 1969	Vice President and Investment Officer	Since 2005	Director, CAM.	N/A	N/A
Christopher W. Floyd* CAM 125 Broad Street New York, NY 10004 Born 1970	Vice President and Investment Officer	Since 2006	Portfolio Manager, SBFM (since 2006); Portfolio Manager (since 2003), Quantitative Analyst (2000-2003), Batterymarch Financial Management, Inc.	N/A	N/A

31

Name and Year of Birth	Position(s) with Fund	Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past Five Years
Scott Glasser* CAM 125 Broad Street New York, NY 10004 Born 1966	Vice President and Investment Officer	Since 1996	Managing Director, CAM; Investment Officer of SBFM; Co-Director of Research, CAM North America.	N/A	N/A
Peter J. Hable* CAM 125 Broad Street New York, NY 10004 Born 1958	Vice President and Investment Officer	Since 1990	Managing Director, CAM; President of Davis Skaggs Investment Management, a Division of CAM.	N/A	N/A
Michael Kagan* CAM 125 Broad Street New York, NY 10004 Born 1960	Vice President and Investment Officer	Since 2000	Managing Director, CAM; Co-Director of Research, CAM North America.	N/A	N/A
Roger M. Lavan* CAM 125 Broad Street New York, NY 10004 Born 1963	Vice President	Since 2002	Managing Director, CAM.	N/A	N/A
Charles F. Lovejoy* CAM 125 Broad Street New York, NY 10004 Born 1954	Vice President and Investment Officer	Since 2006	Portfolio Manager, SBFM (since 2006); Director and Senior Portfolio Manager - International, Batterymarch Financial Management, Inc. (since 1990).	N/A	N/A
Francis L. Mustaro* CAM 125 Broad Street New York, NY 10004 Born 1950	Vice President	Since 2002	Managing Director, CAM.	N/A	N/A
Peter C. Stournaras* CAM 125 Broad Street New York, NY 10004 Born 1973	Vice President and Investment Officer	Since 2005	Director, CAM.	N/A	N/A
John Vietz* CAM 125 Broad Street New York, NY 10004 Born 1971	Vice President and Investment Officer	Since 2006	Portfolio Manager, SBFM (since 2006); Portfolio Manager, Batterymarch Financial Management, Inc. (since 2005).	N/A	N/A

32

Name and Year of Birth	Position(s) with Fund	Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past Five Years
Timothy Woods* CAM 125 Broad Street New York, NY 10004 Born 1960	Vice President and Investment Officer	Since 2001	Managing Director, CAM (since 1999); former Portfolio Manager, Banker’s Trust.	N/A	N/A
Robert I. Frenkel* CAM 300 First Stamford Place Stamford, CT 06902 Born 1954	Secretary and Chief Legal Officer	Since 2000 Since 2003	Managing Director and General Counsel, Global Mutual Funds, CAM (since 2000); Officer of CAM or its predecessors (since 1994); Secretary of CAM; Secretary of certain mutual funds associated with CAM; Chief Legal Officer of certain mutual funds associated with CAM.	N/A	N/A
Ted P. Becker* CAM 399 Park Avenue New York, NY 10022 Born 1951	Chief Compliance Officer	Since 2006	Managing Director of Compliance at Legg Mason & Co., (2005-Present); Chief Compliance Officer with certain mutual funds associated with CAM (since 2006); Managing Director of Compliance at CAM (2002-2005). Prior to 2002, Managing Director-Internal Audit & Risk Review at Citigroup Inc.	N/A	N/A
John Chiota* CAM 100 First Stamford Place, 5th Floor Stamford, CT 06902	Chief Anti-Money Laundering Compliance Officer	Since 2006	Vice President of CAM (since 2004); Chief Anti-Money Laundering Compliance Officer with certain mutual funds associated with CAM (since 2006); prior to August 2004, Chief AML Compliance Officer with TD Waterhouse.	N/A	N/A

33

Name and Year of Birth	Position(s) with Fund	Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past Five Years
Wendy Setnicka* CAM 125 Broad Street New York, NY 10004 Born 1964	Controller	Since 2002	Vice President, CAM (since 2002); Assistant Vice President, CAM (from 1998 to 2002).	N/A	N/A
Thomas C. Mandia* CAM 300 First Stamford Place Stamford, CT 06902 Born: 1962	Assistant Secretary	Since 2000	Managing Director and Deputy General Counsel, CAM (since 1992); Assistant Secretary of certain mutual funds associated with CAM.	N/A	N/A
Rosemary D. Emmens* CAM 300 First Stamford Place Stamford, CT 06902 Born 1969	Assistant Secretary	Since 2000	Director and Associate General Counsel, CAM (since 1998); Assistant Secretary of certain mutual funds associated with CAM.	N/A	N/A
Harris Goldblat* CAM 300 First Stamford Place Stamford, CT 06902 Born 1969	Assistant Secretary	Since 2000	Director and Associate General Counsel, CAM (since 2000); Assistant Secretary of certain mutual funds associated with CAM; Associate, Stroock & Stroock & Lavan LLP (1997-2000).	N/A	N/A
George Hoyt* CAM 300 First Stamford Place Stamford, CT 06902 Born 1965	Assistant Secretary	Since 2005	Director and Associate General Counsel, CAM (since 2005); Assistant Secretary of certain mutual funds associated with CAM; Associate, Sidley Austin Brown & Wood LLP (2000-2005).	N/A	N/A

The business affairs of each Portfolio are managed by or under the direction of the Board of Trustees.

The Board of Trustees has a standing Audit Committee comprised of all of the Trustees who are not “interested persons” of the Portfolios, within the meaning of the 1940 Act. The Audit Committee oversees the scope of the Portfolios’ audit, the Portfolios’ accounting and financial reporting policies and practices and its internal controls. The primary purposes of the Board’s Audit Committee are to assist the Board in fulfilling its responsibility for oversight of the integrity of the accounting, auditing and financial reporting practices of the Trust, the qualifications and independence of the Trust’s independent registered public accounting firm, and the Trust’s compliance with legal and regulatory requirements. The Audit Committee approves, and recommends to the Non-Interested Trustees for their ratification, the selection, appointment, retention or termination of the

34

Trust’s independent registered public accounting firm and approves the compensation of the independent registered public accounting firm. The Audit Committee also approves all audit and permissible non-audit services provided to the Trust by the independent registered public accounting firm and all permissible non-audit services provided by the Trust’s independent registered public accounting firm to its manager and any affiliated service providers if the engagement relates directly to the Trust’s operations and financial reporting. During the most recent fiscal year, the Audit Committee met four times.

The Board has a standing Governance Committee comprised of all of the Trustees who are not “interested persons” of the Portfolios within the meaning of the 1940 Act. The Governance Committee is responsible for, among other things, recommending candidates to fill vacancies on the Board. The Governance Committee met four times during the most recent fiscal year. The Governance Committee may consider nominees recommended by a shareholder. Shareholders who wish to recommend a nominee should send recommendations to the Trust’s Secretary that include all information relating to such person that is required to be disclosed in solicitations of proxies for the election of Board Members. A recommendation must be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the shareholders.

The Governance Committee also identifies potential nominees through its network of contacts and may also engage, if it deems appropriate, a professional search firm. The Governance Committee meets to discuss and consider such candidates’ qualifications and then chooses a candidate by majority vote. The Committee does not have specific, minimum qualifications for nominees, and has not established specific qualities or skills that it regards as necessary for one or more of the Board Members to possess (other than any qualities or skills that may be required by applicable law, regulation or listing standard). However, in evaluating a person as a potential nominee to serve as a Board Member, the Governance Committee may consider the following factors, among any others it may deem relevant:

• whether or not the person is an “interested person,” as defined in the 1940 Act, and whether the person is otherwise qualified under applicable laws and regulations to serve as a Board Member;

• whether or not the person has any relationships that might impair his or her independence, such as any business, financial or family relationships with Fund management, the investment adviser, service providers or their affiliates;

• whether or not the person serves on boards of, or is otherwise affiliated with, competing financial service organizations or their related mutual fund complexes;

• whether or not the person is willing to serve, and willing and able to commit the time necessary for the performance of the duties of a Board Member;

• the contribution which the person can make to the Board (or, if the person has previously served as a Board Member, the contribution which the person made to the Board during his or her previous term of service), with consideration being given to the person’s business and professional experience, education and such other factors as the Governance Committee may consider relevant;

• the character and integrity of the person; and

• whether or not the selection and nomination of the person would be consistent with the requirements of the retirement policies of the Trust, as applicable.

The Board also has a standing Performance and Review Committee, which is comprised of all Board Members who are not “interested persons” within the meaning of the 1940 Act. The Performance and Review Committee is responsible for, among other things, reviewing performance and benchmarks and overseeing the implementation and renewal of the Portfolios’ management contract, distribution plan and distribution agreement. The Performance and Review Committee met five times during the most recent fiscal year.

35

The following table shows the amount of equity securities owned by the Trustees in the Portfolios and in other investment companies in the fund complex supervised by the Trustees as of December 31, 2005:

Name of Trustee	Aggregate Dollar Range of Equity Securities in All Investment Companies in the Fund Complex Overseen by the Trustee
Interested Trustee
R. Jay Gerken	Over $100,000
Non-Interested Trustees
Elliott J. Berv	None
Donald M. Carlton	Over $100,000
A. Benton Cocanougher	$10,001—$50,000
Mark T. Finn	$1—$10,000
Stephen Randolph Gross	None
Diana R. Harrington	$10,001—$50,000
Susan B. Kerley	$1—$10,000
Alan G. Merten	$1—$10,000
R. Richardson Pettit	$10,001—$50,000

Shares of the Portfolios are sold exclusively to insurance company separate accounts. Accordingly, as of December 31, 2005, no Trustee owned shares of any Portfolio.

None of the Non-Interested Trustees nor their family members had any interest in the manager, Legg Mason Investor Services, LLC, Citigroup Global Markets, or any person directly or indirectly controlling, controlled by, or under common control with the manager, Legg Mason Investor Services, LLC or Citigroup Global Markets as of December 31, 2005.

Information regarding compensation paid to the Trustees as of the fiscal year ended October 31, 2005 is set forth below. The members of each Board who are not “interested persons,” as defined in the 1940 Act, receive a fee for each meeting of a Portfolio’s Board of Trustees and committee meetings attended and are reimbursed for all out-of-pocket expenses relating to attendance at such meetings. Mr. Gerken, an “interested person,” as defined in the 1940 Act, does not receive compensation from the funds but may be reimbursed for all out-of-pocket expenses relating to attendance at such meetings.

Each fund in the fund complex pays a pro rata share of Trustee fees based upon asset size. Each Portfolio currently pays each of the Trustees who is not a director, officer or employee of the manager or any of its affiliates its pro rata share of an annual fee of $48,000 plus $12,000 for each regularly scheduled Board of Trustees meeting attended, $6,000 for each special telephonic Board meeting attended, and $500 for each ad-hoc telephonic meeting in which that Trustee participates. The lead independent Trustee will receive an additional $10,000 per year and the Chairs of the Audit Committee and Performance and Review Committee will each receive an additional $7,500 per year. The Portfolios will reimburse Trustees for travel and out-of-pocket expenses incurred in connection with Board meetings.

36

TRUSTEES COMPENSATION TABLE

Trustee	Aggregate Compensation from All Cap Growth Portfolio (1)		Aggregate Compensation from Growth and Income Portfolio (1)		Aggregate Compensation from Government Portfolio (1)
Interested Trustee
R. Jay Gerken	$	0	$	0	$	0
Non-Interested Trustees
Elliott J. Berv	$	786.84	$	803.08	$	854.97
Donald M. Carlton	$	865.56	$	883.60	$	941.13
A. Benton Cocanougher	$	875.98	$	892.23	$	944.22
Mark T. Finn	$	804.92	$	822.50	$	878.54
Stephen Randolph Gross	$	793.38	$	810.99	$	867.12
Diana R. Harrington	$	783.98	$	800.22	$	852.11
Susan B. Kerley	$	783.98	$	800.22	$	852.11
Alan G. Merten	$	856.63	$	872.88	$	924.87
R. Richardson Pettit	$	860.83	$	877.07	$	929.07

Trustee	Pension or Retirement Benefits Paid as Part of Portfolio Expenses (1)	Total Compensation from Portfolios and Fund Complex Paid to Trustees (1)		Number of Funds in Complex Served by Trustee (1)(2)
Interested Trustee
R. Jay Gerken	None	$	0	183
Non-Interested Trustees
Elliott J. Berv	None	$	118,600	37
Donald M. Carlton	None	$	128,100	32
A. Benton Cocanougher	None	$	121,600	32
Mark T. Finn	None	$	126,300	37
Stephen Randolph Gross	None	$	121,600	37
Diana R. Harrington	None	$	118,500	37
Susan B. Kerley	None	$	118,500	37
Alan G. Merten	None	$	118,000	32
R. Richardson Pettit	None	$	118,000	32

(1) Information is for the fiscal year ended October 31, 2005.

(2) Two of the funds in the Fund Complex were not operational during the calendar year ended December 31, 2005.

The Trustees of the Portfolios have adopted a Retirement Plan for all Trustees who are not “interested persons” of the Portfolios, within the meaning of the 1940 Act. Under the Plan, all Trustees are required to retire from the Board as of the last day of the calendar year in which the applicable Trustee attains age 75. Trustees may retire under the Plan before attaining the mandatory retirement age. Trustees who have served as Trustee of the Trust or any of the investment companies in the fund complex, including the Portfolios, for at least ten years when they retire are eligible to receive the maximum retirement benefit under the Plan. The maximum retirement benefit is an amount equal to five times the amount of retainer and regular meeting fees payable to a Trustee during the entirety of the calendar year of the applicable Trustee’s retirement. Trustees are first eligible to receive the minimum retirement benefit under the Plan (50% of the maximum benefit) after five years of service and attainment of at least the age of 67. Retirement benefit eligibility increases proportionally with each additional year of service until eligibility for the maximum benefit has been attained. Amounts under the Plan may be paid in twenty equal quarterly installments or, if the applicable Trustee has made a timely election, in a lump sum

37

(discounted to present value). Benefits under the Plan are unfunded. The following table shows the estimated retirement benefit that would be payable under the Plan upon retirement at the specified compensation and years-of-service classifications.

Average Compensation in Last Year of Service		Years of Service
		5 Years		6 Years		7 Years		8 Years		9 Years		10 Years or More
$	80,000	$	200,000	$	240,000	$	280,000	$	320,000	$	360,000	$	400,000
$	90,000	$	225,000	$	270,000	$	315,000	$	360,000	$	405,000	$	450,000
$	100,000	$	250,000	$	300,000	$	350,000	$	400,000	$	450,000	$	500,000
$	110,000	$	275,000	$	330,000	$	385,000	$	440,000	$	495,000	$	550,000
$	120,000	$	300,000	$	360,000	$	420,000	$	480,000	$	540,000	$	600,000
$	130,000	$	325,000	$	390,000	$	455,000	$	520,000	$	585,000	$	650,000

Assuming continuous service as a Trustee of the Portfolios until the age of mandatory retirement under the Plan, each disinterested Trustee will have achieved at least ten credited years of service and will be eligible for the maximum retirement benefit under the Plan. During the fiscal year ended October 31, 2005, former Trustees of the Trust received the following retirement benefits under the Plan: Mr. Riley C. Gilley, an aggregate of $70,000 in four quarterly installment payments and Mr. E. Kirby Warren, an aggregate of $70,000 in four quarterly installment payments.

Messrs. Carlton, Cocanougher, Gross, Merten and Pettit also are covered by a prior retirement plan. Under the prior plan, retirement benefits are payable for a ten year period following retirement, with the annual payment to be based upon the Trustee’s compensation from the Trust during calendar year 2000. Trustees with more than five but less than ten years of service at retirement will receive a prorated benefit. In order to receive benefits under the current Retirement Plan, a Trustee must waive all rights under the prior plan prior to receiving payment under either plan. The maximum amount payable upon retirement to each Trustee under the prior plan is:

Trustee	Maximum Amount Payable Under the Prior Plan
Donald M. Carlton	$	661,000
A. Benton Cocanougher	$	713,000
Stephen R. Gross	$	661,000
Alan G. Merton	$	661,000
R. Richardson Pettit	$	710,000

At October 31, 2005, an aggregate amount of $863,790 is accrued in connection with these plans.

The Declaration of Trust of the Trust provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Trust, unless, as to liability to the Trust, or its investors, it is finally adjudicated that they engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in their offices, or unless with respect to any other matter it is finally adjudicated that they did not act in good faith in the reasonable belief that their actions were in the best interest of the Trust. In the case of settlement, such indemnification will not be provided unless it has been determined by a court or other body approving the settlement or other disposition or a reasonable determination, based upon a review of readily available facts (as opposed to a full trial-type inquiry) that such officers or trustees have not engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of their duties. Rights to indemnification or insurance cannot be limited retroactively.

The Declaration of Trust of the Trust further provides that (i) the appointment, designation or identification of a Trustee as a member or chairperson of a committee of the Trustees, an expert on any topic or in any area

38

(including an audit committee financial expert), or the lead independent Trustee, or any other special appointment, designation or identification of a Trustee, shall not impose on that individual any duty, obligation or liability that is greater than the duties, obligations and liability imposed on that person as a Trustee in the absence of the appointment, designation or identification (except with respect to duties expressly imposed pursuant to the by-laws of the Trust, a committee charter or a Trust policy statement), (ii) no Trustee who has special skills or expertise, or is appointed, designated or identified shall be held to a higher standard of care by virtue thereof and (iii) no appointment, designation or identification of a Trustee shall affect in any way that Trustee’s rights to indemnification.

Officers receive no compensation from the Portfolios although they may be reimbursed from time to time for certain expenses incurred to attend meetings of the Board of Trustees.

As of February 1, 2006, 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 1, 2006, the following shareholders were known by the manager to beneficially own or hold of record more than 5% of the outstanding shares of any Portfolio of the Trust:

Portfolio	Percent	Name	Address
Premier Selections All Cap Growth Portfolio	49.8631%	Travelers Insurance Company	P.O. Box 990027 Hartford, CT 06199-0027
	47.7010%	Travelers Life Annuity Company	P.O. Box 990027 Hartford, CT 06199-0027
Growth and Income Portfolio	71.8811%	Travelers Insurance Company	P.O. Box 990027 Hartford, CT 06199-0027
	26.9080%	Travelers Life Annuity Company	P.O. Box 990027 Hartford, CT 06199-0027
Government Portfolio Smith Barney Class A	78.0530%	Travelers Life Annuity Company	P.O. Box 990027 Hartford, CT 06199-0027
	20.9611%	Travelers Insurance Company	P.O. Box 990027 Hartford, CT 06199-0027
Salomon Brothers Class B	n/a	n/a	n/a

INVESTMENT MANAGEMENT AGREEMENT

Investment Manager.    SBFM serves as investment manager to each Portfolio pursuant to separate investment management agreements (in each case, the “Management Agreement”) with each Portfolio that was approved by the Board of Trustees, including a majority of the Independent Trustees, on August 7, 2005 and by the Portfolios’ shareholders on November 15, 2005. Each Management Agreement became effective on December 1, 2005 as a result of the sale of substantially all of Citigroup Inc.’s (“Citigroup”) asset management business to Legg Mason. The manager is a wholly-owned subsidiary of Legg Mason. Prior to December 1, 2005, the manager was an indirect wholly-owned subsidiary of Citigroup.

The manager furnishes at its own expense all services, facilities and personnel necessary in connection with managing investments for the Portfolios. The Management Agreement provides that the manager may delegate the daily management of the securities of a Portfolio to one or more subadvisers and that the manager may render services to others.

39

The manager performs administrative and management services necessary for the operation of the Portfolios, such as: supervising the overall administration of the Portfolios, including negotiation of contracts and fees with and the monitoring of performance and billing of the Portfolios’ transfer agent, shareholder servicing agents, custodian and other independent contractors or agents; providing certain compliance, fund accounting, regulatory reporting, and tax reporting services; preparing or participating in the preparation of Board materials, registration statements, proxy statements and reports and other communications to shareholders; maintaining the Portfolios’ existence; maintaining the registration and qualification of the Portfolios’ shares under federal and state laws; and arranging for the maintenance of books and records of the Portfolios. Trustees, officers and investors in the Portfolios are or may become interested in the manager as directors, officers, employees, or otherwise and directors, officers and employees of the manager are or may become similarly interested in the Portfolios.

Unless otherwise terminated, the Management Agreement will continue in effect with respect to a Portfolio for an initial two-year period and thereafter will continue indefinitely as long as such continuance is specifically approved at least annually by the Portfolio’s Trustees or by a vote of a majority of the outstanding voting securities of the Portfolio, and, in either case, by a majority of the Trustees who are not parties to the Management Agreement or interested persons of any such party, at a meeting called for the purpose of voting on the Management Agreement.

The Management Agreement is terminable without penalty on not more than 60 days’ nor less than 30 days’ written notice by a Portfolio when authorized either by a vote of holders of shares representing a majority of the voting power of the outstanding voting securities of the Portfolio (as defined in the 1940 Act) or by a vote of the Portfolio’s Trustees, or by the manager on not less than 90 days’ written notice, and will automatically terminate in the event of its assignment. The Management Agreement provides that neither the manager nor its personnel shall be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in the execution of security transactions for the applicable Portfolio, except for willful misfeasance, bad faith or gross negligence or reckless disregard of its or their obligations and duties.

Effective October 1, 2005, for its services under the Management Agreement with respect to All Cap Growth Portfolio, the manager receives fees, which are computed daily and paid monthly, at the following annual rates of the Portfolio’s average daily net assets on an annualized basis for the Portfolio’s then-current fiscal year: 0.750% on assets up to $1 billion, 0.725% on assets between $1 billion and $2 billion, 0.700% on assets between $2 billion and $5 billion, 0.675% on assets between $5 billion and $10 billion, and 0.650% on assets over $10 billion. For its services under the Management Agreement with respect to Growth and Income Portfolio, the manager receives fees, which are computed daily and paid monthly, at the following annual rates of the Portfolio’s average daily net assets on an annualized basis for the Portfolio’s then-current fiscal year: 0.650% on assets up to $1 billion, 0.600% on assets between $1 billion and $2 billion, 0.550% on assets between $2 billion and $3 billion, 0.500% on assets between $3 billion and $4 billion, and 0.450% on assets over $4 billion. For its services under the Management Agreement with respect to Government Portfolio, the manager receives fees, which are computed daily and paid monthly, at the following annual rates of the Portfolio’s average daily net assets on an annualized basis for the Portfolio’s then-current fiscal year: 0.55% on assets up to $2 billion, 0.50% on assets between $2 billion and $4 billion, 0.45% on assets between $4 billion and $6 billion, 0.40% on assets between $6 billion and $8 billion, and 0.35% on assets over $8 billion. The manager may reimburse a Portfolio for, or waive, all or any portion of its management fees.

40

The following table shows expenses incurred under the Portfolios’ Management agreement during the fiscal years ended October 31, 2005, 2004 and 2003.

	All Cap Growth		Growth and Income		Government
October 31, 2005
Management Fees	$	430,664	$	488,246	$	719,276
October 31, 2004
Management Fees*	$	360,077	$	473,463	$	734,796
October 31, 2003
Management Fees	$	221,516	$	323,656	$	748,054

* The manager waived a portion of the management fee and reimbursed certain expenses in the amount of $1,689 to each of the All Cap Growth, Growth and Income and Government Portfolios, respectively. After waivers and reimbursements, management fees were $358,388, $471,774 and $733,107 for the All Cap Growth, Growth and Income and Government Portfolios, respectively.

SBFM (through its predecessor entities) has been in the investment counseling business since 1968 and renders investment management services to a wide variety of individual, institutional and investment company clients that had aggregate assets under management as of September 30, 2005 of approximately $111.1 billion. Legg Mason, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202, is a financial services holding company. As of December 2, 2005, Legg Mason’s asset management operation had aggregate assets under management of approximately $830 billion.

Code of Ethics.    Pursuant to Rule 17j-1 of the 1940 Act, the Portfolios, the manager and the distributors have adopted codes of ethics that permit their respective 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.

Copies of the codes of ethics of the portfolios, the manager and the distributors are on file with the SEC.

Proxy Voting Guidelines & Procedures.    Although individual Trustees may not agree with particular policies or votes by the manager, the Board has approved delegating proxy voting discretion to the manager believing that the manager should be responsible for voting because it is a matter relating to the investment decision making process.

Non-equity securities, such as debt obligations and money market instruments are not usually considered to be voting securities, and proxy voting, if any, is typically limited to the solicitation of consents to changes in or waivers of features of debt securities, or plans of reorganization involving the issuer of the security. In the rare event that proxies are solicited with respect to any of these securities, the manager would vote the proxy in accordance with the principals set forth in the manager’s proxy voting policies and procedures, including the procedures that the manager uses when a vote presents a conflict between the interests of Portfolio shareholders, on the one hand, and those of the manager or any affiliated person of a fund or the manager, on the other.

A summary of the manager’s policies and procedures with respect to proxy voting is attached as Appendix B to this SAI. This summary gives a general indication as to how the manager will vote proxies relating to portfolio securities on each issue listed. However, the policies and procedures do not address all potential voting issues or the intricacies that may surround individual proxy votes. For that reason there may be instances in which votes may vary from the policies and procedures presented. Notwithstanding the foregoing, the manager always endeavors to vote proxies relating to portfolio securities in accordance with a portfolio’s investment objectives.

41

Information on how each Portfolio voted proxies relating to portfolio securities during the prior 12 month period ended June 30th of each year and a description of the policies and procedures that each Portfolio uses to determine how to vote proxies related to portfolio securities is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on each of the Portfolio’s website at http://www.citigroupam.com and (3) on the SEC’s website at http://www.sec.gov.

DISTRIBUTORS

Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, located at 100 Light Street, Baltimore, Maryland 21202 and Citigroup Global Markets Inc. (“CGMI”), an indirect wholly-owned subsidiary of Citigroup, located at 388 Greenwich Street, New York, New York 10013 serve as the Portfolios’ distributors pursuant to separate written agreements or amendments to written agreements, in each case dated December 1, 2005 (the “Distribution Agreements”), which were approved by the Portfolios’ Board of Trustees and by a majority of the Independent Trustees, casting votes in person at a meeting called for such purpose, on November 21, 2005. The Distribution Agreements went into effect on December 1, 2005. Prior to December 1, 2005, CGMI served as the Portfolios’ distributor.

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 Portfolio as may be sold to the public. A Distributor is not obligated to sell any stated number of shares. Each Distribution 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. Each 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.

GOVERNMENT PORTFOLIO

Smith Barney Class A shares of the Government Portfolio are not subject to a shareholder services and distribution plan.

Salomon Brothers Class B shares of the Government Portfolio have a shareholder services and distribution plan (a “12b-1 plan”) adopted in accordance with Rule 12b-1 under the 1940 Act. Under the Plan, Salomon Brothers Class B shares may pay monthly fees at an annual rate not to exceed 0.25% of the average daily net assets of the Government Portfolio attributable to Class B shares. Such fees may be used to make payments to the distributor for distribution services, to service agents in respect of the sale of Salomon Brothers Class B shares of the Government Portfolio, and to other parties in respect of the sale of Salomon Brothers Class B shares of the Government Portfolio, and to make payments for advertising, marketing or other promotional activity, and payments for preparation, printing, and distribution of prospectuses, statements of additional information and reports for recipients other than regulators and existing Salomon Brothers Class B shareholders. The Government Portfolio also may make payments to the distributor, service agents and others for providing personal service or the maintenance of Salomon Brothers Class B shareholder accounts. The amounts paid by the distributor to each recipient may vary based upon certain factors, including, among other things, the levels of sales of Salomon Brothers Class B shares and/or shareholder services provided, provided, however, that the fees paid to a recipient with respect to a particular Class that may be used to cover expenses primarily intended to result in the sale of shares of that Class, or that may be used to cover expenses primarily intended for personal service and/or maintenance of shareholder accounts, may not exceed the maximum amounts, if any, as may from time to time be permitted for such services under NASD Conduct Rule 2830 or any successor rule, in each case as amended or interpreted by the NASD.

The 12b-1 Plan permits the Government Portfolio to pay fees to the distributor, service agents and others as compensation for their services, not as reimbursement for specific expenses incurred. Thus, even if their

42

expenses exceed the fees provided for by the 12b-1 Plan, the Government Portfolio will not be obligated to pay more than those fees and, if their expenses are less than the fees paid to them, they will realize a profit. The Government Portfolio will pay the fees to the distributor and others until the 12b-1 Plan is terminated or not renewed. In that event, the distributor’s or other recipient’s expenses in excess of fees received or accrued through the termination date will be the distributor’s or other recipient’s sole responsibility and not obligations of the Government Portfolio. The 12b-1 Plan also recognizes that various service providers to the Government Portfolio, such as the manager, may make payments for distribution related expenses out of their own resources, including past profits, or, in the case of the manager, its management fees, and that the Government Portfolio’s distributors or service agents may from time to time use their own resources for distribution related services, in addition to the fees paid under the 12b-1 Plan. The 12b-1 Plan specifically provides that, to the extent that such payments might be deemed to be indirect financing of any activity primarily intended to result in the sale of Salomon Brothers Class B shares of the Government Portfolio within the context of Rule 12b-1, then the payments are deemed to be authorized by the 12b-1 Plan.

The 12b-1 Plan continues in effect if such continuance is specifically approved at least annually by a vote of both a majority of the Trust’s Trustees and a majority of the Trust’s Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of the 12b-1 Plan or in any agreement related to the 12b-1 Plan (for purposes of this paragraph, “qualified Trustees”). The Trustees in the exercise of their business judgement made in the best interests of the Salomon Brothers Class B shareholders of the Portfolio approved the continuation of the 12b-1 Plan. The 12b-1 Plan requires that the Board of Trustees be provided with and review, quarterly, a written report of the amounts expended (and the purposes therefor) under the 12b-1 Plan. The 12b-1 Plan further provides that the selection and nomination of the qualified trustees is committed to the discretion of such qualified trustees then in office. The 12b-1 Plan may be terminated at any time by a vote of a majority of the Trust’s qualified Trustees or by a vote of a majority of the voting power of the outstanding voting securities, as defined in the 1940 Act, of Salomon Brothers Class B shares. The 12b-1 Plan may not be amended to increase materially the amount of permitted expenses of Salomon Brothers Class B shares without the approval of a majority of the voting power of the outstanding voting securities, as defined in the 1940 Act, of Class B and may not be materially amended in any case without a vote of a majority of both the Trustees and qualified Trustees. The distributor will preserve copies of any plan, agreement or report made pursuant to the 12b-1 Plan for a period of not less than six years, and for the first two years the Government Portfolio will preserve such copies in an easily accessible place.

As of the fiscal year ended October 31, 2005, no Salomon Brothers Class B shares were outstanding.

Salomon Brothers Class B shares do not convert into shares of any other class of the Government Portfolio.

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	All Cap Growth		Growth and Income		Government
2004	46	%	43	%	53	%*
2005	43	%	57	%	96	%*

* Excludes mortgage dollar roll transactions. If such transactions were included, the portfolio turnover rate would have been 614% and 667% for the years ended October 31, 2005 and 2004, respectively.

43

DISCLOSURE OF PORTFOLIO HOLDINGS

The Portfolios have adopted policies and procedures developed by CAM, the business unit that includes the Portfolios’ investment manager, with respect to the disclosure of the Portfolios’ portfolio securities and any ongoing arrangements to make available information about a Portfolio’s portfolio securities. The policy requires that consideration always be given as to whether disclosure of information about a Portfolio’s portfolio holdings is in the best interests of such fund’s shareholders, and that any conflicts of interest between the interests of the Portfolios’ shareholders and those of SBFM, the Portfolios’ distributors or their affiliates, be addressed in a manner that places the interests of fund shareholders first. The policy provides that information regarding a Portfolio’s portfolio holdings may not be shared with non-CAM employees, with investors or potential investors (whether individual or institutional), or with third parties unless it is done for legitimate fund business purposes and in accordance with the policy.

CAM’s policy generally provides for the release of details of securities positions once they are considered “stale.” Data is considered stale 25 calendar days following quarter-end for funds other than money market funds, and 25 calendar days following month-end with respect to money market funds. CAM believes that this passage of time prevents a third party from benefiting from an investment decision made by a fund that has not been fully reflected by the market.

Under the policy, a Portfolio’s complete list of holdings (including the size of each position) may be made available to investors, potential investors, third parties and non-CAM employees with simultaneous public disclosure at least 25 days after calendar quarter end, except in the case of a money market fund’s holdings, which may be released with simultaneous public disclosure at least 25 days after month end. Typically, simultaneous public disclosure is achieved by the filing of Form N-Q or Form N-CSR in accordance with SEC rules, provided that such filings may not be made until 25 days following quarter-end, and/or posting the information to a CAM or the Portfolio’s Internet site that is accessible by the public, or through public release by a third party vendor.

The policy permits the release of limited portfolio holdings information that is not yet considered stale in a number of situations, including:

1.    A Portfolio’s top ten securities, current as of month-end, and the individual size of each such security position may be released at any time following month-end with simultaneous public disclosure.

2.    A Portfolio’s top ten securities positions (including the aggregate but not individual size of such positions) may be released at any time with simultaneous public disclosure.

3.    A list of securities (that may include fund holdings together with other securities) followed by a portfolio manager (without position sizes or identification of particular funds) may be disclosed to sell-side brokers at any time for the purpose of obtaining research and/or market information from such brokers.

4.    A trade in process may be discussed only with counterparties, potential counterparties and others involved in the transaction (i.e., brokers and custodians).

5.    A Portfolio’s sector weightings, yield and duration (for fixed income and money market funds), performance attribution (e.g. analysis of the Portfolio’s out performance or underperformance of its benchmark based on its portfolio holdings) and other summary and statistical information that does not include identification of specific portfolio holdings may be released, even if non-public, if such release is otherwise in accordance with the policy’s general principles.

6.    A Portfolio’s portfolio holdings may be released on an as-needed basis to its legal counsel, counsel to its independent trustees, and its independent public accountants, in required regulatory filings or otherwise to governmental agencies and authorities.

Under the policy, if information about a Portfolio’s portfolio holdings is released pursuant to an ongoing arrangement with any party, a fund must have a legitimate business purpose for the release of the information,

44

and either the party receiving the information must be under a duty of confidentiality, or the release of non-public information must be subject to trading restrictions and confidential treatment to prohibit the entity from sharing with an unauthorized source or trading upon any non-public information provided. Neither a Portfolio, nor CAM, nor any other affiliated party may receive compensation or any other consideration in connection with such arrangements. Ongoing arrangements to make available information about a Portfolio’s portfolio securities will be reviewed at least annually by a Portfolio’s Board.

The approval of a Portfolio’s Chief Compliance Officer, or designee, must be obtained before entering into any new ongoing arrangement or altering any existing ongoing arrangement to make available portfolio holdings information, or with respect to any exceptions to the policy. Any exceptions to the policy must be consistent with the purposes of the policy and are granted only after a thorough examination and consultation with CAM’s legal department, as necessary. Exceptions to the policies are reported to a Portfolio’s Board at its next regularly scheduled meeting.

Each of the Portfolios discloses its complete portfolio holdings approximately 25 days after month- end on the manager’s website www.citigroupam.com.

Set forth below is a list, as of December 31, 2005, of those parties with whom CAM, on behalf of a Portfolio, has authorized ongoing arrangements that include the release of portfolio holdings information, the frequency of the release under such arrangements, and the length of the lag, if any, between the date of the information and the date on which the information is disclosed. The parties identified below as recipients are service providers, fund rating agencies, consultants and analysts.

Recipient	Frequency	Delay before dissemination
State Street Bank & Trust Co. (Fund Custodian)	Daily	None
Institutional Shareholders Services (Proxy Voting Services)	As necessary	None
Bloomberg	Quarterly	25 Days after Quarter End
Lipper	Quarterly	25 Days after Quarter End
S&P	Quarterly	25 Days after Quarter End
Morningstar	Quarterly	25 Days after Quarter End
Vestek	Daily	None
Factset	Daily	None

Portfolio holdings information for a Portfolio may also be released from time to time pursuant to ongoing arrangements with the following parties:

Recipient	Frequency	Delay before dissemination
Baseline	Daily	None
Frank Russell	Monthly	1 Day
Callan	Quarterly	25 Days after Quarter End
Mercer	Quarterly	25 Days after Quarter End
eVestment Alliance	Quarterly	25 Days after Quarter End
CRA RogersCasey	Quarterly	25 Days after Quarter End
Cambridge Associates	Quarterly	25 Days after Quarter End
Marco Consulting	Quarterly	25 Days after Quarter End
Wilshire	Quarterly	25 Days after Quarter End
Informa Investment Services (Efron)	Quarterly	25 Days after Quarter End
CheckFree (Mobius)	Quarterly	25 Days after Quarter End
Nelsons Information	Quarterly	25 Days after Quarter End
Investor Tools	Daily	None

45

Recipient	Frequency	Delay before dissemination
Advent	Daily	None
BARRA	Daily	None
Plexus	Quarterly (Calendar)	Sent 1-3 business days following the end of a Quarter
Elkins/McSherry	Quarterly (Calendar)	Sent the first business day following the end of a Quarter
Quantitative Services Group	Daily	None
AMBAC	Daily	None
Deutsche Bank	Monthly	Sent 6-8 Business Days following Month End
Fitch	Monthly	Sent 6-8 Business Days following Month End
Liberty Hampshire	Weekly and Month End	None
Sun Trust	Weekly and Month End	None
New England Pension Consultants	Quarterly	25 Days after Quarter End
Evaluation Associates	Quarterly	25 Days after Quarter End
Watson Wyatt	Quarterly	25 Days after Quarter End
S&P (Rating Agency)	Weekly Tuesday Night	1 business day
Moody’s (Rating Agency)	Weekly Tuesday Night	1 business day

PORTFOLIO MANAGERS

The following tables set forth certain additional information with respect to the portfolio managers for the Portfolios. Unless noted otherwise, all information is provided as of October 31, 2005.

OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGER

The table below identifies, for each portfolio manager, the number of accounts (other than the Portfolio with respect to which information is provided) for which he or she has day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. None of the accounts shown were subject to fees based on performance.

Portfolio Manager	Registered Investment Companies	Other Pooled Investment Vehicles	Other Accounts
All Cap Growth Portfolio—Large Cap Growth Segment
Alan Blake	16 registered investment companies with $7.026 billion in total assets under management	3 other pooled investment vehicles with $348 million in total assets under management	134,402 other accounts with $15.145 billion in total assets under management
All Cap Growth Portfolio—Mid Cap Growth Segment
Brian M. Angerame	3 registered investment companies with $1.169 billion in total assets under management	1 other pooled investment vehicle with $12 million in total assets under management	3,333 other accounts with $121 million in total assets under management

46

Portfolio Manager	Registered Investment Companies	Other Pooled Investment Vehicles	Other Accounts
Derek J. Deutsch	3 registered investment companies with $1.169 billion in total assets under management	1 other pooled investment vehicle with $12 million in total assets under management	3,333 other accounts with $121 million in total assets under management
Peter C. Stournaras	3 registered investment companies with $1.169 billion in total assets under management	1 other pooled investment vehicle with $12 million in total assets under management	3,333 other accounts with $121 million in total assets under management
All Cap Growth Portfolio—Small Cap Growth Segment
Timothy Woods	1 registered investment company with $248 million in total assets under management	None	18 other accounts with $1.6 million in total assets under management
Growth and Income Portfolio
Michael Kagan	4 registered investment companies with $3.440 billion in total assets under management	2 other pooled investment vehicles with $483 million in total assets under management	1 other account with $22 million in total assets under management
Kevin Caliendo	8 registered investment companies with $4.701 billion in total assets under management	None	None
SB Government Portfolio
Roger Lavan	19 registered investment companies with $7.147 billion in total assets under management	5 other pooled investment vehicles with $264 million in total assets under management	5 other accounts with $1.805 billion in total assets under management
Francis Mustaro	2 registered investment companies with $1.029 billion in total assets under management	2 other pooled investment vehicles with $551 million in total assets under management	3 other accounts with $692 million in total assets under management

47

PORTFOLIO MANAGER COMPENSATION

CAM investment professionals receive base salary and other employee benefits and are eligible to receive incentive compensation. Base salary is fixed and typically determined based on market factors and the skill and experience of individual investment personnel.

CAM has implemented an investment management incentive and deferred compensation plan (the “Plan”) for its investment professionals, including the fund’s portfolio manager(s). Each investment professional works as a part of an investment team. The Plan is designed to align the objectives of CAM investment professionals with those of fund shareholders and other CAM clients. Under the Plan a “base incentive pool” is established for each team each year as a percentage of CAM’s revenue attributable to the team (largely management and related fees generated by funds and other accounts). A team’s revenues are typically expected to increase or decrease depending on the effect that the team’s investment performance as well as inflows and outflows have on the level of assets in the investment products managed by the team. The “base incentive pool” of a team is reduced by base salaries paid to members of the team and employee benefits expenses attributable to the team.

The investment team’s incentive pool is then adjusted to reflect its ranking among a “peer group” of non-CAM investment managers and the team’s pre-tax investment performance against the applicable product benchmark (e.g. a securities index and, with respect to a fund, the benchmark set forth in the fund’s prospectus to which the fund’s average annual total returns are compared or, if none, the benchmark set forth in the fund’s annual report). CAM may also measure the team’s pre-tax investment performance against additional benchmarks, as it determines appropriate. Longer-term (5- year) performance will be more heavily weighted than shorter-term (1- year) performance in the calculation of the performance adjustment factor. The incentive pool for a team may also be adjusted to reflect other factors (e.g., severance pay to departing members of the team, and discretionary allocations by the applicable CAM chief investment officer from one investment team to another). The incentive pool will be allocated by the applicable CAM chief investment officer to the team leader and, based on the recommendations of the team leader, to the other members of the team.

Up to 20% of an investment professional’s annual incentive compensation is subject to deferral. Of that principal deferred award amount, 50% will accrue a return based on the hypothetical returns of the investment fund or product that is the primary focus of the investment professional’s business activities with the Firm, and 50% may be received in the form of Legg Mason restricted stock shares.

POTENTIAL CONFLICTS OF INTEREST

Potential conflicts of interest may arise when a Portfolio’s portfolio manager also has day-to-day management responsibilities with respect to one or more other funds or other accounts, as is the case for the portfolio managers listed in the table above.

The investment adviser and the fund(s) have adopted compliance polices and procedures that are designed to address various conflicts of interest that may arise for the investment adviser and the individuals that it employs. For example, CAM seeks to minimize the effects of competing interests for the time and attention of portfolio managers by assigning portfolio managers to manage funds and accounts that share a similar investment style. CAM has also adopted trade allocation procedures that are designed to facilitate the fair allocation of limited investment opportunities among multiple funds and accounts. There is no guarantee, however, that the policies and procedures adopted by CAM and the fund(s) will be able to detect and/or prevent every situation in which an actual or potential conflict may appear.

These potential conflicts include:

Allocation of Limited Time and Attention.    A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. As a result, the portfolio manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those accounts as might be the case if he or she were to devote substantially more attention to the management of a single fund. The effects of this potential conflict may be more pronounced where funds and/or accounts overseen by a particular portfolio manager have different investment strategies.

48

Allocation of Limited Investment Opportunities.    If a portfolio manager identifies a limited investment opportunity that may be suitable for multiple funds and/or accounts, the opportunity may be allocated among these several funds or accounts, which may limit a fund’s ability to take full advantage of the investment opportunity.

Pursuit of Differing Strategies.    At times, a portfolio manager may determine that an investment opportunity may be appropriate for only some of the funds and/or accounts for which he or she exercises investment responsibility, or may decide that certain of the funds and/or accounts should take differing positions with respect to a particular security. In these cases, the portfolio manager may place separate transactions for one or more funds or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other funds and/or accounts.

Selection of Brokers/Dealers.    Portfolio managers may be able to select or influence the selection of the brokers and dealers that are used to execute securities transactions for the funds and/or account that they supervise. In addition to executing trades, some brokers and dealers provide portfolio managers with brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934), which may result in the payment of higher brokerage fees than might have otherwise be available. These services may be more beneficial to certain funds or accounts than to others. Although the payment of brokerage commissions is subject to the requirement that the portfolio manager determine in good faith that the commissions are reasonable in relation to the value of the brokerage and research services provided to the fund, a portfolio manager’s decision as to the selection of brokers and dealers could yield disproportionate costs and benefits among the funds and/or accounts that he or she manages.

Variation in Compensation.    A conflict of interest may arise where the financial or other benefits available to the portfolio manager differ among the funds and/or accounts that he or she manages. If the structure of the investment adviser’s management fee and/or the portfolio manager’s compensation differs among funds and/or accounts (such as where certain funds or accounts pay higher management fees or performance-based management fees), the portfolio manager might be motivated to help certain funds and/or accounts over others. The portfolio manager might be motivated to favor funds and/or accounts in which he or she has an interest or in which the investment advisor and/or its affiliates have interests. Similarly, the desire to maintain or raise assets under management or to enhance the portfolio manager’s performance record or to derive other rewards, financial or otherwise, could influence the portfolio manager to lend preferential treatment to those funds and/or accounts that could most significantly benefit the portfolio manager.

Related Business Opportunities.    The investment adviser or its affiliates may provide more services (such as distribution or recordkeeping) for some types of funds or accounts than for others. In such cases, a portfolio manager may benefit, either directly or indirectly, by devoting disproportionate attention to the management of fund and/or accounts that provide greater overall returns to the investment manager and its affiliates.

PORTFOLIO MANAGER SECURITIES OWNERSHIP

The tables below identify ownership of Portfolio securities by each Portfolio Manager.

Portfolio Manager	Dollar Range of Ownership of Securities in the All Cap Growth Portfolio
Alan Blake	None
Brian M. Angerame	None
Derek J. Deutsch	None
Peter C. Stournaras	None
Timothy Woods	None

Portfolio Manager	Dollar Range of Ownership of Securities in the Growth and Income Portfolio
Michael Kagan	None
Kevin Caliendo	None

49

Portfolio Manager	Dollar Range of Ownership of Securities in the SB Government Portfolio
Roger Lavan	None
Francis Mustaro	None

PORTFOLIO TRANSACTIONS AND BROKERAGE

The manager is responsible for decisions to buy and sell securities for each Portfolio 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 Portfolio 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 Trust may place brokerage transactions with affiliated persons of the manager or one of the distributors. 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 Portfolio 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.

For the fiscal year ended October 31, 2005, each Portfolio directed brokerage transactions and commissions paid for research-related services as follows:

Portfolios	Total Dollar Amount Of Brokerage Transactions Related To Research Services		Total Dollar Amount of Brokerage Commissions Paid on Transactions Related To Research Services
All Cap Growth	$	5,122,454	$	9,240
Growth and Income	$	0	$	0
Government	$	0	$	0

Pursuant to the Management Agreement, the manager is authorized to pay a broker or dealer who provides such brokerage and research services a commission for executing a transaction for a Portfolio which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the manager determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer. This determination may be viewed in terms of either that particular transaction or the overall responsibilities which the manager and its affiliates have with respect to accounts over which they exercise investment discretion. The management fee that a Portfolio pays to the manager will not be reduced as a consequence of the manager’s receipt of brokerage and research services. While such services are not expected to reduce the expenses of the manager, the manager would, through the use of the services, avoid the additional expenses which would be incurred if it should attempt to develop comparable information through its own staff or obtain such services independently.

50

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 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 of the manager. 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 a Portfolio, 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 Portfolio the total brokerage commissions paid.

Fiscal Year Ended 10/31	All Cap Growth		Growth and Income		Government
2005	$	77,806	$	126,185	$	0
2004	$	84,949	$	109,949	$	0
2003	$	67,656	$	110,485	$	0

The Portfolios may from time to time place brokerage transactions with a Distributor or other brokers that may be considered affiliated persons of the manager or a Distributor. 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 Board has approved procedures in conformity with Rule 10f-3 under the 1940 Act whereby the Portfolios may purchase securities that are offered in underwritings in which a Legg Mason affiliate participates. These procedures prohibit the Portfolios from directly or indirectly benefiting a Legg Mason affiliate in connection with such underwritings. In addition, for underwritings where a Legg Mason affiliate participates as a principal underwriter, certain restrictions may apply that could, among other things, limit the amount of securities that the Portfolios could purchase in the underwritings.

Effective December 1, 2005, CGMI is no longer an affiliated person of the Portfolios under the 1940 Act. As a result, the Portfolios are permitted to execute transactions with CGMI or an affiliate of CGMI as agent (but not as principal). Similarly, the Portfolios are permitted to purchase securities in underwritings in which CGMI or an affiliate of CGMI is a member without the restrictions imposed by certain rules of the SEC. The manager’s use of CGMI or affiliates of CGMI as agent in portfolio transactions with the Portfolios will be governed by the Portfolios’ policy of seeking the best overall terms available.

The Portfolios paid the following commissions to CGMI during the periods shown:

Fiscal 2005 Commissions	Citigroup Global Markets
All Cap Growth	$	8,796
Growth and Income	$	325
Government	$	0

51

Fiscal 2004 Commissions	Citigroup Global Markets
All Cap Growth	$	2,806
Growth and Income	$	100
Government		0
Fiscal 2003 Commissions	Citigroup Global Markets
All Cap Growth	$	2,514
Growth and Income	$	0
Government	$	0

The tables below set forth the percentage of each Portfolio’s aggregate brokerage commissions paid to CGMI, as a broker, during the fiscal year ended October 31, 2005, and the percentage of each Portfolio’s aggregate dollar amount of transactions involving the payment of commissions effected through CGMI during the same period.

Percentage of Aggregate Brokerage Commissions Paid	Citigroup Global Markets
All Cap Growth	11.31	%
Growth and Income	0.26	%
Government	0	%
Percentage of Aggregate Dollar Amount of Transactions Involving Payment of Commissions	Citigroup Global Markets
All Cap Growth	17.26	%
Growth and Income	0.19	%
Government	0	%

During the fiscal year ended October 31, 2005, each Portfolio purchased securities issued by the following regular broker-dealers of each Portfolio, which had the following values as of October 31, 2005:

Portfolio	Broker-Dealer	Value of Securities as of October 31, 2005
All Cap Growth	Merrill Lynch, Pierce, Fenner & Smith	$1,333,644
	Bear Stearns & Co.	$   232,760
Growth and Income	J.P. Morgan Chase & Co.	$1,594,728
	Banc of America Securities LLC	$1,493,109
	Merrill Lynch, Pierce, Fenner & Smith	$1,302,569
	Goldman Sachs & Co.	$1,161,340

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each of the Portfolios is determined for each class on each day during which the NYSE is open for trading (a “business day”). As of the date of this Statement of Additional Information, the NYSE is open for trading every weekday except for the following holidays (or the days on which they are observed): New Year’s Day, Martin Luther King Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas and during emergencies. This determination of net asset value is made once each day as of the close of regular trading on such NYSE (normally 4:00 p.m. Eastern

52

time) by adding the market value of all securities and other assets attributable to the class, then subtracting the liabilities attributable to that class, and then dividing the result by the number of outstanding shares of the class. The net asset value per share is effective for orders received and accepted by the service agent prior to its calculation.

Each Portfolio’s prospectus contains further information on the procedures, including the fair value procedures approved by the Board of Trustees, to be used to value the Portfolio’s securities.

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 individualized 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 for any year, the Portfolio would incur a regular corporate federal income tax upon its taxable income, its distributions would generally be taxable as ordinary income to shareholders and investments through life insurance separate accounts would no longer qualify for the look-through treatment described below, with potential adverse consequences for contract holders as described below.

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 Portfolio intends at least annually to declare and make distributions of substantially all of its taxable income and net taxable capital gains to its shareholders (i.e., the Separate Accounts). Such distributions are automatically reinvested in additional shares of 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.

53

Tax treatment of shareholders. Each separate account that invests in a Portfolio must meet certain diversification requirements under Section 817(h) of the Code in order for the associated contracts to be treated as “life insurance contracts” under the Code. If the account is not sufficiently diversified and the contracts are not treated as life insurance contracts, the contract holders generally will be subject to tax on all taxable distributions from a Portfolio, and on all sales, exchanges or redemptions of interests in the Portfolio.

If all of the beneficial interests in a Portfolio are held by one or more insurance companies and certain other eligible holders, the diversification requirements of Section 817(h) may be applied by taking into account the assets of the Portfolio, rather than treating the interest in the Portfolio as a separate investment of each separate account investing in the Portfolio. Beneficial interests in the Portfolios are currently being offered only to separate accounts of participating life insurance companies and other qualifying holders. Each Portfolio intends to diversify its assets in accordance with the requirements of Section 817(h) so that, assuming that look-through treatment as described above is available, any separate account invested wholly in the Portfolio would also satisfy such diversification requirements.

The Trust has undertaken to ensure that each Portfolio meets 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.

Capital Loss Carryforwards

All Cap Growth Portfolio—On October 31, 2005, the unused capital loss carryforwards for the All Cap Growth Portfolio were approximately $10,006,454. For federal income tax purposes, this amount is available to be applied against future capital gains of the Portfolio, if any, that are realized prior to the expiration of the applicable carryforwards. The carryforwards expire as follows:

October 31,
2009	2010		2011
$997,566	$	6,363,962	$	2,644,926

Growth and Income Portfolio—On October 31, 2005, the unused capital loss carryforwards for the Growth and Income Portfolio were approximately $6,814,329. For federal income tax purposes, this amount is available to be applied against future capital gains of the Portfolio, if any, that are realized prior to the expiration of the applicable carryforwards. The carryforwards expire as follows:

October 31,
2010	2011
$3,058,834	$	3,755,495

Government Portfolio—On October 31, 2005, the unused capital loss carryforwards for the Government Portfolio were approximately $3,571,137. For federal income tax purposes, this amount is available to be applied against future capital gains of the Portfolio, if any, that are realized prior to the expiration of the applicable carryforwards. The carryforwards expire as follows:

October 31,
2010	2011		2012		2013
$49,007	$	2,378,580	$	877,195	$	266,355

54

ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS

LEGAL MATTERS

Beginning in June 2004, class action lawsuits alleging violations of the federal securities laws were filed against CGMI and a number of its affiliates, including SBFM and Salomon Brothers Asset Management Inc (“SBAM”) (collectively, the “Advisers”), substantially all of the mutual funds managed by the Advisers, including the Funds (the “Funds”), and directors or trustees of the Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGMI 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 CGMI 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, the Fund’s investment manager 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 above, the Fund’s investment manager 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.

The Defendants have moved to dismiss the Complaint. Those motions are pending before the court.

* * * *

Recent Developments.    Beginning in August 2005, five putative class action lawsuits alleging violations of federal securities laws and state law were filed against CGMI and SBFM (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC described in the prospectus. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the advisor for the Smith Barney family of funds (the “Funds”), rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses.

On October 5, 2005, a motion to consolidate the five actions and any subsequently-filed, related action was filed. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future.

As of the date above, the Fund’s investment manager believes that resolution of the pending lawsuits will not have a material effect on the financial position or results of operations of the Funds or the ability of the Fund’s investment manager and its affiliates to continue to render services to the Funds under their respective contracts.

55

Additional Developments.    The Funds have received the following information concerning SBFM and its affiliate SBAM:

On September 16, 2005, the staff of the SEC informed SBFM and SBAM that the staff is considering recommending that the SEC institute administrative proceedings against SBFM and SBAM for alleged violations of Section 19(a) and 34(b) of the 1940 Act (and related Rule 19a-1). The notification is a result of an industry wide inspection by the SEC and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. Section 19(a) and related Rule 19a-1 of the 1940 Act generally require funds that are making dividend and distribution payments to provide shareholders with a written statement disclosing the source of the dividends and distributions, and, in particular, the portion of the payments made from each of the net investment income, undistributed net profits and/or paid-in capital. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM or SBAM.

SBFM and SBAM are cooperating with the SEC. Although there can be no assurance, SBFM believes that these matters are not likely to have a material adverse effect on the Funds or its ability to perform investment management services relating to the Funds.

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. 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 correspond 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

PFPC Inc., P.O. Box 9699, Providence, Rhode Island 02940-9699, is the transfer agent for the Portfolios. Under the transfer agency agreement, the 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.

CUSTODY OF ASSETS

Securities owned by the Portfolios and all cash, including proceeds from the sale of shares of the Portfolios and of securities in each Portfolio’s investment portfolio, are held by State Street Bank and Trust Company, located at 225 Franklin Street, Boston, Massachusetts 02110, 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 REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP, 345 Park Avenue, New York, NY 10154 has been selected as the Trust’s independent registered public accounting firm to audit and report on the financial statements and financial highlights of the Trust for its fiscal year ending October 31, 2006.

56

SHAREHOLDER AND TRUSTEE RESPONSIBILITY

The Trust is an entity of the type commonly known as a “Massachusetts business trust.” Under Massachusetts law, shareholders of such a business trust may, under certain circumstances, be held personally liable as partners for its obligations and liabilities. However, the Declaration of Trust of the Trust contains an express disclaimer of shareholder liability for acts or obligations of the Trust and provides for indemnification and reimbursement of expenses out of Trust property for any shareholder held personally liable for the obligations of the Trust. The Declaration of Trust of the Trust also provides that the Trust may maintain insurance (e.g., fidelity bonding and errors and omissions insurance) for the protection of the Trust, its shareholders, Trustees, Trustees Emeritus, officers, employees and agents covering possible tort and other liabilities. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which both inadequate insurance existed and the Trust itself was unable to meet its obligations.

The Trust’s Declaration of Trust further provides that obligations of the Trust are not binding upon the Trustees individually but only upon the property of the Trust and that the Trustees will not be liable for any action or failure to act, but nothing in the Declaration of Trust of the Trust protects a Trustee against any liability to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office.

ABOUT THE TRUST

The Trust was organized on January 29, 1987 under the laws of The Commonwealth of Massachusetts. As of December 31, 1997, the name of the Trust was changed from the Common Sense Funds Trust to Concert Investment Series^®, and then to Smith Barney Investment Series on September 11, 2000. The Trust is a diversified, open-end management investment company. Each Portfolio is a series of the Trust. Prior to May 12, 2003, the SB Government Portfolio was known as Smith Barney Government Portfolio. Prior to November 29, 2001, the Smith Barney Government Portfolio was known as the Select Government Portfolio. Prior to May 1, 2001, the Smith Barney Premier Selections All Cap Growth Portfolio was known as the Select Mid Cap Portfolio, and the Smith Barney Growth and Income Portfolio was known as the Select Growth and Income Portfolio.

The Trust’s Declaration of Trust permits the Trust’s Board of Trustees to issue an unlimited number of full and fractional shares of beneficial interest (par value $0.00001 per share) of each series and to divide or combine the shares of any series into a greater or lesser number of shares of that series without thereby changing the proportionate beneficial interests in that series and to divide such shares into classes. The Trust has reserved the right to create and issue additional series and classes of shares or to classify or reclassify outstanding shares. The Trust also reserves the right, subject to the 1940 Act, to modify the preferences, voting powers, rights and privileges of shares of each class without shareholder approval. Shares of each series of the Trust participate equally in the earnings, dividends and distribution of net assets of the particular series upon liquidation or dissolution (except for any differences among classes of shares of a series). Shareholders of all series of the Trust generally will vote together on all matters except when the Trustees determine that only shareholders of particular series or classes are affected by a particular matter or when applicable law requires shareholders to vote separately by series or class.

Subject to applicable law, the Trust may involuntarily redeem shareholders’ shares at any time for any reason the Trustees of the Trust deem appropriate, including for the following reasons: (i) in order to eliminate small accounts for administrative efficiencies and cost savings, (ii) the failure of a shareholder to supply certain information such as a tax identification number if required to do so, or to provide data sufficient to verify such information (iii) to protect the tax status of a Portfolio if necessary, (iv) failure of a shareholder to meet or maintain the qualifications for ownership of a particular class of shares; (v) the failure of a shareholder to pay when due for the purchase of shares and (vi) to eliminate ownership of shares by a particular shareholder when a Portfolio determines pursuant to adopted procedures that the particular shareholder’s ownership is not in the best interests of the other shareholders of a Portfolio.

57

The holders of shares are required to disclose information on direct or indirect ownership of Portfolio shares as may be required to comply with various laws applicable to a Portfolio, and ownership of Portfolio shares may be disclosed by the Portfolio if so required by law or regulation.

Each shareholder of a Portfolio is entitled to one vote for each dollar of net asset value (number of shares of the Portfolio owned times net asset value per share) of the Portfolio, on each matter on which the shareholder is entitled to vote. Each fractional dollar amount is entitled to a proportionate fractional vote. Except when a larger vote is required by applicable law, a majority of the voting power of the shares voted in person or by proxy on a matter will decide that matter and a plurality of the voting power of the shares voted in person or by proxy will elect a Trustee. Shareholders in the Trust do not have cumulative voting rights. The Trust is not required to hold and has no present intention of holding annual meetings of shareholders, but the Trust will hold special meetings of a Portfolio’s shareholders when in the judgment of the Trustees it is necessary or desirable to submit matters for a shareholder vote.

Shareholders have, under certain circumstances (e.g., upon the application and submission of certain specified documents to the Trustees by a specified number of shareholders), the right to communicate with other shareholders in connection with requesting a meeting of shareholders for the purpose of removing one or more Trustees. Except in limited circumstances, the Trustees may, without any shareholder vote, amend or otherwise supplement the Trust’s Declaration of Trust.

The Trust’s Declaration of Trust provides that, at any meeting of shareholders of the Trust or of any series of the Trust, a shareholder servicing agent may vote any shares of which it is the holder of record and for which it does not receive voting instructions proportionately in accordance with the votes cast by holders of all shares otherwise represented at the meeting in person or by proxy as to which such shareholder servicing agent is the agent at record. Shares have no preference, pre-emptive, conversion or similar rights except as the Trustees may otherwise determine. Shares, when issued, are fully paid and non-assessable, except as set forth below.

The Trust or any series or class of the Trust, may merge or consolidate or may sell, lease or exchange all or substantially all of its assets if authorized at any meeting of shareholders representing a majority of the voting power of the Trust (or of the affected series or class) voting as a single class, or by written consent, without a meeting, of the holders of shares representing a majority of the voting power of the outstanding shares of the Trust (or of the affected series or class) voting as a single class. The Trust or any series or class may reincorporate or reorganize (but not with another operating entity) without any shareholder vote. The Trust may be terminated at any time by a vote of a majority of the voting power of the Trust or by the Trustees by written notice to the shareholders. Any series of the Trust, or any class of any series, may be terminated at any time by a vote of a majority of the outstanding voting power of that series or class, or by the Trustees by written notice to the shareholders of that series or class. If not so terminated, the Trust will continue indefinitely.

The Trust’s Declaration of Trust provides that shareholders may not bring suit on behalf of a Portfolio without first requesting that the Trustees bring such suit. Trustees are not considered to have a personal financial interest by virtue of being compensated for their services as Trustees or as trustees of funds with the same or an affiliated investment adviser or distributor.

The Trust’s Declaration of Trust provides that by becoming a shareholder of a Portfolio, each shareholder shall be expressly held to have assented to and agreed to be bound by the provisions of the Declaration.

GOVERNMENT PORTFOLIO

The Government Portfolio now offers two classes of shares—Smith Barney Class A and Salomon Brothers Class B. On May 5, 2003, all outstanding shares of the SB Government Portfolio were designated Class A shares. Accordingly, all references to Government Portfolio shares outstanding prior to that date are now references to Class A shares. On July 11, 2003, Class A shares were renamed Smith Barney Class A shares. Class B shares

58

were offered beginning July 22, 2003. Each class of shares of the Government Portfolio represents an interest in the same portfolio of investments. Share certificates will not be issued.

Each class bears its own class expenses. As a result of the differences in the expenses borne by each class of shares, net income per share, dividends per share and net asset value per share will vary for each class of shares, and the Government Portfolio will calculate net asset value for each class of shares separately. There are no conversion, preemptive or other subscription rights.

Shareholders of each class will share expenses proportionately for services that are received equally by all shareholders. A particular class of shares will bear only those expenses that are directly attributable to that class, where the type or amount of services received by a class varies from one class to another. The expenses that may be borne by specific classes of shares may include (i) transfer agency fees attributable to a specific class of shares, (ii) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses and proxy statements to current shareholders of a specific class of shares, (iii) SEC and state securities registration fees incurred by a specific class, (iv) the expense of administrative personnel and services required to support the shareholders of a specific class of shares, (v) litigation or other legal expenses relating to a specific class of shares, (vi) accounting expenses relating to a specific class of shares and (vii) any additional incremental expenses subsequently identified and determined to be properly allocated to one or more classes of shares.

FINANCIAL STATEMENTS

The audited financial statements of the Trust (Statement of Assets and Liabilities at October 31, 2005, Statement of Operations for the year ended October 31, 2005, Statements of Changes in Net Assets for the years ended October 31, 2005 and 2004, Financial Highlights for each of the years in the five-year period ended October 31, 2005 and Notes to Financial Statements, along with the Report of Independent Registered Public Accounting Firm) each of which is included in the Annual Report to Shareholders of the Trust, are incorporated by reference into this Statement of Additional Information (filed on January 9, 2006; accession number 0001193125-06-003414).

59

APPENDIX A

RATINGS OF BONDS, NOTES AND COMMERCIAL PAPER

Moody’s Investors Service, Inc.

Aaa—Obligations rated Aaa are judged to be of the best quality with minimal credit risk.

Aa—Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

A—Obligations rated A are considered upper-medium grade and are subject to low credit risk.

Baa—Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.

Ba—Obligations rated Ba are judged to have speculative and are subject to substantial credit risk.

B—Obligations rated B are considered speculative and are subject to high credit risk.

Caa—Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.

Ca—Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

C—Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classifications Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that 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 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.

BBB—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.

BB, B, CCC, CC, and C—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.

A-1

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.—An issuer designated “N.R.” is not rated.

Fitch Ratings

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.

P-1—Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

P-2—Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

Standard & Poor’s

A-1—A short-term obligation rated A-1 is rated in the highest category by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.

A-2

A-2—A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.

A-3—A short-term obligation rated ‘A-3’ 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.

Fitch Ratings

Fitch’s short-term ratings has a time horizon of less than 12 months for most obligations, or up to three years, for U.S. public finance securities, and thus places greater emphasis on the liquidity necessary to meet financial commitments 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 timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade.

A-3

APPENDIX B

DESCRIPTION OF PROXY VOTING POLICIES AND PROCEDURES

PROXY VOTING GUIDELINES & PROCEDURES SUMMARY

Concerning Citigroup Asset Management¹(CAM)

Proxy Voting Policies and Procedures

The following is a brief overview of the Proxy Voting Policies and Procedures (the “Policies”) that CAM has adopted to seek to ensure that CAM votes proxies relating to equity securities in the best interest of clients.

CAM votes proxies for each client account with respect to which it has been authorized to vote proxies. In voting proxies, CAM is guided by general fiduciary principles and seeks to act prudently and solely in the best interest of clients. CAM attempts to consider all factors that could affect the value of the investment and will vote proxies in the manner that it believes will be consistent with efforts to maximize shareholder values. CAM may utilize an external service provider to provide it with information and/or a recommendation with regard to proxy votes. However, the CAM adviser (business unit) continues to retain responsibility for the proxy vote.

In the case of a proxy issue for which there is a stated position in the Policies, CAM generally votes in accordance with such stated position. In the case of a proxy issue for which there is a list of factors set forth in the Policies that CAM considers in voting on such issue, CAM votes on a case-by-case basis in accordance with the general principles set forth above and considering such enumerated factors. In the case of a proxy issue for which there is no stated position or list of factors that CAM considers in voting on such issue, CAM votes on a case-by-case basis in accordance with the general principles set forth above. Issues for which there is a stated position set forth in the Policies or for which there is a list of factors set forth in the Policies that CAM considers in voting on such issues fall into a variety of categories, including election of directors, ratification of auditors, proxy and tender offer defenses, capital structure issues, executive and director compensation, mergers and corporate restructurings, and social and environmental issues. The stated position on an issue set forth in the Policies can always be superseded, subject to the duty to act solely in the best interest of the beneficial owners of accounts, by the investment management professionals responsible for the account whose shares are being voted. Issues applicable to a particular industry may cause CAM to abandon a policy that would have otherwise applied to issuers generally. As a result of the independent investment advisory services provided by distinct CAM business units, there may be occasions when different business units or different portfolio managers within the same business unit vote differently on the same issue. A CAM business unit or investment team (e.g. CAM’s Social Awareness Investment team) may adopt proxy voting policies that supplement these policies and procedures. In addition, in the case of Taft-Hartley clients, CAM will comply with a client direction to vote proxies in accordance with Institutional Shareholder Services’ (ISS) PVS Voting Guidelines, which ISS represents to be fully consistent with AFL-CIO guidelines.

¹ Citigroup Asset Management comprises CAM North America, LLC, Salomon Brothers Asset Management Inc, Smith Barney Fund Management LLC, and other affiliated investment advisory firms. On December 1, 2005, Citigroup Inc. (“Citigroup”) sold substantially all of its worldwide asset management business, Citigroup Asset Management, to Legg Mason, Inc. (“Legg Mason”). As part of this transaction, CAM North America, LLC, Salomon Brothers Asset Management Inc and Smith Barney Fund Management LLC became wholly-owned subsidiaries of Legg Mason. Under a licensing agreement between Citigroup and Legg Mason, the names of CAM North America, LLC, Salomon Brothers Asset Management Inc, Smith Barney Fund Management LLC and their affiliated advisory entities, as well as all logos, trademarks, and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason. Citi Marks include, but are not limited to, “Citigroup Asset Management,” “Salomon Brothers Asset Management” and “CAM”. All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement. Legg Mason and its subsidiaries, including CAM North America, LLC, Salomon Brothers Asset Management Inc, and Smith Barney Fund Management LLC are not affiliated with Citigroup.

B-1

In furtherance of CAM’s goal to vote proxies in the best interest of clients, CAM follows procedures designed to identify and address material conflicts that may arise between CAM’s interests and those of its clients before voting proxies on behalf of such clients. To seek to identify conflicts of interest, CAM periodically notifies CAM employees in writing that they are under an obligation (i) to be aware of the potential for conflicts of interest on the part of CAM with respect to voting proxies on behalf of client accounts both as a result of their personal relationships and due to special circumstances that may arise during the conduct of CAM’s business, and (ii) to bring conflicts of interest of which they become aware to the attention of CAM’s compliance personnel. CAM also maintains and considers a list of significant CAM relationships that could present a conflict of interest for CAM in voting proxies. CAM is also sensitive to the fact that a significant, publicized relationship between an issuer and a non-CAM Legg Mason affiliate might appear to the public to influence the manner in which CAM decides to vote a proxy with respect to such issuer. Absent special circumstances or a significant, publicized non-CAM Legg Mason affiliate relationship that CAM for prudential reasons treats as a potential conflict of interest because such relationship might appear to the public to influence the manner in which CAM decides to vote a proxy, CAM generally takes the position that relationships between a non-CAM Legg Mason affiliate and an issuer (e.g. investment management relationship between an issuer and a non-CAM Legg Mason affiliate) do not present a conflict of interest for CAM in voting proxies with respect to such issuer. Such position is based on the fact that CAM is operated as an independent business unit from other Legg Mason business units as well as on the existence of information barriers between CAM and certain other Legg Mason business units.

CAM maintains a Proxy Voting Committee to review and address conflicts of interest brought to its attention by CAM compliance personnel. A proxy issue that will be voted in accordance with a stated CAM position on such issue or in accordance with the recommendation of an independent third party is not brought to the attention of the Proxy Voting Committee for a conflict of interest review because CAM’s position is that to the extent a conflict of interest issue exists, it is resolved by voting in accordance with a pre-determined policy or in accordance with the recommendation of an independent third party. With respect to a conflict of interest brought to its attention, the Proxy Voting Committee first determines whether such conflict of interest is material. A conflict of interest is considered material to the extent that it is determined that such conflict is likely to influence, or appear to influence, CAM’s decision-making in voting proxies. If it is determined by the Proxy Voting Committee that a conflict of interest is not material, CAM may vote proxies notwithstanding the existence of the conflict.

If it is determined by the Proxy Voting Committee that a conflict of interest is material, the Proxy Voting Committee is responsible for determining an appropriate method to resolve such conflict of interest before the proxy affected by the conflict of interest is voted. Such determination is based on the particular facts and circumstances, including the importance of the proxy issue and the nature of the conflict of interest.

B-2

EX-99.17.I

EXPERIENCE

ANNUAL REPORT

OCTOBER 31, 2005

Smith Barney Investment Series

Smith Barney Premier Selections All Cap Growth Portfolio

Smith Barney Dividend Strategy Portfolio

Smith Barney Growth and Income Portfolio

SB Government Portfolio

INVESTMENT PRODUCTS: NOT FDIC INSURED Ÿ NO BANK GUARANTEE Ÿ MAY LOSE VALUE

Smith Barney Investment Series

Annual Report Ÿ October 31, 2005

What’s

Inside

Letter from the Chairman	1
Smith Barney Premier Selections All Cap Growth Portfolio
Manager Overview	5
Fund at a Glance	8
Historical and Fund Performance	9
Smith Barney Dividend Strategy Portfolio
Manager Overview	11
Fund at a Glance	14
Historical and Fund Performance	15
Smith Barney Growth and Income Portfolio
Manager Overview	16
Fund at a Glance	19
Historical and Fund Performance	20
SB Government Portfolio
Manager Overview	21
Fund at a Glance	25
Historical and Fund Performance	26
Fund Expenses	27
Schedules of Investments	29
Statements of Assets and Liabilities	47
Statements of Operations	48
Statements of Changes in Net Assets	49
Financial Highlights	51
Notes to Financial Statements	55
Report of Independent Registered Public Accounting Firm	67
Board Approval of Management Agreement	68
Additional Information	94
Additional Shareholder Information	101
Important Tax Information	103

Under a licensing agreement between Citigroup and Legg Mason, the names of funds, the names of any classes of shares of funds, and the names of investment advisers of funds, as well as all logos, trademarks and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason. Citi Marks include, but are not limited to, “Smith Barney,” “Salomon Brothers,” “Citi,” “Citigroup Asset Management,” and “Davis Skaggs Investment Management”. Legg Mason and its affiliates, as well as the Funds’ investment manager, are not affiliated with Citigroup.

All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement.

Letter from the Chairman

R. JAY GERKEN

Chairman, President and

Chief Executive Officer

Dear Shareholder,

The U.S. economy was surprisingly resilient during the fiscal year. While surging oil prices, rising interest rates and the impact of Hurricanes Katrina and Rita threatened to derail economic expansion, growth remained solid throughout the period. After a 3.3% advance in the second quarter of 2005, third quarter gross domestic product (“GDP”)ⁱ growth grew to 4.3%, marking the tenth consecutive quarter in which GDP growth grew 3.0% or more.

As expected, the Federal Reserve Board (“Fed”)ⁱⁱ continued to raise interest rates in an attempt to ward off inflation. After raising rates three times from June 2004 through September 2004, the Fed increased its target for the federal funds rateⁱⁱⁱ in 0.25% increments eight additional times over the reporting period. The Fed again raised rates in early November, after the Funds’ reporting period had ended. All told, the Fed’s twelve rate hikes have brought the target for the federal funds rate from 1.00% to 4.00%. This represents the longest sustained Fed tightening cycle since 1976-1979.

During the 12-month period covered by this report, the U.S. stock market generated solid results, with the S&P 500 Index^iv returning 8.72%. Generally positive economic news, relatively benign core inflation and strong corporate profits supported the market during much of the period. Looking at the fiscal year as a whole, mid-cap stocks generated superior returns, with the Russell Midcap^v, Russell 1000^vi, and Russell 2000^vii Indexes returning 18.09%, 10.47%, and 12.08%, respectively. From a market style perspective, value-oriented stocks significantly outperformed their growth counterparts, with the Russell 3000 Value^viii and Russell 3000 Growth^ix Indexes returning 11.96% and 8.99%, respectively.

During much of the fiscal year, the fixed income market confounded investors as short-term interest rates rose in concert with the Fed rate tightening, while longer-term rates, surprisingly, declined. However, due to a spike late in the period, the 10-year Treasury yield was 4.56% on October 31, 2005, versus 4.11% when the period began. Nevertheless, this was still lower than its yield of 4.62% when the Fed began its tightening cycle on June 30, 2004. Looking at the one-year period as a whole, the overall bond market, as measured by the Lehman Brothers Aggregate Bond Index^x, returned 1.13%.

Please read on for a more detailed look at prevailing economic and market conditions during the Funds’ fiscal year and to learn how those conditions have affected fund performance.

Smith Barney Investment Series          1

Performance of the Funds1 as of October 31, 2005 (unaudited)
	6 Months	12 Months
Smith Barney Premier Selections All Cap Growth Portfolio	10.07%	9.97%
Russell 1000 Growth Index	7.59%	8.81%
Russell 2000 Growth Index	13.15%	10.91%
S&P MidCap 400 Index	11.33%	17.65%
Lipper Variable Multi-Cap Growth Funds Category Average	12.84%	14.64%
Smith Barney Dividend Strategy Portfolio	0.70%	2.23%
S&P 500 Index	5.27%	8.72%
Lipper Variable Large-Cap Core Funds Category Average	6.06%	9.39%
Smith Barney Growth and Income Portfolio	4.64%	6.37%
S&P 500 Index	5.27%	8.72%
Lipper Variable Large-Cap Core Funds Category Average	6.06%	9.39%
SB Government Portfolio	-0.26%	0.41%
Lehman Brothers Government Bond Index	0.07%	0.94%
Lipper Variable General U.S. Government Funds Category Average	-0.11%	1.49%

¹ The Funds are underlying investment options of various variable annuity and variable life insurance products. A variable annuity product is a contract issued by an insurance company where the annuity premium (a set amount of dollars) is immediately turned into units of a portfolio of securities. Upon retirement, the policyholder is paid according to accumulated units whose dollar value varies according to the performance of the securities within the sub accounts. Its objective is to preserve, through investment, the purchasing value of the annuity, which otherwise is subject to erosion through inflation. The Funds’ performance returns do not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity contracts, such as administrative fees, account charges, and surrender charges which, if reflected, would reduce the performance of the Funds. Past performance is no guarantee of future results.

2         Smith Barney Investment Series

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost.

Fund returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the deduction of all fund expenses.

Lipper, Inc. is a major independent mutual-fund tracking organization.

Returns are based on the period ended October 31, 2005, calculated among the 117 funds for the six-month period and among the 116 funds for the 12-month period in the Lipper Variable Multi-Cap Growth Funds Category, including the reinvestment of all distributions, including returns of capital, if any.

Returns are based on the period ended October 31, 2005, calculated among the 228 funds for the six-month period and among the 227 funds for the 12-month period in the Lipper Variable Large-Cap Core Funds Category, including the reinvestment of all distributions, including returns of capital, if any.

Returns are based on the period ended October 31, 2005, calculated among the 62 funds for the six-month period and among the 61 funds for the 12-month period in the Lipper Variable General U.S. Government Funds Category, including the reinvestment of all distributions, including returns of capital, if any.

Special Shareholder Notice

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management, to Legg Mason, Inc. (“Legg Mason”). As a result, the Funds’ investment advisor, Smith Barney Fund Management LLC (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a whole-owned subsidiary of Legg Mason. Completion of the sale caused the existing investment management contracts to terminate. Each Fund’s shareholders previously approved a new investment management contract between the Funds and the Manager, which became effective December 1, 2005.

Information About Your Funds

As you may be aware, several issues in the mutual fund industry have recently come under the scrutiny of federal and state regulators. The Funds’ Manager and some of its affiliates have received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the Funds’ response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The Funds have been informed that the Manager and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.

Important information concerning the Funds and their Manager with regard to recent regulatory developments is contained in the Notes to Financial Statements included in this report.

Smith Barney Investment Series          3

As always, thank you for your confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.

Sincerely,

R. Jay Gerken, CFA

Chairman, President and Chief Executive Officer

December 1, 2005

All index performance reflects no deduction for fees, expenses or taxes. Please note an investor cannot invest directly in an index.

ⁱ Gross domestic product is a market value of goods and services produced by labor and property in a given country.

ⁱⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱⁱ The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.

^iv The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

^v The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index whose average market capitalization was approximately $4.7 billion as of 6/24/05.

^vi The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.

^vii The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

^viii The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.)

^ix The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

^x The Lehman Brothers Aggregate Bond Index is a broad-based bond index comprised of Government, Corporate, Mortgage and Asset-backed issues, rated investment grade or higher, and having at least one year to maturity.

4         Smith Barney Investment Series

Smith Barney Premier Selections All Cap Growth Portfolio

Manager Overview

Q. What were the overall market conditions during the Fund’s reporting period?

A. Despite some headwinds, the domestic economy continued to expand during the 12-month reporting period as gross domestic product (“GDP”)ⁱ grew in excess of 3% during the first three quarters 2005 and the major equity indexes advanced at respectable rates. The major roadblocks to progress were the same for much of the past year: the Federal Reserve Board (“Fed”)ⁱⁱ continued to raise interest rates; oil and energy prices reached new record highs; and weather-related catastrophes took a heavy human and economic toll in the Gulf region. The price of oil skyrocketed throughout the year, from $43 per barrel at the start of 2005 to a high of just under $70 at the end of August, as a result of tension in the Middle East, increased demand from China, labor strikes in Venezuela, and weather-related supply interruptions. During this period, the Fed continued its tightening policy with twelve consecutive federal funds rateⁱⁱⁱ hikes occurring between June 2004 (before the start of the annual period) and November 2005. The Gulf region hurricanes added insult to injury for the consumer and certain business segments already feeling the strain from higher energy prices and interest rates. Despite this difficult economic environment, equities were able to advance, in part due to attractive valuations and strong corporate profits.

Performance Review

For the 12 months ended October 31, 2005, the Smith Barney Premier Selections All Cap Growth Portfolio returned 9.97%. In comparison, the Fund’s unmanaged benchmarks, the Russell 1000 Growth Index,^iv the Russell 2000 Growth Index,^v and the S&P MidCap 400 Index,^vi , returned 8.81%, 10.91% and 17.65%, respectively, for the same period. The Lipper Variable Multi-Cap Growth Funds Category Average¹ increased 14.64% over the same time frame.

Q. What were the most significant factors affecting the Fund’s Performance?

A. During the annual period, the Fund’s strongest returns came from the overweighted energy sector, followed by positive performance in the underweighted consumer staples and the overweighted financials, consumer discretionary and the underweighted industrials sectors. The Fund had losses for the period in the overweighted materials sector and the underweighted utilities sector.

     What were the leading contributors to performance?

A. In terms of individual stock holdings, the leading contributors to performance included positions in Chico’s FAS, Inc. in consumer discretionary, Gillette Co. in consumer staples (which was acquired by Procter & Gamble Co. during the period), SanDisk Corp. and Motorola Inc., both in information technology, and Amgen Inc. in health care.

¹ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 116 funds in the Fund’s Lipper category.

Smith Barney Investment Series 2005 Annual Report         5

     What were the leading detractors from performance?

A. In terms of individual stock holdings, the leading detractors from performance included positions in Pfizer Inc., Medicis Pharmaceutical Corp., and Centene Corp., all in health care, DreamWorks Animation SKG, Inc. in consumer discretionary and Alliance Data Systems Corp. in information technology.

Q. Were there any significant changes made to the Fund during the reporting period?

A. In May of 2005, in the middle of the annual period, the Fund’s previous Portfolio Manager for mid-cap equities was replaced with a new team of managers that restructured the mid-cap segment of the Fund, replacing many holdings to better reflect the new team’s investment philosophy and process. The mid-cap segment of the portfolio was brought into better alignment with the new Managers’ emphasis on companies that generate abundant cash flow, have strong or improving balance sheets, and/or whose share prices reflect unappreciated growth expectations. The Fund’s returns for the most recent six-month period largely reflect the current Fund and Portfolio Management, as opposed to the returns for the full 12-month period, which include returns achieved under the previous mid-cap manager, prior to the restructuring.

At the close of the period, the Fund was overweight the consumer discretionary, energy, financials and utilities sectors, underweight the consumer staples, health care, information technology, industrials and materials sectors, with no significant holdings in the telecommunications services sector.

Thank you for your investment in the Smith Barney Premier Selections All Cap Growth Portfolio. As ever, we appreciate that you have chosen us to manage your assets, and we remain focused on achieving the Fund’s investment goals.

Sincerely,

Alan J. Blake	Timothy Woods, CFA
Portfolio Manager	Portfolio Manager
Brian Angerame Portfolio Manager	Derek Deutsch, CFA Portfolio Manager	Peter Stournaras, CFA Portfolio Manager

December 1, 2005

6         Smith Barney Investment Series 2005 Annual Report

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of October 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: Merrill Lynch and Co. Inc. (2.5%), Texas Instruments Inc. (2.5%), Amgen Inc. (2.3%), Bed, Bath & Beyond Inc. (2.2%), Motorola Inc. (2.2%), Home Depot Inc. (2.2%), Amazon.com Inc. (2.2%), Time Warner Inc. (2.1%), Johnson & Johnson (2.0%) and Microsoft Corp. (2.0%). Please refer to pages 29 through 34 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Consumer Discretionary (24.0%), Information Technology (21.2%), Health Care (18.8%), Financials (12.3%) and Consumer Staples (7.4%). The Fund’s portfolio composition is subject to change at any time.

RISKS: The Fund may invest in small- and mid-cap companies that may involve a higher degree of risk and volatility than investments in large-cap companies. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on fund performance. The Fund may invest in foreign securities that may be subject to certain risks not associated with domestic investing, such as currency fluctuations, and changes in political and economic conditions. These risks are magnified in emerging or developing markets. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note an investor cannot invest directly in an index.

ⁱ Gross domestic product is a market value of goods and services produced by labor and property in a given country.

ⁱⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱⁱ The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.

^iv The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

^v The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.

^vi The S&P MidCap 400 Index is a market-value weighted index which consists of 400 domestic stocks chosen for market size, liquidity, and industry group representation.

Smith Barney Investment Series 2005 Annual Report         7

Fund at a Glance (unaudited)

Smith Barney Premier Selections All Cap Growth Portfolio

8         Smith Barney Investment Series 2005 Annual Report

Smith Barney Premier Selections All Cap Growth Portfolio*

Historical Performance (unaudited)

Value of $10,000 Invested in the Smith Barney Premier Selections All Cap Growth Portfolio vs. S&P MidCap 400 Index, Russell 1000 Growth Index and Russell 2000 Growth Index^† (September 1999 — October 2005)

† Hypothetical illustration of $10,000 invested on September 15, 1999 (commencement of operations), assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2005. Before May 1, 2001, the Portfolio was known as the Select Mid Cap Portfolio and had a different investment style. The S&P MidCap 400 Index is a widely recognized index of 400 medium-capitalization stocks. Figures for the S&P MidCap 400 Index include reinvestment of dividends. The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities. The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.) The Indices are unmanaged and are not subject to the same management and trading expenses of a mutual fund. Please note that an investor cannot invest directly in an index.

* Before May 1, 2001, the Portfolio was known as Select Mid Cap Portfolio and had a different investment style.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

Smith Barney Investment Series 2005 Annual Report         9

Fund Performance

Average Annual Total Returns‡ (unaudited)
Twelve Months Ended 10/31/05	9.97	%
Five Years Ended 10/31/05	(3.00	)
9/15/99** through 10/31/05	3.64

Cumulative Total Returns‡ (unaudited)
9/15/99** through 10/31/05	24.50	%

‡ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

** Commencement of operations.

10         Smith Barney Investment Series 2005 Annual Report

Smith Barney Dividend Strategy Portfolio

Manager Overview

Q. What were the overall market conditions during the Fund’s reporting period?

A. Despite a number of setbacks and obstacles, the domestic economy continued to expand during the 12-month reporting period. The major roadblocks to progress were the same for much of the past year: the Federal Reserve Board (“Fed”)ⁱ continued to raise interest rates; oil and energy prices reached new record highs; and the effects of the hurricanes on the Gulf Coast. The price of oil skyrocketed throughout the year, from $43 per barrel at the start of 2005 to a high of just under $70 at the end of August, as a result of tension in the Middle East, increased demand from China, labor strikes in Venezuela and weather-related supply interruptions. Several of these factors, especially higher energy prices, have weighed heavily on the consumer resulting in some reining-in of consumer spending. The housing market continued at a torrid pace throughout the year, showing signs of cooling only in the last few months, despite increasing short-term interest rates throughout the year and recent credit tightening from banks. The war in Iraq continued to put a strain on international relations and domestic spending. The continued dual deficits (both trade and budget deficits) have become a concern to the market with regard to their effect on long-term growth.

While the market experienced some short-term volatility during the period, especially in the first quarter of 2005, the domestic stock market in general registered gains over the past twelve months. However, most of the gains occurred at the end of 2004 following the Presidential election. With the uncertainty from the election removed, the S&P 500 Indexⁱⁱ rallied over 7% from Election Day until the end of year. But in 2005, the equity market has stayed within a narrow range, with the S&P 500 Index ending the third quarter of 2005 virtually flat for the year. In general, market leadership over the period came from the mid- and small-cap stocks, as large-caps had positive returns but lagged their smaller counterparts, while value-oriented stocks continued to outperform growth-oriented stocks.

Performance Review

For the 12 months ended October 31, 2005, the Smith Barney Dividend Strategy Portfolio returned 2.23%. In comparison, the Fund’s unmanaged benchmark, the S&P 500 Index returned 8.72% for the same period. The Lipper Variable Large-Cap Core Funds Category Average¹ increased 9.39% over the same time frame.

¹ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 227 funds in the Fund’s Lipper category.

Smith Barney Investment Series 2005 Annual Report         11

Q. What were the most significant factors affecting the Fund’s Performance?

A. In general economic terms, many of the high-dividend paying stocks that the Fund favors lagged behind other segments of the market during the period. Specifically, the Fund’s overweights and stock selection in industrials, materials and selected health care sector stocks detracted from relative performance. In the slightly underweighted energy sector, the Fund’s investments in large integrated oil companies performed well but lagged the performance of other energy sector stocks that pay little or no dividends.

     What were the leading contributors to performance?

A. In terms of individual stock holdings, the leading contributors to performance included positions in GlaxoSmithKline PLC and Wyeth in health care, Chubb Corp. in financials, BP PLC in energy and Albertson’s, Inc. in consumer staples.

     What were the leading detractors from performance?

A. In terms of individual stock holdings, the leading detractors from performance included positions in Pfizer Inc. in health care, Pearson PLC in consumer discretionary, Alcoa Inc. in materials, Verizon Communications Inc. in telecommunication services and Gannett Co. Inc. in consumer discretionary.

Q. Were there any significant changes made to the Fund during the reporting period?

A. At the start of the 12-month reporting period, the Smith Barney Large Cap Core Portfolio was renamed Smith Barney Dividend Strategy Portfolio and Portfolio Managers Scott Glasser and Peter Hable became co-managers for the Fund. The investment objective and investment policy of the Fund were also modified: The Fund’s current objective is to seek capital appreciation, principally through investments in dividend-paying stocks and the investment policy of the Fund is to invest, under normal market conditions, at least 80% of assets in dividend-paying stocks. The Fund is permitted to invest up to 20% of assets in other types of securities, including non-dividend paying companies, preferred stocks and fixed income securities.

In-line with these substantial changes, at the start of the annual period a significant portion of the Fund’s existing portfolio positions were closed and a number of new positions were established by the new management team. At the close of the period, the Fund was overweight materials, industrials, health care and consumer staples, market weight telecommunication services, and underweight information technology, consumer discretionary, financials, energy and utilities.

12         Smith Barney Investment Series 2005 Annual Report

Thank you for your investment in the Smith Barney Dividend Strategy Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.

Sincerely,

Scott K. Glasser,
Portfolio Manager Peter J. Hable,
Portfolio Manager Peter C. Stournaras
Portfolio Manager

December 1, 2005

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Health Care (15.7%), Industrials (14.8%), Financials (14.7%), Consumer Staples (11.3%) and Materials (9.2%). The Fund’s portfolio composition is subject to change at any time.

RISKS: The Fund may invest in foreign securities that may be subject to certain risks not associated with domestic investing, such as currency fluctuations, and changes in political and economic conditions. The Fund may engage in active and frequent trading, resulting in increased transaction costs, which could detract from the Fund’s performance. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses and have a potentially large impact on fund performance. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱ The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

Smith Barney Investment Series 2005 Annual Report         13

Fund at a Glance (unaudited)

Smith Barney Dividend Strategy Portfolio

14         Smith Barney Investment Series 2005 Annual Report

Smith Barney Dividend Strategy Portfolio*

Historical Performance (unaudited)

Value of $10,000 Invested in the Smith Barney Dividend Strategy Portfolio vs. S&P 500 Index^† (September 1999 — October 2005)

† Hypothetical illustration of $10,000 invested on September 15, 1999 (commencement of operations), assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2005. Before November 1, 2004, the Portfolio was known as Smith Barney Large Cap Core Portfolio and had a different investment style. The S&P 500 Index is an index of widely held common stocks listed on the New York and American Stock Exchanges and the over-the-counter markets. Figures for the S&P 500 Index include reinvestment of dividends. The Index is unmanaged and is not subject to the same management and trading expenses of a mutual fund. Please note that an investor cannot invest directly in an index.

* Before November 1, 2004, the Portfolio was known as Smith Barney Large Cap Core Portfolio and had a different investment style.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

Fund Performance

Average Annual Total Returns‡ (unaudited)
Twelve Months Ended 10/31/05	2.23	%
Five Years Ended 10/31/05	(6.05	)
9/15/99** through 10/31/05	(1.90	)

Cumulative Total Return‡ (unaudited)
9/15/99** through 10/31/05	(11.07	)%

‡ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

** Commencement of operations.

Smith Barney Investment Series 2005 Annual Report         15

Smith Barney Growth and Income Portfolio

Manager Overview

Q. What were the overall market conditions during the Fund’s reporting period?

A. The market was led by the energy related (energy and utilities) and the defensive (consumer staples, health care and financials) sectors. Oil and natural gas prices rose through the period, hitting all time highs in late August 2005. Supply/demand fundamentals have been tight for energy for the past twenty-four months, but hit a peak in August from the damage done to Gulf of Mexico production facilities by Hurricanes Katrina and Rita. Energy fundamentals appear balanced to us, with strong demand growth in China and India offset by lower gasoline demand in the U.S. due to higher prices. The Federal Reserve Board (“Fed”)ⁱ raised interest rates 0.25% at each of the last twelve meetings. We believe that the Fed will continue to increase rates until we hit historical normal levels of real interest rates. That would entail further increases into 2006. Defensive stocks outperformed due to fears that higher oil prices and interest rates would slow economic growth.

The Chinese government partly floated its currency vs. the dollar and the Yen starting in late July. Gold prices began to rise coincident with the first floating of the Yuan.

General Motors faced two crises in 2005, first the downgrading of its credit rating to below investment grade and second the bankruptcy of Delphi Automotive, its largest parts supplier and onetime affiliate. Currently, the debt markets are pricing in a 30% probability of GM’s own bankruptcy within eighteen months. General Motors and Ford are struggling with high costs, declining market shares and a mix shift away from high profit SUV’s. The Portfolio has avoided and will continue to avoid any auto related exposure.

Performance Review

For the 12 months ended October 31, 2005, the Smith Barney Growth and Income Portfolio returned 6.37%. The Fund underperformed its unmanaged benchmark, the S&P 500 Index,ⁱⁱ which returned 8.72% for the same period. The Lipper Variable Large-Cap Core Funds Category Average¹ increased 9.39% over the same time frame.

Q. What were the most significant factors affecting the Fund’s Performance?

A. The Fund had strong performance in the health care sector. Returns were helped by over-weights in HMO’s and generic drug stocks, and an underweight in large capitalization pharmaceuticals. We believe that cost pressures and a large number of drugs coming off patent will help HMO and generic drug company earnings and hurt the earnings of the traditional pharmaceutical companies. The consumer discretionary sector returns were

¹ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 227 funds in the Fund’s Lipper category.

16         Smith Barney Investment Series 2005 Annual Report

helped by positions in Best Buy Co. Inc. and JC Penney Co. Inc., and the absence of any auto related stocks.

The Fund was hurt by poor stock picking in the technology sector. Technology appears to be seeing a changing of the guard, and the Fund owned too many of the old guard and not enough of the new. Positions in International Business Machines Corp., Dell Inc. and Nortel Networks Corp. all detracted from performance.

     What were the leading contributors to performance?

A. The biggest contributors to performance were Boeing Co., Teva Pharmaceutical Industries Ltd. and Coventry Health Care Inc. The best performing sectors were health care, consumer discretionary and industrials. Boeing was helped by large orders of the new 787 plane, while Teva benefited from anticipation of a powerful pipeline of new products to come in 2006. Coventry delivered better than expected cost savings, and saw favorable medical cost trends.

     What were the leading detractors from performance?

A. The stocks that most hurt performance were OSI Pharmaceuticals, Inc., Sara Lee Corp. and Nortel Networks Corp. The worst performing sectors were technology, consumer staples and materials. OSI had unfavorable tests of its Tarceva drug, and made what was in the eyes of Wall Street a poor acquisition of Eyetech. Sara Lee’s turnaround under new CEO Brenda Barnes took longer than expected. Her performance at PepsiCo Inc. gives us confidence that she will be able to unlock significant hidden value at Sara Lee. Sales growth at Nortel was insufficient to create earnings leverage.

Q. Were there any significant changes made to the Fund during the reporting period?

A. The Portfolio is higher growth and higher quality than it was coming into 2005. U.S. corporate operating margins are now the highest since the late 1960’s. We believe that companies who derive their growth from revenues (typically growth stocks) will show higher earnings per share growth than companies who derive their earnings growth from operating margin expansion (typically value stocks). Many companies with strong franchises, balance sheets and returns, such as Microsoft Corp., Wal-Mart Stores Inc. and Ecolab Inc., which historically have looked expensive to us, now appear to us to trade at attractive levels.

Smith Barney Investment Series 2005 Annual Report         17

Thank you for your investment in the Smith Barney Growth and Income Portfolio. As ever, we appreciate that you have chosen us to manage your assets, and we remain focused on achieving the Fund’s investment goals.

Sincerely,

Michael A. Kagan	Kevin Caliendo
Portfolio Manager	Portfolio Manager

December 1, 2005

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Portfolio holdings and breakdowns are as of October 31, 2005 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: General Electric Co. (4.1%), Microsoft Corp. (3.6%), Boeing Co. (2.8%), Wells Fargo & Co. (2.6%), Exxon Mobil Corp. (2.5%), Sprint Nextel Corp. (2.4%), Barrick Gold Corp. (2.4%), Total SA (2.4%), JPMorgan Chase & Co. (2.2%) and PepsiCo Inc. (2.1%). Please refer to pages 40 through 44 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio manager’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Financials (20.4%), Information Technology (16.3%), Consumer Discretionary (11.3%), Health Care (11.0%) and Industrials (10.4%). The Fund’s portfolio composition is subject to change at any time.

RISKS: The Fund may invest in foreign securities, which are subject to certain risks not associated with domestic investing, such as currency fluctuations, and changes in political and economic conditions. The Fund may also invest in lower-rated, higher-yielding bonds, known as “junk bonds,” which are subject to greater credit risk, including the risk of default, than higher-rated obligations. The Fund may engage in short sales. Losses from short sales may be unlimited. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on fund performance. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱ The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

18         Smith Barney Investment Series 2005 Annual Report

Fund at a Glance (unaudited)

Smith Barney Growth and Income Portfolio

Smith Barney Investment Series 2005 Annual Report         19

Smith Barney Growth and Income Portfolio

Historical Performance (unaudited)

Value of $10,000 Invested in the Smith Barney Growth and Income Portfolio vs. S&P 500 Index^† (September 1999 — October 2005)

^† Hypothetical illustration of $10,000 invested on September 15, 1999 (commencement of operations), assuming the reinvestment of distributions, including returns of capital, if any, at net asset value through October 31, 2005. The S&P 500 Index is an index of widely held common stocks listed on the New York and American Stock Exchanges and the over-the-counter markets. Figures for the S&P 500 Index include reinvestment of dividends. The Index is unmanaged and is not subject to the same management and trading expenses of a mutual fund. Please note that an investor cannot invest directly in an index.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

Fund Performance

Average Annual Total Returns‡ (unaudited)
Twelve Months Ended 10/31/05	6.37	%
Five Years Ended 10/31/05	(1.89	)
9/15/99* through 10/31/05	(0.31	)

Cumulative Total Return‡ (unaudited)
9/15/99* through 10/31/05	(1.88	)%

^‡ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

* Commencement of operations.

20         Smith Barney Investment Series 2005 Annual Report

SB Government Portfolio

Manager Overview

Q. What were the overall market conditions during the Fund’s reporting period?

A. During the 12 months ended October 31, 2005, markets were primarily driven by Federal Reserve Board (“Fed”)ⁱ activity, employment and inflation data and rising energy costs, exacerbated near period end by the devastating impact of Hurricane Katrina on the U.S. Gulf Coast. The Fed’s eight “measured” 25-basis-pointⁱⁱ hikes during the period brought the federal funds rateⁱⁱⁱ to 3.75% from 1.75% by period end. The Fed raised rates an additional quarter point to 4.00% on November 1st, after the close of the reporting period. These measured consecutive rate hikes exerted upward pressure on short-term bond yields, driving 2-year yields up about 183 basis points during the 12 months. However, in what Fed Chairman Alan Greenspan termed a “conundrum,” yields on the long bond stayed low during the period, even declining slightly (four basis points) over the 12 months despite relinquishing all gains to end 53 basis points higher by period end. This sharp rise in short yields and relative stagnation in longer yields resulted in the extensive yield curve flattening seen during the period.

As the market fully expected each 25-basis-point hike in the federal funds rate during the period – thanks to the Fed’s well-advertised intentions to raise rates at a measured pace – investors spent much of the period dissecting language from the Fed for clues on its assessment of the U.S. economy and the pace of rate hikes. The Fed reiterated throughout the year that it would increase rates “at a pace that is likely to be measured” and, starting in June 2004, added that, “the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.” In its most recent statement (from the September 20th meeting), the Fed noted that core inflation remained low near the end of the period and long-term inflation expectations remained “contained” (even if the language was downgraded from the “well contained” language used at prior meetings).

Slowing global growth, rising inflation and surging oil prices undoubtedly restrained economic activity during the period, with gross domestic product (“GDP”)^iv declining year-over-year to 3.8% growth in first quarter 2005 (from first quarter 2004’s 4.5% pace) and to 3.4% growth in second quarter 2005 (from second quarter 2004’s 3.5%). However, economic growth remained remarkably resilient into the third quarter, particularly after fears of a sharp slowdown in the wake of Hurricanes Katrina and Rita, gaining 3.8% on an annualized basis versus 3.9% last year and consensus expectations of 3.6% growth. Although growth remained strong throughout the period, fears of potential slowing, combined with increasing inflation, drove markets. Oil prices, which breached $70 per barrel before period end, continue to cast a pall on growth and consumer spending expectations.

This was particularly true in the latter half of the period, as investors assessed the potential impact of Hurricanes Katrina and Rita on U.S. economic growth, inflation and the

Smith Barney Investment Series 2005 Annual Report         21

pace of interest rates and growth indicators turned increasingly mixed. For example, the U.S. labor market began to pick up in early 2004 and continued to improve through most of the Fund’s fiscal year, although the pace of improvement remained uneven from month to month. Unemployment fell through the majority of the period, declining from 5.5% in October 2004 to 4.9% in August 2005. However, unemployment skyrocketed, even if not as much as expected, in the wake of Hurricane Katrina, and the unemployment rate rose to 5.0% in October. Industrial production and retail sales also remained positive through most of the period, even considering the volatility in the auto sector as General Motors and Ford were successively downgraded by three major statistical credit rating agencies to below investment grade. Again, however, as with employment, industrial production and retail sales data turned negative near period end as the effects of Hurricane Katrina roiled through the economy, reductions in auto production hit the market and the highly successful automotive dealer incentive packages offered through the summer came to an end.

While inflationary pressures from sustained high commodity prices began to creep into the economy, particularly near the end of the period, continued strong growth and limited wage pressures are keeping long-term inflation expectations “contained”. Core inflation rates, in particular, remained subdued throughout the period despite growing inflationary pressure. Specifically, core Consumer Price Index (CPI)^v inflation rose only 0.1% year-over-year to 2.1% in October 2005, and core Producer Price Index (PPI)^vi inflation edged up only 0.1% year-over-year to 1.9% in September 2005. However, both consumer and producer headline inflation rose dramatically by period end as continually high and rising energy prices and competitive pricing pressures began to be passed through to the consumer. Headline CPI inflation rose approximately 1.1% to 4.3% in October 2005 versus October 2004, and headline PPI inflation increased 1.5% to 5.9% over the same period. Pricing pressures were also seen in the core PCE deflator^vii, the Fed’s preferred measure of inflation, which rose 0.5% versus September 2004 to 2.0% year-over-year in the latest September reading.

Performance Review

For the 12 months ended October 31, 2005, the SB Government Portfolio returned 0.41%. In comparison, the Fund’s unmanaged benchmark, the Lehman Brothers Government Bond Index^viii, returned 0.94%, and its Lipper Variable General U.S. Government Funds Category Average¹ increased 1.49% over the same period.

Q. What were the most significant factors affecting the Fund’s Performance?

     What were the leading contributors to performance?

A. The Fund’s underweight allocation to the shorter portion of the yield curve and overweight in the 20+ year portion of the curve positively contributed to performance during the 12 months ending October 31, 2005, as short yields rose dramatically during the

¹ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of distributions, including returns of capital, if any, calculated among the 61 funds in the Fund’s Lipper category.

22         Smith Barney Investment Series 2005 Annual Report

period as the curve flattened. Our allocation to mortgages also contributed to Fund performance during the period.

     What were the leading detractors from performance?

A. The Fund’s shorter duration posture versus the benchmark early in the period detracted from performance, as the longer end (10+ year) of the yield curve held up better than market participants expected. However, the Fund recouped some of its early losses in the second half of the period due to its shorter duration position as rates continued to climb across all parts of the yield curve. In addition, our underweight exposure to U.S. Agencies detracted from performance relative to the benchmark during the 12 months, as Agencies outperformed U.S. Treasuries.

Q. Were there any significant changes made to the Fund during the reporting period?

A. We reduced overall duration in the Fund versus the benchmark in advance of the remarkable yield curve flattening seen during the 12 months ended October 31, 2005. Although remaining somewhat defensive (i.e., slightly short), we brought the Fund’s duration closer to neutral as rates backed up and the 10-year U.S. Treasury bond sold off in the latter half of the period. We also removed our yield curve flattener trade, in which we had underweighted the short end of the yield curve and overweighted the long end in anticipation of further flattening.

We reduced the Fund’s exposure to mortgage-backed securities during the period in anticipation of increased interest rate volatility on the long end of the yield curve and continued monetary policy tightening by the Fed. We opportunistically reallocated assets into U.S. Treasury securities during market troughs as U.S. Treasuries sold off at several points during the period.

Smith Barney Investment Series 2005 Annual Report         23

Thank you for your investment in the SB Government Portfolio. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.

Sincerely,

Roger M. Lavan, CFA Portfolio Manager Francis L. Mustaro Portfolio Manager

December 1, 2005

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

RISKS: Keep in mind, bond and mortgage-related securities are subject to interest rate and market risks. The U.S. government guarantee of principal and interest payment only applies to underlying securities in the Fund’s portfolio. Please note that the Fund’s shares are not guaranteed by the U.S. government or its agencies. The Fund may use derivatives, such as options and futures, which can have a potentially large impact on fund performance. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱ A basis point is one one-hundredth (1/100 or 0.01) of one percent.

ⁱⁱⁱ The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.

^iv Gross domestic product is a market value of goods and services produced by labor and property in a given country.

^v The Consumer Price Index measures the average change in U.S. consumer prices over time in a fixed market basket of goods and services determined by the U.S. Bureau of Labor Statistics.

^vi The Producer Price Index measures the change in wholesale prices as released monthly by the U.S. Bureau of Labor Statistics.

^vii The PCE deflator is a nation-wide indicator of the average increase in prices for all domestic personal consumption. It’s derived from the largest Gross Domestic Product (“GDP”) component, personal consumption expenditures, and is indexed to a base of 100 in 1992.

^viii The Lehman Brothers Government Bond Index is a broad-based index of all public debt obligations of the U.S. government and its agencies that have an average maturity of roughly nine years.

24         Smith Barney Investment Series 2005 Annual Report

Fund at a Glance (unaudited)

SB Government Portfolio

Smith Barney Investment Series 2005 Annual Report         25

SB Government Portfolio

Historic Performance (unaudited)

Value of $10,000 Invested in the SB Government Portfolio vs. Lehman Brothers Government Bond Index^† (September 1999 — October 2005)

† Hypothetical illustration of $10,000 invested on September 15, 1999 (commencement of operations), assuming the reinvestment of distributions, including returns of capital, if any, at net asset value through October 31, 2005. The Lehman Brothers Government Bond Index includes U.S. Treasury and government agency securities with maturities of one year or more having a minimum outstanding principal of $100 million and are only fixed-coupon securities. The Index is unmanaged and is not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

Fund Performance

Average Annual Total Returns‡ (unaudited)
Twelve Months Ended 10/31/05	0.41	%
Five Years Ended 10/31/05	4.48
9/15/99* through 10/31/05	4.95

Cumulative Total Return‡ (unaudited)
9/15/99* through 10/31/05	34.40	%

‡ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

* Commencement of operations.

26         Smith Barney Investment Series 2005 Annual Report

Fund Expenses (unaudited)

Example

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested on May 1, 2005 and held for the six months ended October 31, 2005.

Actual Expenses

The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

Based on Actual Total Return(1)
	Actual Total Return(2)		Beginning Account Value		Ending Account Value		Annualized Expense Ratio		Expenses Paid During the Period(3)
Smith Barney Premier Selections All Cap Growth Portfolio	10.07	%	$	1,000.00	$	1,100.70	1.02	%	$	5.40
Smith Barney Dividend Strategy Portfolio	0.70			1,000.00		1,007.00	0.88			4.45
Smith Barney Growth and Income Portfolio	4.64			1,000.00		1,046.40	0.81			4.18
SB Government Portfolio	(0.26	)		1,000.00		997.40	0.67			3.37

⁽¹⁾ For the six months ended October 31, 2005.

⁽²⁾ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower.

⁽³⁾ Expenses are equal to each Fund’s respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

Smith Barney Investment Series 2005 Annual Report         27

Fund Expenses (unaudited) (continued)

Hypothetical Example for Comparison Purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore, this table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

Based on Hypothetical Total Return(1)
	Hypothetical Annualized Total Return		Beginning Account Value		Ending Account Value		Annualized Expense Ratio		Expenses Paid During the Period(2)
Smith Barney Premier Selections All Cap Growth Portfolio	5.00	%	$	1,000.00	$	1,020.06	1.02	%	$	5.19
Smith Barney Dividend Strategy Portfolio	5.00			1,000.00		1,020.77	0.88			4.48
Smith Barney Growth and Income Portfolio	5.00			1,000.00		1,021.12	0.81			4.13
SB Government Portfolio	5.00			1,000.00		1,021.83	0.67			3.41

⁽¹⁾ For the six months ended October 31, 2005.

⁽²⁾ Expenses are equal to each Fund’s respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

28         Smith Barney Investment Series 2005 Annual Report

Schedule of Investments (October 31, 2005)

SMITH BARNEY PREMIER SELECTIONS ALL CAP GROWTH PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 98.3%
CONSUMER DISCRETIONARY — 24.0%
Diversified Consumer Services — 1.6%
8,400	Laureate Education Inc.*	$	414,960
33,300	ServiceMaster Co.		418,914
	Total Diversified Consumer Services		833,874
Hotels, Restaurants & Leisure — 4.8%
10,700	Brinker International Inc.*		407,884
2,600	CBRL Group Inc.		90,220
8,950	GTECH Holdings Corp.		284,968
23,000	La Quinta Corp., Paired*		192,050
20,850	Shuffle Master Inc.*		528,756
8,700	Station Casinos Inc.		557,670
10,200	Texas Roadhouse Inc.*		160,548
13,900	WMS Industries Inc.*		349,307
	Total Hotels, Restaurants & Leisure		2,571,403
Household Durables — 2.3%
12,300	Ethan Allen Interiors Inc.		415,986
19,050	Jarden Corp.*		643,699
2,270	Mohawk Industries Inc.*		177,174
	Total Household Durables		1,236,859
Internet & Catalog Retail — 4.6%
28,800	Amazon.com Inc.*		1,148,544
26,300	eBay Inc.*		1,041,480
14,300	GSI Commerce Inc.*		228,514
	Total Internet & Catalog Retail		2,418,538
Media — 2.8%
14,100	Harte-Hanks Inc.		360,960
63,000	Time Warner Inc.		1,123,290
	Total Media		1,484,250
Multiline Retail — 0.5%
12,600	Family Dollar Stores Inc.		278,964
Specialty Retail — 7.4%
5,300	Aeropostale Inc.*		103,562
29,030	Bed Bath & Beyond Inc.*		1,176,296
15,800	Chico’s FAS Inc.*		624,732
11,200	Dick’s Sporting Goods Inc.*		335,216
3,100	Guitar Center Inc.*		161,541
28,100	Home Depot Inc.		1,153,224
9,500	Sherwin-Williams Co.		404,225
	Total Specialty Retail		3,958,796
	TOTAL CONSUMER DISCRETIONARY		12,782,684

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         29

Schedule of Investments (October 31, 2005) (continued)

Shares	Security	Value
CONSUMER STAPLES — 7.4%
Beverages — 2.3%
25,100	Coca-Cola Co.	$	1,073,778
2,700	Molson Coors Brewing Co., Class B Shares		166,590
	Total Beverages		1,240,368
Food & Staples Retailing — 0.7%
14,750	Albertson’s Inc.		370,372
Food Products — 2.5%
14,600	Hormel Foods Corp.		464,280
12,900	Wm. Wrigley Jr. Co.		896,550
	Total Food Products		1,360,830
Household Products — 1.9%
17,822	Procter & Gamble Co.		997,854
	TOTAL CONSUMER STAPLES		3,969,424
ENERGY — 5.8%
Energy Equipment & Services — 2.9%
7,400	Cal Dive International Inc.*		455,396
16,600	FMC Technologies Inc.*		605,236
3,800	Nabors Industries Ltd.*		260,794
7,300	Smith International Inc.		236,520
	Total Energy Equipment & Services		1,557,946
Oil, Gas & Consumable Fuels — 2.9%
5,200	Arch Coal Inc.		400,764
6,050	Murphy Oil Corp.		283,443
10,450	Newfield Exploration Co.*		473,698
9,000	Whiting Petroleum Corp.*		364,950
	Total Oil, Gas & Consumable Fuels		1,522,855
	TOTAL ENERGY		3,080,801
FINANCIALS — 12.3%
Capital Markets — 4.6%
6,950	Affiliated Managers Group Inc.*		533,413
2,200	Bear Stearns Cos. Inc.		232,760
1,510	Legg Mason Inc.		162,038
20,600	Merrill Lynch & Co. Inc.		1,333,644
4,800	National Financial Partners Corp.		217,104
	Total Capital Markets		2,478,959
Commercial Banks — 2.2%
6,900	East-West Bancorp Inc.		264,201
11,450	North Fork Bancorporation Inc.		290,143
5,800	Westamerica Bancorporation		309,198
3,950	Zions Bancorporation		290,206
	Total Commercial Banks		1,153,748

See Notes to Financial Statements.

30         Smith Barney Investment Series 2005 Annual Report

Schedule of Investments (October 31, 2005) (continued)

Shares	Security	Value
Consumer Finance — 0.5%
7,100	Nelnet Inc., Class A Shares*	$	263,410
Insurance — 3.9%
14,200	American International Group Inc.		920,160
327	Berkshire Hathaway Inc., Class B Shares*		920,505
10,100	Old Republic International Corp.		261,691
	Total Insurance		2,102,356
Real Estate — 0.4%
2,600	Alexandria Real Estate Equities Inc.		210,210
Thrifts & Mortgage Finance — 0.7%
19,600	New York Community Bancorp Inc.		316,932
1,240	PMI Group Inc.		49,451
	Total Thrifts & Mortgage Finance		366,383
	TOTAL FINANCIALS		6,575,066
HEALTH CARE — 18.8%
Biotechnology — 3.4%
16,400	Amgen Inc.*		1,242,464
10,100	ImClone Systems Inc.*		350,470
10,400	Vertex Pharmaceuticals Inc.*		236,600
	Total Biotechnology		1,829,534
Health Care Equipment & Supplies — 5.2%
21,800	Dade Behring Holdings Inc.		785,018
2,800	DENTSPLY International Inc.		154,392
6,700	Fisher Scientific International Inc.*		378,550
2,800	Gen-Probe Inc.*		114,352
12,400	Kyphon Inc.*		497,116
9,600	ResMed Inc.*		366,048
14,900	Thermo Electron Corp.*		449,831
	Total Health Care Equipment & Supplies		2,745,307
Health Care Providers & Services — 5.5%
8,000	Amedisys Inc.*		305,680
8,325	Coventry Health Care Inc.*		449,467
9,400	DaVita Inc.*		462,292
9,000	Eclipsys Corp.*		144,000
12,500	Sierra Health Services Inc.*		937,500
24,200	VCA Antech Inc.*		624,360
	Total Health Care Providers & Services		2,923,299
Pharmaceuticals — 4.7%
17,400	Johnson & Johnson		1,089,588
12,400	Medicis Pharmaceutical Corp., Class A Shares		365,800
11,700	MGI Pharma Inc.*		219,492
34,600	Pfizer Inc.		752,204

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         31

Schedule of Investments (October 31, 2005) (continued)

Shares	Security	Value
Pharmaceuticals — 4.7% (continued)
4,400	Valeant Pharmaceuticals International	$	75,504
	Total Pharmaceuticals		2,502,588
	TOTAL HEALTH CARE		10,000,728
INDUSTRIALS — 6.1%
Aerospace & Defense — 0.8%
3,385	Alliant Techsystems Inc.*		237,695
4,000	Armor Holdings Inc.*		178,840
	Total Aerospace & Defense		416,535
Commercial Services & Supplies — 0.7%
15,300	Labor Ready Inc.*		357,255
Electrical Equipment — 0.8%
12,100	Roper Industries Inc.		456,170
Industrial Conglomerates — 1.7%
27,400	General Electric Co.		929,134
Machinery — 0.4%
4,600	AGCO Corp.*		73,554
2,800	Eaton Corp.		164,724
	Total Machinery		238,278
Road & Rail — 0.8%
20,750	Heartland Express Inc.		409,812
Trading Companies & Distributors — 0.9%
12,000	MSC Industrial Direct Co. Inc., Class A Shares		458,160
	TOTAL INDUSTRIALS		3,265,344
INFORMATION TECHNOLOGY — 21.2%
Communications Equipment — 3.4%
37,100	Cisco Systems Inc.*		647,395
52,600	Motorola Inc.		1,165,616
	Total Communications Equipment		1,813,011
Computers & Peripherals — 2.4%
2,000	Avid Technology Inc.*		98,460
23,400	Dell Inc.*		745,992
7,250	SanDisk Corp.*		426,953
	Total Computers & Peripherals		1,271,405
Electronic Equipment & Instruments — 1.3%
7,200	Benchmark Electronics Inc.*		202,248
3,850	CDW Corp.		216,948
10,000	Trimble Navigation Ltd.*		288,700
	Total Electronic Equipment & Instruments		707,896

See Notes to Financial Statements.

32         Smith Barney Investment Series 2005 Annual Report

Schedule of Investments (October 31, 2005) (continued)

Shares	Security	Value
IT Services — 2.5%
17,800	Acxiom Corp.	$	379,852
3,200	Affiliated Computer Services Inc., Class A Shares*		173,152
40,800	MPS Group Inc.*		507,960
13,400	Sabre Holdings Corp., Class A Shares		261,702
	Total IT Services		1,322,666
Semiconductors & Semiconductor Equipment — 7.4%
10,500	Cypress Semiconductor Corp.*		142,800
4,400	Diodes, Inc.*		159,544
14,200	Entegris Inc.*		138,592
7,700	FormFactor Inc.*		189,574
33,700	Intel Corp.		791,950
20,000	MEMC Electronic Materials Inc.*		358,800
8,400	Microchip Technology Inc.		253,428
19,300	Microsemi Corp.*		447,181
6,200	Tessera Technologies Inc.*		172,980
46,100	Texas Instruments Inc.		1,316,155
	Total Semiconductors & Semiconductor Equipment		3,971,004
Software — 4.2%
11,050	Amdocs Ltd.*		292,493
42,000	Microsoft Corp.		1,079,400
52,200	Quest Software Inc.*		726,102
7,800	Synopsys Inc.*		147,810
	Total Software		2,245,805
	TOTAL INFORMATION TECHNOLOGY		11,331,787
MATERIALS — 1.5%
Chemicals — 1.1%
6,250	Air Products & Chemicals Inc.		357,750
4,750	Cytec Industries Inc.		196,175
	Total Chemicals		553,925
Metals & Mining — 0.4%
10,000	Compass Minerals International Inc.		223,900
	TOTAL MATERIALS		777,825
UTILITIES — 1.2%
Multi-Utilities — 1.2%
8,750	KeySpan Corp.		302,488
8,250	SCANA Corp.		327,277
	TOTAL UTILITIES		629,765
	TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $44,625,570)		52,413,424

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         33

Schedule of Investments (October 31, 2005) (continued)

Face Amount		Security	Value
	SHORT-TERM INVESTMENT — 0.9%
	Repurchase Agreement — 0.9%
$	490,000	Interest in $447,167,000 joint tri-party repurchase agreement dated 10/31/05 with Goldman, Sachs & Co., 4.010% due 11/1/05, Proceeds at maturity — $490,055; (Fully collateralized by various U.S. Treasury obligations, 1.875% to 3.875% due 1/15/07 to 4/15/32; Market value — $499,926) (Cost — $490,000)	$	490,000
		TOTAL INVESTMENTS — 99.2% (Cost — $45,115,570#)		52,903,424
		Other Assets in Excess of Liabilities — 0.8%		404,159
		TOTAL NET ASSETS — 100.0%	$	53,307,583

* Non-income producing security.

^# Aggregate cost for federal income tax purposes is $45,443,330.

See Notes to Financial Statements.

34         Smith Barney Investment Series 2005 Annual Report

Schedule of Investments (October 31, 2005) (continued)

SMITH BARNEY DIVIDEND STRATEGY PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 90.5%
CONSUMER DISCRETIONARY — 5.0%
Hotels, Restaurants & Leisure — 1.0%
9,100	International Game Technology	$	241,059
15,721	McDonald’s Corp.		496,784
	Total Hotels, Restaurants & Leisure		737,843
Leisure Equipment & Products — 0.3%
13,900	Hasbro Inc.		261,876
Media — 2.4%
8,536	Gannett Co. Inc.		534,866
48,500	Pearson PLC		538,889
19,270	Regal Entertainment Group, Class A Shares		355,146
20,000	Time Warner Inc.		356,600
	Total Media		1,785,501
Multiline Retail — 0.6%
8,464	Target Corp.		471,360
Specialty Retail — 0.7%
12,799	Home Depot Inc.		525,271
	TOTAL CONSUMER DISCRETIONARY		3,781,851
CONSUMER STAPLES — 11.3%
Beverages — 1.5%
9,800	Coca-Cola Co.		419,244
12,897	PepsiCo Inc.		761,955
	Total Beverages		1,181,199
Food & Staples Retailing — 3.3%
47,022	Albertson’s Inc.		1,180,722
27,300	Wal-Mart Stores Inc.		1,291,563
	Total Food & Staples Retailing		2,472,285
Food Products — 4.0%
11,250	Campbell Soup Co.		327,375
10,000	General Mills Inc.		482,600
12,800	H.J. Heinz Co.		454,400
33,004	Kraft Foods Inc., Class A Shares		934,013
20,823	Unilever PLC, Sponsored ADR		845,414
	Total Food Products		3,043,802
Household Products — 2.5%
21,006	Kimberly-Clark Corp.		1,193,981
12,800	Procter & Gamble Co.		716,672
	Total Household Products		1,910,653
	TOTAL CONSUMER STAPLES		8,607,939

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         35

Schedule of Investments (October 31, 2005) (continued)

Shares	Security	Value
ENERGY — 8.0%
Oil, Gas & Consumable Fuels — 8.0%
30,801	BP PLC, Sponsored ADR	$	2,045,186
27,946	Chevron Corp.		1,594,878
43,042	Exxon Mobil Corp.		2,416,378
	TOTAL ENERGY		6,056,442
EXCHANGE TRADED — 1.6%
11,400	Health Care Select Sector SPDR Fund		346,902
7,000	SPDR Trust Series 1		840,910
	TOTAL EXCHANGE TRADED		1,187,812
FINANCIALS — 14.0%
Capital Markets — 2.4%
2,850	Goldman Sachs Group Inc.		360,155
11,400	Merrill Lynch & Co. Inc.		738,036
8,563	UBS AG, Registered Shares		733,592
	Total Capital Markets		1,831,783
Commercial Banks — 3.1%
11,400	Bank of America Corp.		498,636
11,400	U.S. Bancorp		337,212
24,573	Wells Fargo & Co.		1,479,295
	Total Commercial Banks		2,315,143
Consumer Finance — 1.1%
32,100	MBNA Corp.		820,797
Diversified Financial Services — 2.2%
46,141	JPMorgan Chase & Co.		1,689,683
Insurance — 2.4%
10,000	Assurant Inc.		382,000
15,721	Chubb Corp.		1,461,581
	Total Insurance		1,843,581
Real Estate — 2.8%
6,000	Mills Corp.		321,000
27,200	Plum Creek Timber Co. Inc.		1,058,080
8,304	ProLogis		357,072
5,219	Simon Property Group Inc.		373,785
	Total Real Estate		2,109,937
	TOTAL FINANCIALS		10,610,924
HEALTH CARE — 14.7%
Health Care Equipment & Supplies — 0.5%
7,150	Medtronic Inc.		405,119
Pharmaceuticals — 14.2%
45,256	Abbott Laboratories		1,948,271
15,700	Eli Lilly & Co.		781,703

See Notes to Financial Statements.

36         Smith Barney Investment Series 2005 Annual Report

Schedule of Investments (October 31, 2005) (continued)

Shares	Security	Value
Pharmaceuticals — 14.2% (continued)
29,794	GlaxoSmithKline PLC, Sponsored ADR	$	1,548,990
39,950	Johnson & Johnson		2,501,669
8,700	Novartis AG, Sponsored ADR		468,234
60,657	Pfizer Inc.		1,318,683
48,705	Wyeth		2,170,295
	Total Pharmaceuticals		10,737,845
	TOTAL HEALTH CARE		11,142,964
INDUSTRIALS — 14.8%
Aerospace & Defense — 3.9%
42,082	Honeywell International Inc.		1,439,204
12,800	Raytheon Co.		472,960
20,000	United Technologies Corp.		1,025,600
	Total Aerospace & Defense		2,937,764
Air Freight & Logistics — 0.5%
5,600	United Parcel Service Inc., Class B Shares		408,464
Building Products — 0.3%
6,900	Masco Corp.		196,650
Commercial Services & Supplies — 1.8%
8,500	Pitney Bowes Inc.		357,680
9,250	R.R. Donnelley & Sons Co.		323,935
22,800	Waste Management Inc.		672,828
	Total Commercial Services & Supplies		1,354,443
Electrical Equipment — 3.1%
10,700	Cooper Industries Ltd., Class A Shares		758,523
23,510	Emerson Electric Co.		1,635,121
	Total Electrical Equipment		2,393,644
Industrial Conglomerates — 5.2%
12,800	3M Co.		972,544
74,725	General Electric Co.		2,533,925
15,700	Tyco International Ltd.		414,323
	Total Industrial Conglomerates		3,920,792
	TOTAL INDUSTRIALS		11,211,757
INFORMATION TECHNOLOGY — 5.5%
Computers & Peripherals — 1.2%
6,950	Hewlett-Packard Co.		194,878
8,530	International Business Machines Corp.		698,436
	Total Computers & Peripherals		893,314
IT Services — 1.1%
18,500	Automatic Data Processing Inc.		863,210
Semiconductors & Semiconductor Equipment — 0.6%
18,500	Intel Corp.		434,750

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         37

Schedule of Investments (October 31, 2005) (continued)

Shares	Security	Value
Software — 2.6%
77,721	Microsoft Corp.	$	1,997,430
	TOTAL INFORMATION TECHNOLOGY		4,188,704
MATERIALS — 9.2%
Chemicals — 6.4%
37,767	Dow Chemical Co.		1,731,995
42,000	E.I. du Pont de Nemours & Co.		1,750,980
42,600	Olin Corp.		761,688
9,980	PPG Industries Inc.		598,500
	Total Chemicals		4,843,163
Metals & Mining — 1.2%
38,144	Alcoa Inc.		926,518
Paper & Forest Products — 1.6%
19,188	Weyerhaeuser Co.		1,215,368
	TOTAL MATERIALS		6,985,049
TELECOMMUNICATION SERVICES — 3.1%
Diversified Telecommunication Services — 3.1%
45,311	BellSouth Corp.		1,178,992
37,919	Verizon Communications Inc.		1,194,828
	TOTAL TELECOMMUNICATION SERVICES		2,373,820
UTILITIES — 3.3%
Electric Utilities — 1.0%
8,600	Cinergy Corp.		343,140
8,600	FPL Group Inc.		370,316
	Total Electric Utilities		713,456
Gas Utilities — 1.0%
19,750	Equitable Resources Inc.		763,337
Multi-Utilities — 1.3%
4,300	Ameren Corp.		226,180
15,000	KeySpan Corp.		518,550
11,400	NiSource Inc.		269,610
	Total Multi-Utilities		1,014,340
	TOTAL UTILITIES		2,491,133
	TOTAL COMMON STOCKS (Cost — $65,259,701)		68,638,395
CONVERTIBLE PREFERRED STOCKS — 1.7%
FINANCIALS — 0.7%
Diversified Financial Services — 0.7%
2,245	State Street Corp., 6.750% due 2/15/06 (a)		544,289

See Notes to Financial Statements.

38         Smith Barney Investment Series 2005 Annual Report

Schedule of Investments (October 31, 2005) (continued)

Shares		Security	Value
	HEALTH CARE — 1.0%
	Health Care Equipment & Supplies — 1.0%
	13,698	Baxter International Inc., Equity Units, 7.000% due 2/16/06 (b)	$	742,021
		TOTAL CONVERTIBLE PREFERRED STOCKS (Cost — $1,192,217)		1,286,310
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $66,451,918)		69,924,705
Face Amount
	SHORT-TERM INVESTMENTS — 7.7%
	Repurchase Agreements — 7.7%
$	220,000	Interest in $442,372,000 joint tri-party repurchase agreement dated 10/31/05 with Morgan Stanley, 3.990% due 11/1/05; Proceeds at maturity — $220,024; (Fully collateralized by various U.S. government agency obligations, 0.000% to 6.000% due 11/28/06 to 7/21/25; Market value — $225,418)		220,000
	2,652,000	Interest in $542,622,000 joint tri-party repurchase agreement dated 10/31/05 with Greenwich Capital Markets Inc., 4.020% due 11/1/05; Proceeds at maturity — $2,652,296; (Fully collateralized by various U.S. Treasury obligations, 1.500% to 6.250% due 3/31/06 to 5/15/30; Market value — $2,705,061)		2,652,000
	1,500,000	Interest in $572,678,000 joint tri-party repurchase agreement dated 10/31/05 with Deutsche Bank Securities Inc., 4.000% due 11/1/05; Proceeds at maturity — $1,500,167; (Fully collateralized by various U.S. government agency obligations, 0.000% to 7.125% due 11/28/05 to 1/15/30; Market value — $1,530,009)		1,500,000
	1,500,000	Interest in $689,187,000 joint tri-party repurchase agreement dated 10/31/05 with Merrill Lynch, Pierce, Fenner & Smith Inc., 4.000% due 11/1/05; Proceeds at maturity — $1,500,167; (Fully collateralized by U.S. Treasury obligations, 0.000% to 3.750% due 11/3/05 to 5/15/08; Market value — $1,530,003)		1,500,000
		TOTAL SHORT-TERM INVESTMENTS (Cost — $5,872,000)		5,872,000
		TOTAL INVESTMENTS — 99.9% (Cost — $72,323,918#)		75,796,705
		Other Assets in Excess of Liabilities — 0.1%		69,646
		TOTAL NET ASSETS — 100.0%	$	75,866,351

^(a) SPACES Forward purchase contract unit—Each unit represents 1 space (fixed share purchase contract and U.S. Treasury Strip) and 1 cover (variable share repurchase contract). SPACES is a service mark of Goldman, Sachs & Co.

^(b) Each unit represents a separate contract to purchase common stock and senior notes.

# Aggregate cost for federal income tax purposes is $72,772,261.

Abbreviations used in this schedule:
ADR	— American Depositary Receipt
SPDR	— Standard & Poor’s Depositary Receipts

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         39

Schedule of Investments (October 31, 2005) (continued)

SMITH BARNEY GROWTH AND INCOME PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 98.7%
CONSUMER DISCRETIONARY — 11.3%
Hotels, Restaurants & Leisure — 2.4%
2,570	Ctrip.com International Ltd., ADR (a)	$	147,852
27,040	McDonald’s Corp.		854,464
11,600	Station Casinos Inc.		743,560
	Total Hotels, Restaurants & Leisure		1,745,876
Household Durables — 1.0%
31,420	Newell Rubbermaid Inc. (a)		722,346
Media — 4.8%
13,010	Comcast Corp., Class A Shares*		362,069
25,100	EchoStar Communications Corp., Class A Shares*		674,437
61,034	Liberty Media Corp., Class A Shares*		486,441
65,520	News Corp., Class B Shares		986,731
59,300	Time Warner Inc.		1,057,319
	Total Media		3,566,997
Specialty Retail — 3.1%
35,090	Best Buy Co. Inc.		1,553,083
33,600	Staples Inc.		763,728
	Total Specialty Retail		2,316,811
	TOTAL CONSUMER DISCRETIONARY		8,352,030
CONSUMER STAPLES — 10.0%
Beverages — 2.1%
26,710	PepsiCo Inc.		1,578,027
Food & Staples Retailing — 1.9%
28,900	Wal-Mart Stores Inc.		1,367,259
Food Products — 3.4%
26,560	Kellogg Co.		1,173,155
18,150	McCormick & Co. Inc., Non Voting Shares		549,763
45,900	Sara Lee Corp.		819,315
	Total Food Products		2,542,233
Household Products — 2.6%
14,130	Kimberly-Clark Corp.		803,149
20,540	Procter & Gamble Co.		1,150,035
	Total Household Products		1,953,184
	TOTAL CONSUMER STAPLES		7,440,703
ENERGY — 9.4%
Energy Equipment & Services — 1.7%
13,010	ENSCO International Inc.		593,126
15,520	GlobalSantaFe Corp.		691,416
	Total Energy Equipment & Services		1,284,542

See Notes to Financial Statements.

40         Smith Barney Investment Series 2005 Annual Report

Schedule of Investments (October 31, 2005) (continued)

Shares	Security	Value
Oil, Gas & Consumable Fuels — 7.7%
10,370	Burlington Resources Inc.	$	748,921
32,720	Exxon Mobil Corp.		1,836,901
20,900	Nexen Inc.		864,006
9,580	Suncor Energy Inc.		513,775
13,850	Total SA, Sponsored ADR (a)		1,745,377
	Total Oil, Gas & Consumable Fuels		5,708,980
	TOTAL ENERGY		6,993,522
FINANCIALS — 20.4%
Capital Markets — 3.3%
9,190	Goldman Sachs Group Inc.		1,161,340
20,120	Merrill Lynch & Co. Inc.		1,302,569
	Total Capital Markets		2,463,909
Commercial Banks — 6.7%
34,136	Bank of America Corp.		1,493,109
12,580	Comerica Inc.		726,872
15,920	Wachovia Corp.		804,278
31,740	Wells Fargo & Co.		1,910,748
	Total Commercial Banks		4,935,007
Consumer Finance — 2.9%
21,410	American Express Co.		1,065,576
14,170	Capital One Financial Corp.		1,081,879
	Total Consumer Finance		2,147,455
Diversified Financial Services — 2.1%
43,548	JPMorgan Chase & Co.		1,594,728
Insurance — 4.3%
12,470	AFLAC Inc.		595,817
17,760	American International Group Inc.		1,150,848
8	Berkshire Hathaway Inc., Class A Shares (a)*		687,200
8,160	Chubb Corp.		758,635
	Total Insurance		3,192,500
Thrifts & Mortgage Finance — 1.1%
13,660	Golden West Financial Corp.		802,252
	TOTAL FINANCIALS		15,135,851
HEALTH CARE — 11.0%
Biotechnology — 1.5%
14,870	Amgen Inc.*		1,126,551
Health Care Providers & Services — 4.4%
14,955	Coventry Health Care Inc.*		807,421
23,200	UnitedHealth Group Inc.		1,343,048
15,060	WellPoint Inc.*		1,124,681
	Total Health Care Providers & Services		3,275,150

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         41

Schedule of Investments (October 31, 2005) (continued)

Shares	Security	Value
Pharmaceuticals — 5.1%
21,000	Pfizer Inc.	$	456,540
30,200	Sanofi-Aventis, ADR		1,211,624
12,770	Sepracor Inc. (a)*		718,312
35,280	Teva Pharmaceutical Industries Ltd., Sponsored ADR (a)		1,344,874
	Total Pharmaceuticals		3,731,350
	TOTAL HEALTH CARE		8,133,051
INDUSTRIALS — 10.4%
Aerospace & Defense — 4.3%
32,420	Boeing Co.		2,095,629
28,770	Raytheon Co.		1,063,051
	Total Aerospace & Defense		3,158,680
Building Products — 1.1%
20,760	American Standard Cos. Inc.		789,711
Industrial Conglomerates — 5.0%
89,600	General Electric Co.		3,038,336
9,680	Textron Inc.		697,347
	Total Industrial Conglomerates		3,735,683
	TOTAL INDUSTRIALS		7,684,074
INFORMATION TECHNOLOGY — 16.3%
Communications Equipment — 0.9%
36,188	ADC Telecommunications Inc. (a)*		631,481
Computers & Peripherals — 2.2%
28,530	Dell Inc.*		909,536
9,210	International Business Machines Corp.		754,115
	Total Computers & Peripherals		1,663,651
Electronic Equipment & Instruments — 0.3%
11,370	Dolby Laboratories Inc., Class A Shares*		183,057
Internet Software & Services — 1.4%
2,000	Netease.com Depositary Receipts*		152,540
6,380	SINA Corp. (a)*		161,733
20,100	Yahoo! Inc.*		743,097
	Total Internet Software & Services		1,057,370
IT Services — 1.1%
21,700	Paychex Inc.		841,092
Semiconductors & Semiconductor Equipment — 3.7%
44,200	Applied Materials Inc.		723,996
32,700	ASML Holding NV, NY Registered Shares*		555,246
29,290	Intel Corp.		688,315
23,200	Maxim Integrated Products Inc.		804,576
	Total Semiconductors & Semiconductor Equipment		2,772,133

See Notes to Financial Statements.

42         Smith Barney Investment Series 2005 Annual Report

Schedule of Investments (October 31, 2005) (continued)

Shares		Security	Value
	Software — 6.7%
	22,200	Adobe Systems Inc.	$	715,950
	19,800	Cognos Inc.*		743,094
	13,860	Electronic Arts Inc.*		788,357
	104,720	Microsoft Corp.		2,691,304
		Total Software		4,938,705
		TOTAL INFORMATION TECHNOLOGY		12,087,489
	MATERIALS — 5.4%
	Chemicals — 2.3%
	22,400	E.I. du Pont de Nemours & Co.		933,856
	22,600	Ecolab Inc.		747,608
		Total Chemicals		1,681,464
	Metals & Mining — 3.1%
	71,390	Barrick Gold Corp.		1,802,597
	25,900	Placer Dome Inc.		516,705
		Total Metals & Mining		2,319,302
		TOTAL MATERIALS		4,000,766
	TELECOMMUNICATION SERVICES — 3.3%
	Wireless Telecommunication Services — 3.3%
	10,780	ALLTEL Corp.		666,851
	77,309	Sprint Nextel Corp.		1,802,073
		TOTAL TELECOMMUNICATION SERVICES		2,468,924
	UTILITIES — 1.2%
	Multi-Utilities — 1.2%
	20,700	Sempra Energy		917,010
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $63,972,401)		73,213,420
Face Amount
	SHORT-TERM INVESTMENTS — 9.3%
	Repurchase Agreement — 1.4%
$	1,032,000	Interest in $164,777,000 joint tri-party repurchase agreement dated 10/31/05 with Barclays Capital Inc., 3.930% due 11/1/05, Proceeds at maturity — $1,032,113; (Fully collateralized by various U.S. Treasury Strips, 0.000% due 2/15/11 to 2/15/19; Market value — $1,062,963) (Cost — $1,032,000)		1,032,000

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         43

Schedule of Investments (October 31, 2005) (continued)

Shares	Security	Value
Securities Purchased from Securities Lending Collateral — 7.9%
5,831,978	State Street Navigator Securities Lending Trust Prime Portfolio (Cost — $5,831,978)	$	5,831,978
	TOTAL SHORT-TERM INVESTMENTS (Cost — $6,863,978)		6,863,978
	TOTAL INVESTMENTS — 108.0% (Cost — $70,836,379#)		80,077,398
	Liabilities in Excess of Other Assets — (8.0)%		(5,934,858	)
	TOTAL NET ASSETS — 100.0%	$	74,142,540

* Non-income producing security.

^(a) All or a portion of this security is on loan (See Notes 1 and 3).

^# Aggregate cost for federal income tax purposes is $71,350,139.

Abbreviation used in this schedule:
ADR	— American Depositary Receipt

See Notes to Financial Statements.

44         Smith Barney Investment Series 2005 Annual Report

Schedule of Investments (October 31, 2005) (continued)

SB GOVERNMENT PORTFOLIO

Face Amount		Security	Value
	MORTGAGE-BACKED SECURITIES — 49.4%
	FHLMC — 3.7%
		Federal Home Loan Mortgage Corp. (FHLMC), Gold:
$	305,954	6.500% due 9/1/31(a)	$	314,365
	141,949	6.000% due 12/1/31 (a)		143,605
	337,291	5.000% due 8/1/33 (a)		325,823
	2,600,000	5.000% due 11/1/35 (b)(c)		2,501,689
	1,600,000	6.000% due 11/1/35 (b)(c)		1,616,000
		TOTAL FHLMC		4,901,482
	FNMA — 40.8%
		Federal National Mortgage Association (FNMA):
	1,952,756	6.000% due 8/1/16-1/1/33 (a)		1,972,633
	26,500,000	5.500% due 11/1/20-11/1/35 (b)(c)		26,164,206
	1,000,000	6.000% due 11/1/20 (b)(c)		1,022,812
	143,275	6.500% due 4/1/29-5/1/32 (a)		147,375
	129,390	7.000% due 11/1/31 (a)		135,399
	169,171	7.500% due 3/1/32-5/1/32 (a)		178,619
	2,400,000	4.500% due 11/1/35 (b)(c)		2,242,500
	15,000,000	5.000% due 11/1/35 (b)(c)		14,437,500
	7,000,000	6.500% due 11/1/35 (b)(c)		7,185,934
		TOTAL FNMA		53,486,978
	GNMA — 4.9%
		Government National Mortgage Association (GNMA):
	51,695	6.500% due 6/15/31 (a)		53,670
	74,706	7.000% due 9/15/31 (a)		78,579
	6,110,726	6.000% due 3/15/33 (a)		6,220,893
		TOTAL GNMA		6,353,142
		TOTAL MORTGAGE-BACKED SECURITIES (Cost — $66,046,280)		64,741,602
	COLLATERALIZED MORTGAGE OBLIGATIONS — 1.0%
		Federal Home Loan Mortgage Corp. (FHLMC):
	121,832	Series 2525, Class AM, 4.500% due 4/15/32 (a)		106,571
	3,608,746	Series 2686, Class QI, PAC IO, 5.500% due 1/15/23 (a)		151,542
	1,091,762	Series 2780, Class SL PAC, 6.000% due 4/15/34 (a)(d)		1,075,811
		TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost — $1,327,549)		1,333,924
	U.S. GOVERNMENT & AGENCY OBLIGATIONS — 47.3%
	U.S. Government Agencies — 2.6%
	700,000	Federal Home Loan Bank (FHLB), Series K805, 6.500% due 11/15/05 (a)		700,567
		Federal National Mortgage Association (FNMA):
	1,700,000	5.250% due 1/15/09 (a)		1,730,350
	1,000,000	Notes, 4.308% due 2/17/09 (a)(d)		1,001,540
		Total U.S. Government Agencies		3,432,457

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         45

Schedule of Investments (October 31, 2005) (continued)

Face Amount		Security	Value
	U.S. Government Obligations — 44.7%
		U.S. Treasury Bonds:
$	300,000	7.250% due 5/15/16 (a)	$	364,172
	200,000	9.000% due 11/15/18 (a)(e)		282,094
	700,000	7.625% due 2/15/25 (a)		943,168
	8,000,000	5.375% due 2/15/31 (a)		8,727,504
		U.S. Treasury Notes:
	1,500,000	3.625% due 4/30/07 (a)		1,483,770
	7,700,000	3.500% due 5/31/07 (a)		7,599,245
	8,500,000	3.250% due 8/15/08 (a)		8,243,674
	7,500,000	3.375% due 10/15/09 (a)		7,211,723
	5,000,000	4.000% due 4/15/10 (a)		4,905,860
	5,000,000	4.125% due 8/15/10		4,925,785
	6,300,000	4.250% due 8/15/13 (a)		6,180,155
	8,000,000	4.000% due 2/15/15 (a)		7,652,192
		Total U.S. Government Obligations		58,519,342
		TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost — $63,044,156)		61,951,799
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $130,417,985)		128,027,325
	SHORT-TERM INVESTMENTS — 44.4%
	U.S. Government Agencies — 38.1%
	25,000,000	Federal Farm Credit Discount Note, 3.650% due 11/3/05		24,994,944
	25,000,000	Federal Home Loan Bank Discount Notes, 3.720% due 11/9/05		24,979,389
		Total U.S. Government Agencies (Cost — $49,974,333)		49,974,333
	Repurchase Agreement — 6.3%
	8,218,000	Interest in $164,777,000 joint tri-party repurchase agreement dated 10/31/05 with Barclays Capital Inc., 3.930% due 11/1/05, Proceeds at maturity — $8,218,897; (Fully collateralized by various U.S. Treasury Strips, 0.000% due 2/15/11 to 2/15/19; Market value - $8,464,563) (a) (Cost — $8,218,000)		8,218,000
		TOTAL SHORT-TERM INVESTMENTS (Cost — $58,192,333)		58,192,333
		TOTAL INVESTMENTS — 142.1% (Cost — $188,610,318#)		186,219,658
		Liabilities in Excess of Other Assets — (42.1)%		(55,206,263	)
		TOTAL NET ASSETS — 100.0%	$	131,013,395

^(a) All or a portion of this security is segregated for “to be announced” securities, open futures contracts and/or mortgage dollar rolls.

^(b) This security is traded on a “to-be-announced” basis.

^(c) Security acquired under mortgage dollar roll agreement.

^(d) Variable rate securities. Coupon rate disclosed is that which is in effect at October 31, 2005.

^(e) All or a portion of this security is held at the broker as collateral for open futures contracts.

^# Aggregate cost for federal income tax purposes is $188,684,303.

Abbreviations used in this schedule:
IO	— Interest Only
PAC	— Planned Amortization Cost

See Notes to Financial Statements.

46         Smith Barney Investment Series 2005 Annual Report

Statement of Assets and Liabilities (October 31, 2005)

	Smith Barney Premier Selections All Cap Growth Portfolio			Smith Barney Dividend Strategy Portfolio			Smith Barney Growth and Income Portfolio			SB Government Portfolio
ASSETS:
Investments, at cost	$	44,625,570		$	66,451,918		$	63,972,401		$	130,417,985
Short-term investments, at cost		490,000			5,872,000			6,863,978			58,192,333
Investments, at value	$	52,413,424		$	69,924,705		$	73,213,420		$	128,027,325
Short-term investments, at value		490,000			5,872,000			6,863,978			58,192,333
Cash		74			1,177			345			875
Receivable for securities sold		650,854			313,688			720,771			—
Dividends and interest receivable		29,059			113,873			16,089			711,177
Receivable for Fund shares sold		2,055			—			20,253			88,914
Receivable from broker — variation margin on open futures contracts		—			—			—			5,094
Prepaid expenses		967			273			993			1,967
Total Assets		53,586,433			76,225,716			80,835,849			187,027,685
LIABILITIES:
Payable for securities purchased		102,163			—			730,876			55,844,176
Payable for loaned securities collateral (Notes 1 and 3)		—			—			5,831,978			—
Payable for Fund shares repurchased		105,049			261,160			48,951			24,929
Management fee payable		34,071			41,983			40,861			61,688
Deferred dollar roll income		—			—			—			24,644
Trustees’ Retirement Plan payable (Note 2)		5,144			9,422			5,070			5,417
Trustees’ fees payable		449			—			—			1,584
Transfer agent fees payable		1,251			1,013			1,478			1,643
Accrued expenses		30,723			45,787			34,095			50,209
Total Liabilities		278,850			359,365			6,693,309			56,014,290
Total Net Assets	$	53,307,583		$	75,866,351		$	74,142,540		$	131,013,395
NET ASSETS:
Par value (Note 4)	$	43		$	87		$	78		$	115
Paid-in capital in excess of par value		55,788,391			97,383,210			71,861,358			132,928,946
Undistributed net investment income		65,509			1,104,524			368,174			4,243,941
Accumulated net realized loss on investments, futures contracts and foreign currency transactions		(10,334,214	)		(26,094,257	)		(7,328,089	)		(3,849,164	)
Net unrealized appreciation (depreciation) on investments and futures contracts		7,787,854			3,472,787			9,241,019			(2,310,443	)
Total Net Assets	$	53,307,583		$	75,866,351		$	74,142,540		$	131,013,395
Shares Outstanding		4,317,033			8,731,998			7,832,395			11,540,394
Net Asset Value		$12.35			$8.69			$9.47			$11.35

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         47

Statements of Operations (For the year ended October 31, 2005)

	Smith Barney Premier Selections All Cap Growth Portfolio		Smith Barney Dividend Strategy Portfolio			Smith Barney Growth and Income Portfolio			SB Government Portfolio
INVESTMENT INCOME:
Interest	$	12,536	$	235,199		$	64,706		$	5,663,939
Dividends		594,548		2,077,667			1,391,580			—
Income from securities lending		—		—			6,225			—
Less: Foreign taxes withheld		—		(5,721	)		(15,096	)		—
Total Investment Income		607,084		2,307,145			1,447,415			5,663,939
EXPENSES:
Management fee (Note 2)		430,664		512,506			488,246			719,276
Legal fees		29,405		53,637			27,095			48,099
Custody fees		19,618		50,103			18,162			25,057
Shareholder reports		22,801		26,309			17,214			16,847
Audit and tax		18,600		19,089			17,201			13,051
Trustees’ fees		10,434		4,366			5,282			11,533
Transfer agent fees (Note 2)		4,979		4,770			5,232			5,484
Insurance		355		1,063			731			3,600
Registration fees		43		—			—			39
Miscellaneous expenses		4,676		4,751			8,930			9,124
Total Expenses		541,575		676,594			588,093			852,110
Net Investment Income		65,509		1,630,551			859,322			4,811,829
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS (NOTES 1 AND 3):
Net Realized Gain (Loss) From:
Investments		854,169		3,549,110			1,946,100			(73,054	)
Futures contracts		—		134,370			—			224,887
Foreign currency transactions		—		1,552			—			—
Net Realized Gain		854,169		3,685,032			1,946,100			151,833
Change in Net Unrealized Appreciation/Depreciation From:
Investments		4,675,349		(3,608,921	)		1,704,609			(4,333,069	)
Futures contracts		—		(17,325	)		—			(25,655	)
Change in Net Unrealized Appreciation/Depreciation		4,675,349		(3,626,246	)		1,704,609			(4,358,724	)
Net Gain (Loss) on Investments, Futures Contracts and Foreign Currency Transactions		5,529,518		58,786			3,650,709			(4,206,891	)
Increase in Net Assets From Operations	$	5,595,027	$	1,689,337		$	4,510,031		$	604,938

See Notes to Financial Statements.

48         Smith Barney Investment Series 2005 Annual Report

Statements of Changes in net Assets (For the years ended October 31,)

	Smith Barney Premier Selections All Cap Growth Portfolio						Smith Barney Dividend Strategy Portfolio
	2005			2004			2005			2004
OPERATIONS:
Net investment income (loss)	$	65,509		$	(121,872	)	$	1,630,551		$	286,063
Net realized gain		854,169			488,527			3,685,032			800,792
Change in net unrealized appreciation/depreciation		4,675,349			(1,328,204	)		(3,626,246	)		1,424,267
Increase (Decrease) in Net Assets From Operations		5,595,027			(961,549	)		1,689,337			2,511,122
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		—			—			(750,395	)		(307,815	)
Decrease in Net Assets From Distributions to Shareholders		—			—			(750,395	)		(307,815	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		2,175,320			31,811,952			7,025,850			9,042,364
Net asset value of shares issued for reinvestment of distributions		—			—			750,395			307,815
Cost of shares repurchased		(13,543,097	)		(6,654,085	)		(10,684,795	)		(7,434,335	)
Increase (Decrease) in Net Assets From Fund Share Transactions		(11,367,777	)		25,157,867			(2,908,550	)		1,915,844
Increase (Decrease) in Net Assets		(5,772,750	)		24,196,318			(1,969,608	)		4,119,151
NET ASSETS:
Beginning of year		59,080,333			34,884,015			77,835,959			73,716,808
End of year*	$	53,307,583		$	59,080,333		$	75,866,351		$	77,835,959
*  Includes undistributed net investment income of:		$65,509			—			$1,104,524			$237,488

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         49

Statements of Changes in Net Assets (continued) (For the years ended October 31,)

	Smith Barney Growth and Income Portfolio						SB Government Portfolio
	2005			2004			2005			2004
OPERATIONS:
Net investment income	$	859,322		$	397,098		$	4,811,829		$	4,267,080
Net realized gain (loss)		1,946,100			1,849,969			151,833			(558,108	)
Change in net unrealized appreciation/depreciation		1,704,609			1,768,256			(4,358,724	)		1,020,171
Increase in Net Assets From Operations		4,510,031			4,015,323			604,938			4,729,143
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(825,257	)		(305,096	)		(4,853,346	)		(3,949,420	)
Decrease in Net Assets From Distributions to Shareholders		(825,257	)		(305,096	)		(4,853,346	)		(3,949,420	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		7,667,798			15,634,248			16,268,536			15,381,121
Net asset value of shares issued for reinvestment of distributions		825,257			305,096			4,853,346			3,949,420
Cost of shares repurchased		(8,199,481	)		(3,819,398	)		(12,823,407	)		(20,525,266	)
Increase (Decrease) in Net Assets From Fund Share Transactions		293,574			12,119,946			8,298,475			(1,194,725	)
Increase (Decrease) in Net Assets		3,978,348			15,830,173			4,050,067			(415,002	)
NET ASSETS:
Beginning of year		70,164,192			54,334,019			126,963,328			127,378,330
End of year*	$	74,142,540		$	70,164,192		$	131,013,395		$	126,963,328
*  Includes undistributed net investment income of:		$368,174			$334,109			$4,243,941			$3,945,584

See Notes to Financial Statements.

50         Smith Barney Investment Series 2005 Annual Report

Financial Highlights

For a share of each class of beneficial interest outstanding throughout each year ended October 31:

Smith Barney Premier Selections All Cap Growth Portfolio	2005		2004		2003		2002		2001
Net Asset Value, Beginning of Year	$11.23		$11.45		$8.96		$10.73		$14.48
Income (Loss) From Operations:
Net investment income (loss)	0.02		(0.02	)	(0.01	)	(0.03	)	0.02
Net realized and unrealized gain (loss)	1.10		(0.20	)	2.50		(1.73	)	(3.69	)
Total Income (Loss) From Operations	1.12		(0.22	)	2.49		(1.76	)	(3.67	)
Less Distributions From:
Net investment income	—		—		—		(0.01	)	(0.04	)
Net realized gains	—		—		—		—		(0.04	)
Total Distributions	—		—		—		(0.01	)	(0.08	)
Net Asset Value, End of Year	$12.35		$11.23		$11.45		$  8.96		$10.73
Total Return(1)	9.97	%	(1.92	)%	27.79	%	(16.44	)%	(25.45	)%
Net Assets, End of Year (000s)	$53,308		$59,080		$34,884		$28,628		$34,384
Ratios to Average Net Assets:
Gross expenses	0.94	%	0.95	%	0.90	%	1.11	%	1.08	%
Net expenses(2)	0.94		0.94	(3)	0.90		0.95	(3)	0.95	(3)
Net investment income (loss)	0.11		(0.25	)	(0.08	)	(0.25	)	0.16
Portfolio Turnover Rate	43	%	46	%	66	%	58	%	116	%

⁽¹⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽²⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 0.95%.

⁽³⁾ The investment manager voluntarily waived a portion of its fees.

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         51

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended October 31:

Smith Barney Dividend Strategy Portfolio	2005			2004			2003			2002			2001
Net Asset Value, Beginning of Year	$	8.58		$	8.33		$	7.24		$	8.96		$	12.14
Income (Loss) From Operations:
Net investment income		0.18			0.03			0.03			0.02			0.04
Net realized and unrealized gain (loss)		0.01			0.25			1.09			(1.72	)		(3.19	)
Total Income (Loss) From Operations		0.19			0.28			1.12			(1.70	)		(3.15	)
Less Distributions From:
Net investment income		(0.08	)		(0.03	)		(0.03	)		(0.02	)		(0.03	)
Total Distributions		(0.08	)		(0.03	)		(0.03	)		(0.02	)		(0.03	)
Net Asset Value, End of Year	$	8.69		$	8.58		$	8.33		$	7.24		$	8.96
Total Return(1)		2.23	%		3.41	%		15.47	%		(18.94	)%		(26.03	)%
Net Assets, End of Year (000s)		$75,866			$77,836			$73,717			$61,139			$67,093
Ratios to Average Net Assets:
Gross expenses		0.86	%		0.88	%		0.91	%		0.93	%		0.93	%
Net expenses(2)		0.86			0.88	(3)		0.91			0.93			0.93
Net investment income		2.07			0.37			0.47			0.24			0.42
Portfolio Turnover Rate		99	%		42	%		77	%		45	%		26	%

⁽¹⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽²⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 0.95%.

⁽³⁾ The investment manager voluntarily waived a portion of its fees.

See Notes to Financial Statements.

52         Smith Barney Investment Series 2005 Annual Report

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended October 31:

Smith Barney Growth and Income Portfolio	2005			2004			2003			2002			2001
Net Asset Value, Beginning of Year	$	9.00		$	8.44		$	6.95		$	8.15		$	10.77
Income (Loss) From Operations:
Net investment income		0.11			0.05			0.05			0.02			0.05
Net realized and unrealized gain (loss)		0.46			0.55			1.48			(1.20	)		(2.58	)
Total Income (Loss) From Operations		0.57			0.60			1.53			(1.18	)		(2.53	)
Less Distributions From:
Net investment income		(0.10	)		(0.04	)		(0.04	)		(0.02	)		(0.05	)
Net realized gains		—			—			—			—			(0.04	)
Total Distributions		(0.10	)		(0.04	)		(0.04	)		(0.02	)		(0.09	)
Net Asset Value, End of Year	$	9.47		$	9.00		$	8.44		$	6.95		$	8.15
Total Return(1)		6.37	%		7.18	%		22.09	%		(14.47	)%		(23.63	)%
Net Assets, End of Year (000s)		$74,143			$70,164			$54,334			$36,730			$31,576
Ratios to Average Net Assets:
Gross expenses		0.78	%		0.91	%		0.87	%		1.09	%		1.18	%
Net expenses(2)		0.78			0.91	(3)		0.87			0.95	(3)		0.95	(3)
Net investment income		1.14			0.61			0.68			0.40			0.53
Portfolio Turnover Rate		57	%		43	%		65	%		48	%		68	%

⁽¹⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.

⁽²⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 0.95%.

⁽³⁾ The investment manager voluntarily waived a portion of its fees.

See Notes to Financial Statements.

Smith Barney Investment Series 2005 Annual Report         53

Financial Highlights (continued)

For a share of each class of beneficial interest outstanding throughout each year ended October 31:

SB Government Portfolio	2005			2004			2003			2002(1)			2001
Net Asset Value, Beginning of Year		$11.75			$11.68			$11.74			$11.44			$10.62
Income (Loss) From Operations:
Net investment income		0.45			0.41			0.33			0.35	(2)		0.52
Net realized and unrealized gain (loss)		(0.40	)		0.03			(0.23	)		0.13	(2)		0.87
Total Income From Operations		0.05			0.44			0.10			0.48			1.39
Less Distributions From:
Net investment income		(0.45	)		(0.37	)		(0.16	)		(0.11	)		(0.57	)
Net realized gains		—			—			—			(0.07	)		—
Total Distributions		(0.45	)		(0.37	)		(0.16	)		(0.18	)		(0.57	)
Net Asset Value, End of Year		$11.35			$11.75			$11.68			$11.74			$11.44
Total Return(3)		0.41	%		3.90	%		0.87	%		4.20	%		13.56	%
Net Assets, End of Year (000s)	$	131,013		$	126,963		$	127,378		$	84,104		$	13,410
Ratios to Average Net Assets:
Gross expenses		0.65	%		0.70	%		0.68	%		1.00	%		1.30	%
Net expenses(4)		0.65			0.70	(5)		0.68			0.80	(5)		0.80	(5)
Net investment income		3.68			3.44			2.91			3.17	(2)		4.47
Portfolio Turnover Rate		96	%(6)		53	%(6)		83	%(6)		145	%		90	%

⁽¹⁾ Per share amounts have been calculated using the average shares method.

⁽²⁾ Effective November 1, 2001, the Fund adopted a change in the accounting method that requires the Fund to amortize premiums and accrete all discounts. Without the adoption of this change, for the year ended October 31, 2002, net investment income, net realized and unrealized gain and the ratio of net investment income to average net assets would have been $0.36, $0.12 and 3.32%, respectively. Per share information, ratios and supplemental data for the periods prior to November 1, 2001 have not been restated to reflect this change in presentation.

⁽³⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽⁴⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 0.80%.

⁽⁵⁾ The investment manager voluntarily waived a portion of its fees.

⁽⁶⁾ Excluding mortgage dollar roll transactions, If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 614%, 667% and 429% for the years ended October 31, 2005, 2004 and 2003, respectively.

See Notes to Financial Statements.

54         Smith Barney Investment Series 2005 Annual Report

Notes to Financial Statements

1. Organization and Significant Accounting Policies

The Smith Barney Premier Selections All Cap Growth Portfolio, Smith Barney Dividend Strategy Portfolio, Smith Barney Growth and Income Portfolio and SB Government Portfolio (“Funds”) are separate diversified investment funds of Smith Barney Investment Series (“Trust”), a Massachusetts business trust. The Trust is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company.

The following are significant accounting policies consistently followed by the Funds and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.

(a) Investment Valuation. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various relationships between securities. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Funds calculates their net asset value, such Funds may value these investments at fair value as determined in accordance with the procedures approved by the Funds’ Board of Trustees. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.

(b) Repurchase Agreements. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian takes possession of the underlying collateral securities, the market value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.

(c) Financial Futures Contracts. The Funds may enter into financial futures contracts to hedge a portion of the portfolio. Upon entering into a financial futures contract, the Funds are required to deposit cash or securities as initial margin. Additional securities are also segregated up to the current market value of the financial futures contracts. Subsequent payments, known as variation margin, are made or received by the Funds each day, depending on the daily fluctuation in the value of the underlying financial instruments. The Funds recognize an unrealized gain or loss equal to the daily variation margin. When the financial futures contracts are closed, a realized gain or loss is recognized equal to the difference between the proceeds from (or cost of) the closing transactions and the Funds’ basis in the contracts.

Smith Barney Investment Series 2005 Annual Report         55

Notes to Financial Statements (continued)

The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. In addition, investing in financial futures contracts involves the risk that the Funds could lose more than the original margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

(d) Lending of Portfolio Securities. The Funds have an agreement with their custodian whereby the custodian may lend securities owned by the Funds to brokers, dealers and other financial organizations. In exchange for lending securities under the terms of the agreement with their custodian, the Funds receive a lender’s fee. Fees earned by the Funds on securities lending are recorded as securities lending income. Loans of securities by the Funds are collateralized by cash, U.S. government securities or high quality money market instruments that are maintained at all times in an amount at least equal to the current market value of the loaned securities, plus a margin which varies depending on the type of securities loaned. The custodian establishes and maintains the collateral in a segregated account. The Funds have the right under the lending agreement to recover the securities from the borrower on demand.

The Funds maintain the risk of any loss on the securities on loan as well as the potential loss on investments purchased with cash collateral received from securities lending.

(e) Securities Traded on a To-Be-Announced Basis. SB Government Portfolio may trade securities on a to-be-announced (“TBA”) basis. In a TBA transaction, the Fund commits to purchasing or selling securities, which have not yet been issued by the issuer and for which specific information is not known, such as the face amount and maturity date and the underlying pool of investments in U.S. government agency mortgage pass-through transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Fund, normally 15 to 45 days later. Beginning on the date the Fund enters into a TBA transaction, cash, U.S. government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.

(f) Mortgage Dollar Rolls. SB Government Portfolio may enter into dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities to settle on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. The Fund is compensated by a fee paid by the counterparty, often in the form of a drop in the repurchase price of the securities. Dollar rolls are accounted for as financing arrangements; the fee is accrued into interest income ratably over the term of the dollar roll and any gain or loss on the roll is deferred and realized upon disposition of the rolled security.

The risk of entering into a mortgage dollar roll is that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of proceeds of the dollar roll may be restricted

56         Smith Barney Investment Series 2005 Annual Report

Notes to Financial Statements (continued)

pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.

(g) Stripped Securities. Certain Funds invest in “Stripped Securities,” a term used collectively for stripped fixed income securities. Stripped Securities can be principal only securities (“PO”), which are debt obligations that have been stripped of unmatured interest coupons or interest only securities (“IO”), which are unmatured interest coupons that have been stripped from debt obligations. Stripped Securities do not make periodic payments of interest prior to maturity. As is the case with all securities, the market value of Stripped Securities will fluctuate in response to changes in economic conditions, interest rates and the market’s perception of the securities. However, fluctuations in response to interest rates may be greater in Stripped Securities than for debt obligations of comparable maturities that pay interest currently. The amount of fluctuation increases with a longer period of maturity.

The yield to maturity on IO’s is sensitive to the rate of principal repayments (including prepayments) on the related underlying debt obligation and principal payments may have a material effect on yield to maturity. If the underlying debt obligation experiences greater than anticipated prepayments of principal, the Funds may not fully recoup its initial investment in IO’s.

(h) Security Transactions and Investment Income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Funds determine the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method.

(i) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities, at the date of valuation, resulting from changes in exchange rates.

Smith Barney Investment Series 2005 Annual Report         57

Notes to Financial Statements (continued)

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

(j) Distributions to Shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Funds are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

(k) Federal and Other Taxes. It is the Funds’ policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Funds intend to distribute substantially all of its taxable income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Funds’ financial statements. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

(l) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. There were no reclassifications during the current year for Smith Barney Premier Selections All Cap Growth Portfolio and Smith Barney Growth and Income Portfolio. Additionally, during the current year, the following reclassifications have been made:

Fund	Undistributed Net Investment Income			Realized Gains / Accumulated Net Realized Losses			Paid-in Capital
Smith Barney Dividend Strategy Portfolio(a)	$	(13,120	)	$	13,120			—
SB Government Portfolio(b)		—			20		$	(20	)
SB Government Portfolio (c)		339,874			(339,874	)		—

^(a) Reclassifications are primarily due to foreign currency transactions treated as ordinary income for tax purposes and book/tax differences in the treatment of distributions from real estate investment trusts.

^(b) Reclassifications are primarily due to rounding.

^(c) Reclassifications are primarily due to differences between book and tax amortization of premium on fixed income securities and income from mortgage backed securities treated as capital gains for tax purposes.

2. Management Agreement and Other Transactions with Affiliates

Smith Barney Fund Management LLC (“SBFM”), an indirect wholly-owned subsidiary of Citigroup Inc. (“Citigroup”), acts as investment manager to the Funds. Smith Barney Premier Selections All Cap Growth Portfolio, Smith Barney Dividend Strategy Portfolio, Smith Barney Growth and Income Portfolios and SB Government Portfolio each paid SBFM a management fee which are calculated daily and payable monthly, are calculated in accordance with the following breakpoint schedules:

Smith Barney Dividend Strategy and Smith Barney Growth and Income Portfolios	Fee
Average Daily Net Assets
First $1 billion	0.65	%
Next $1 billion	0.60
Next $1 billion	0.55
Next $1 billion	0.50
Over $4 billion	0.45

58         Smith Barney Investment Series 2005 Annual Report

Notes to Financial Statements (continued)

SB Government Portfolio	Fee
Average Daily Net Assets
First $2 billion	0.55	%
Next $2 billion	0.50
Next $2 billion	0.45
Next $2 billion	0.40
Over $8 billion	0.35

Prior to October 1, 2005, the management fee for Smith Barney Premier Selections All Cap Growth Portfolio was calculated at an annual rate of .75% of average daily net assets of the Fund.

Effective October 1, 2005, the Smith Barney Premier Selections All Cap Growth Portfolio applied the following breakpoints to the management fee:

Smith Barney Premier Selections All Cap Growth Portfolios	Fee
Average Daily Net Assets
First $1 billion	0.750	%
Next $1 billion	0.725
Next $3 billion	0.700
Next $5 billion	0.675
Over $10 billion	0.650

During the year ended October 31, 2005, Smith Barney Premier Selections All Cap Growth Portfolio, Smith Barney Dividend Strategy Portfolio and Smith Barney Growth and Income Portfolio, had voluntary expense limitations in place of 0.95%, respectively. SB Government Portfolio had a voluntary expense limitation in place of 0.80%. These expense limitations can be terminated at any time by SBFM.

Citicorp Trust Bank, fsb. (“CTB”), another subsidiary of Citigroup, acts as the Funds’ transfer agent. PFPC Inc. (“PFPC”) acts as the Funds’ sub-transfer agent. CTB receives account fees and asset-based fees that vary according to the size and type of account. PFPC is responsible for shareholder recordkeeping and financial processing for all shareholder accounts and is paid by CTB. For the year ended October 31, 2005, each Fund paid transfer agent fees of $4,167 to CTB.

Citigroup Global Markets Inc. (“CGM”), another indirect wholly-owned subsidiary of Citigroup, acts as the Funds’ distributor.

For the year ended October 31, 2005, CGM and its affiliates received in brokerage commissions of $8,796, $325 and $60,593 for the Smith Barney Premier Selections All Cap Growth Portfolio, Smith Barney Growth and Income Portfolio and Smith Barney Dividend Strategy Portfolio, respectively for the Funds’ agency transactions.

Certain officers and one Trustee of the Trust are employees of Citigroup or its affiliates and do not receive compensation from the Trust.

The Trustees of the Funds have adopted a Retirement Plan (“Plan”) for all Trustees who are not “interested persons” of the Funds, within the meaning of the 1940 Act. Under the Plan, all Trustees are required to retire from the Board as of the last day of the calendar year in which the applicable Trustee attains age 75. Trustees may retire under the Plan before attaining the mandatory retirement age. Trustees who have served as Trustee of the

Smith Barney Investment Series 2005 Annual Report         59

Notes to Financial Statements (continued)

Trust or any of the investment companies associated with the manager for at least ten years when they retire are eligible to receive the maximum retirement benefit under the Plan. The maximum retirement benefit is an amount equal to five times the amount of retainer and regular meeting fees payable to a Trustee during the entirety of the calendar year of the Trustee’s retirement (assuming no change in relevant facts for the balance of the year following the Trustee’s retirement). Amounts under the Plan may be paid in installments or in a lump sum (discounted to present value). Benefits under the Plan are unfunded. Three former Trustees are currently receiving payments under the Plan. In addition, two other former Trustees elected to receive a lump sum payment under the Plan.

Certain of the Trustees are also covered by a prior retirement plan. Under the prior plan, retirement benefits are payable for a ten-year period following retirement, with the annual payment to be based upon the Trustee’s compensation from the Trust during calendar year 2000. Trustees with more than five but less than ten years of service at retirement will receive a prorated benefit. In order to receive benefits under the current Plan, a Trustee must waive all rights under the prior plan prior to receiving payment under either plan.

At October 31, 2005, the Smith Barney Premier Selections All Cap Growth Portfolio, Smith Barney Dividend Strategy Portfolio, Smith Barney Growth and Income Portfolio, and SB Government Portfolio have accrued $5,144, $9,422, $5,070, and $5,417, respectively, in connection with these plans.

3. Investments

During the year ended October 31, 2005, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:

	Purchases		Sales
Smith Barney Premier Selections All Cap Growth Portfolio	$	24,170,794	$	32,781,882
Smith Barney Dividend Strategy Portfolio		69,956,845		70,736,177
Smith Barney Growth and Income Portfolio		43,797,002		41,251,248
SB Government Portfolio		130,781,446		118,723,777

At October 31, 2005, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

Fund	Gross unrealized appreciation		Gross unrealized depreciation			Net unrealized appreciation/ depreciation
Smith Barney Premier Selections All Cap Growth Portfolio	$	9,690,055	$	(2,229,961	)	$	7,460,094
Smith Barney Dividend Strategy Portfolio		5,333,747		(2,309,303	)		3,024,444
Smith Barney Growth and Income Portfolio		10,482,509		(1,755,250	)		8,727,259
SB Government Portfolio		257,645		(2,722,290	)		(2,464,645	)

At October 31, 2005, SB Government Portfolio had the following open futures contracts:

Contracts to Buy:	Number of Contracts	Expiration Date	Basis Value		Market Value		Unrealized Gain (Loss)
U.S. Treasury 10 Years Notes	76	12/05	$	8,447,182	$	8,242,438	$	(204,744	)
U.S. Treasury Bonds	20	12/05		2,296,322		2,239,375		(56,947	)
								(261,691	)

60         Smith Barney Investment Series 2005 Annual Report

Notes to Financial Statements (continued)

Contracts to Sell:	Number of Contracts	Expiration Date	Basis Value	Market Value	Unrealized Gain (Loss)
U.S. Treasury 5 Years Notes	109	12/05	11,726,068	11,542,078	$	183,990
U.S. Treasury 2 Years Notes	83	12/05	17,189,778	17,031,860		157,918
						341,908
Net Unrealized Gain on Open Futures Contracts					$	80,217

At October 31, 2005, Smith Barney Growth and Income Portfolio loaned securities having a market value of $5,700,669. The Fund received cash collateral amounting to $5,831,978 which was invested into the State Street Navigator Securities Lending Trust Prime Portfolio, a Rule 2a-7 money market fund, registered under the 1940 Act.

At October 31, 2005, SB Government Portfolio had outstanding mortgage dollar rolls with a total cost of $56,267,352.

During the year ended October 31, 2005, SB Government Portfolio entered into mortgage dollar roll transactions in the aggregate amount of $643,335,328.

For the year ended October 31, 2005, SB Government Portfolio recorded interest income of $1,231,940 related to such mortgage dollar rolls.

4. Shares of Beneficial Interest

At October 31, 2005, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 per share.

Transactions in shares of the Fund were as follows:

Smith Barney Premier Selections All Cap Growth Portfolio	Year Ended October 31, 2005		Year Ended October 31, 2004
Shares sold	182,244		2,799,961
Shares repurchased	(1,127,132	)	(583,442	)
Net Increase (Decrease)	(944,888	)	2,216,519
Smith Barney Dividend Strategy Portfolio
Shares sold	801,488		1,048,052
Shares issued on reinvestment	84,314		35,544
Shares repurchased	(1,221,275	)	(863,838	)
Net Increase (Decrease)	(335,473	)	219,758
Smith Barney Growth and Income Portfolio
Shares sold	817,377		1,757,533
Shares issued on reinvestment	86,414		34,319
Shares repurchased	(869,834	)	(431,387	)
Net Increase	33,957		1,360,465
SB Government Portfolio
Shares sold	1,421,226		1,331,786
Shares issued on reinvestment	429,880		345,833
Shares repurchased	(1,119,908	)	(1,774,164	)
Net Increase (Decrease)	731,198		(96,545	)

Smith Barney Investment Series 2005 Annual Report         61

Notes to Financial Statements (continued)

5. Income Tax Information and Distributions to Shareholders

During the fiscal years ended October 31, 2005 and October 31, 2004, Smith Barney Premier Selections All Cap Growth Portfolio did not make any distribution.

The tax character of distributions paid during the fiscal years ended October 31, 2005, was as follows:

	Smith Barney Dividend Strategy Portfolio		Smith Barney Growth and Income Portfolio		SB Government Portfolio
Distributions paid from:
Ordinary Income	$	750,395	$	825,257	$	4,853,346
Total Distributions Paid	$	750,395	$	825,257	$	4,853,346

The tax character of distributions paid during the fiscal year ended October 31, 2004 were as follows:

	Smith Barney Dividend Strategy Portfolio		Smith Barney Growth and Income Portfolio		SB Government Portfolio
Distributions paid from:
Ordinary Income	$	307,815	$	305,096	$	3,949,420
Total Distributions Paid	$	307,815	$	305,096	$	3,949,420

As of October 31, 2005, the components of accumulated earnings on a tax basis were as follows:

	Smith Barney Premier Selections All Cap Growth Portfolio			Smith Barney Dividend Strategy Portfolio			Smith Barney Growth and Income Portfolio			SB Government Portfolio
Undistributed ordinary income — net	$	65,509		$	1,104,524		$	368,174		$	4,243,941
Total undistributed earnings	$	65,509		$	1,104,524		$	368,174		$	4,243,941
Capital loss carryforward (*)		(10,006,454	)		(25,645,914	)		(6,814,329	)		(3,571,137	)
Other book/tax temporary differences		—			—			—			(204,042	)(c)
Unrealized appreciation/(depreciation)		7,460,094	(a)		3,024,444	(b)		8,727,259	(a)		(2,384,428	)(d)
Total accumulated earnings / (losses) — net	$	(2,480,851	)	$	(21,516,946	)	$	2,281,104		$	(1,915,666	)

(*) During the taxable year ended October 31, 2005, Smith Barney Premier Selections All Cap Growth Portfolio utilized $775,520, Smith Barney Dividend Strategy Portfolio utilized $2,954,957 and Smith Barney Growth and Income Portfolio utilized $1,905,365 of each of their respective capital loss carryovers available from prior years. As of October 31, 2005, the Funds had the following net capital loss carryforwards remaining:

62         Smith Barney Investment Series 2005 Annual Report

Notes to Financial Statements (continued)

Year of Expiration	Smith Barney Premier Selections All Cap Growth Portfolio			Smith Barney Dividend Strategy Portfolio			Smith Barney Growth and Income Portfolio			SB Government Portfolio
10/31/2009	$	(997,566	)	$	(3,340,004	)		—			—
10/31/2010		(6,363,962	)		(15,846,502	)	$	(3,058,834	)	$	(49,007	)
10/31/2011		(2,644,926	)		(6,459,408	)		(3,755,495	)		(2,378,580	)
10/31/2012		—			—			—			(877,195	)
10/31/2013		—			—			—			(266,355	)
	$	(10,006,454	)	$	(25,645,914	)	$	(6,814,329	)	$	(3,571,137	)

These amounts will be available to offset any future taxable capital gains.

(a) The difference between book-basis and tax-basis unrealized appreciation / (depreciation) is attributable primarily to the tax deferral of losses on wash sales.

(b) The difference between book-basis and tax-basis unrealized appreciation / (depreciation) is attributable primarily to the tax deferral of losses on wash sales and the difference between the book and tax cost basis of investments in real estate investment trusts.

(c) Other book/tax temporary differences are attributable primarily to the tax deferral of losses on straddles and the realization for tax purposes of unrealized gains on certain futures contracts.

(d) The difference between book-basis and tax-basis unrealized appreciation / (depreciation) is attributable primarily to the difference between book & tax amortization methods for premiums on fixed income securities.

6. Regulatory Matters

On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and CGM relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).

The SEC order finds that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the funds’ investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also finds that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to

Smith Barney Investment Series 2005 Annual Report         63

Notes to Financial Statements (continued)

pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan prepared and submitted for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.

The order required SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGM would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Funds’ Board selected a new transfer agent for the Funds. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.

On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason Inc.

7. Legal Matters

Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGM and SBFM (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the advisor for the Smith Barney family of funds, rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses.

On October 5, 2005, a motion to consolidate the five actions and any subsequently-filed, related action was filed. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future.

As of the date of this report, the Funds’ investment manager believes that 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 Funds’ investment manager and its affiliates to continue to render services to the Funds under their respective contracts.

*    *    *

64         Smith Barney Investment Series 2005 Annual Report

Notes to Financial Statements (continued)

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 l2b-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, the Funds’ investment manager 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 theses 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, the Funds’ investment manager 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.

The Defendants have moved to dismiss the Complaint. Those motions are pending before the court.

8. Other Matters

The Funds have received information concerning SBFM as follows:

On September 16, 2005, the staff of the Securities and Exchange Commission (the “Commission”) informed SBFM that the staff is considering recommending that the Commission institute administrative proceedings against SBFM for alleged violations of Sections 19(a) and 34(b) of the Investment Company Act (and related Rule 19a-1). The notification is a result of an industry wide inspection undertaken by the Commission and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM.

Although there can be no assurance, SBFM believes that this matter is not likely to have a material adverse effect on the Funds or SBFM’s ability to perform investment advisory services relating to the Funds.

Smith Barney Investment Series 2005 Annual Report         65

Notes to Financial Statements (continued)

9. Subsequent Events

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business, Citigroup Asset Management (“CAM”), to Legg Mason, Inc. (“Legg Mason”). As a result, the Funds’ investment manager (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused each Fund’s existing investment management contract to terminate. Each Fund’s shareholders previously approved a new investment management contract between each Fund, as applicable, and the Manager which became effective on December 1, 2005.

Legg Mason, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202, is a financial services holding company. As of December 2, 2005, Legg Mason’s asset management operation had aggregate assets under management of approximately $830 billion.

Each Fund’s Board has appointed such Fund’s current distributor, Citigroup Global Markets Inc. (“CGM”), and Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, as co-distributors of such Fund. Each Fund’s Board has also approved amended and restated Rule 12b-1 Plans. CGM and other broker-dealers, financial intermediaries and financial institutions (each called a “Service Agent”) that currently offer Fund shares will continue to make Fund shares available to their clients. Additional Service Agents may offer Fund shares in the future.

Effective December 1, 2005, with respect to those Fund classes subject to a Rule 12b-1 Plan, each Fund pays service and distribution fees to each of LMIS and CGM for the services they provide and expenses they bear under the Distribution Agreements. The expenses intended to be covered by the distribution fees include those of each co-distributor. The co-distributors will provide the Funds’ Board with periodic reports of amounts expended under each Fund’s Rule 12b-1 Plans and the purposes for which such expenditures were made.

Effective December 1, 2005, CGM will no longer be an affiliated person of the Funds under the Investment Company Act of 1940, as amended. As a result, each Fund will be permitted to execute transactions with CGM or an affiliate of CGM as agent (but not as principal) without the restrictions applicable to transactions with affiliated persons. Similarly, each Fund generally will be permitted to purchase securities in underwritings in which CGM or an affiliate of CGM is a member without the restrictions imposed by certain rules of the Securities and Exchange Commission. The Manager’s use of CGM or affiliates of CGM as agent in portfolio transactions with a fund will be governed by such Fund’s policy of seeking the best overall terms available.

Certain officers and one Trustee of the Funds are employees of Legg Mason or its affiliates and do not receive compensation from the Funds.

Each Fund’s Board has approved PFPC Inc. (“PFPC”) to serve as transfer agent for such Fund. The principal business office of PFPC is located at P.O. Box 9699, Providence, RI 02940-9699.

66         Smith Barney Investment Series 2005 Annual Report

Report of Independent Registered Public Accounting Firm

The Shareholders and Board of Trustees

Smith Barney Investment Series:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Smith Barney Premier Selections All Cap Growth Portfolio, Smith Barney Dividend Strategy Portfolio (formerly known as Smith Barney Large Cap Core Portfolio), Smith Barney Growth and Income Portfolio and SB Government Portfolio, each a series of the Smith Barney Investment Series, as of October 31, 2005, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Smith Barney Premier Selections All Cap Growth Portfolio, Smith Barney Dividend Strategy Portfolio, Smith Barney Growth and Income Portfolio and SB Government Portfolio as of October 31, 2005, and the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended in conformity with U.S. generally accepted accounting principles.

New York, New York

December 16, 2005

Smith Barney Investment Series 2005 Annual Report         67

Board Approval of Management Agreement (unaudited)

Smith Barney Premier Selections All Cap Growth Portfolio

Background

The members of the Board of Smith Barney Premier Selections All Cap Growth Portfolio (the “Fund”), a series of Smith Barney Investment Series, including the Fund’s Board members that are not considered to be “interested persons” under the Investment Company Act of 1940, as amended (the “Independent Board Members”), received information from the Fund’s manager (the “Manager”) to assist them in their consideration of the Fund’s management agreement (the “Management Agreement”). The Board received and considered a variety of information about the Manager and the Fund’s distributors, as well as the advisory and distribution arrangements for the Fund and other funds overseen by the Board, certain portions of which are discussed below. The presentation made to the Board encompassed the Fund and all the funds for which the Board has responsibility. The discussion below covers both advisory and administrative functions being rendered by the Manager, each function encompassed by the Management Agreement.

Board Approval of Management Agreement

In approving the Management Agreement, the Fund’s Board, including the Independent Board Members, considered the factors below. In all of the Board’s considerations with respect to the approval of the Management Agreement, the Board was mindful of the proposed acquisition of the Manager by Legg Mason, Inc.

Nature, Extent and Quality of the Services under the Management Agreement

The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager under the Management Agreement during the past year. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager in its management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager took into account the Board’s knowledge and familiarity gained as Board members of funds in the Citigroup Asset Management (“CAM”) fund complex, including the scope and quality of the Manager’s investment management and other capabilities and the quality of its administrative and other services. The Board observed that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Fund’s expanded compliance programs. The Board also considered the Manager’s response to recent regulatory compliance issues affecting it and the CAM fund complex. The Board reviewed information received from the Manager regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended.

The Board reviewed the qualifications, backgrounds and responsibilities of the Fund’s senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the degree to which the Manager implemented organizational changes to improve investment results and the

68         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

services provided to the CAM fund complex. The Board also considered, based on its knowledge of the Manager and its affiliates, the financial resources available to CAM and its parent organization, Citigroup Inc.

The Board also considered the Manager’s brokerage policies and practices, the standards applied in seeking best execution, the Manager’s policies and practices regarding soft dollars, the use of a broker affiliated with the Manager and the existence of quality controls applicable to brokerage allocation procedures. In addition, management also reported to the Board on, among other things, its business plans, recent organizational changes and portfolio manager compensation plan.

The Board concluded that, overall, the nature, extent and quality of services provided (and expected to be provided) under the Management Agreement were acceptable.

Fund Performance

The Board received and considered performance information for the Fund as well as for a group of funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the Fund with the funds included in the Performance Universe. The Board also noted that it had received and discussed with management information throughout the year at periodic intervals comparing the Fund’s performance against its benchmark(s).

The information comparing the Fund’s performance to that of its Performance Universe, consisting of all underlying variable insurance products (VIPs) classified as “multi-cap growth funds” by Lipper, showed, among other data, that the Fund’s performance for the 1- and 3- year periods ended March 31, 2005 was below the median while the performance for the 5- year period ended March 31, 2005 was better than the median. The Board noted management’s discussion of the Fund’s performance. Management noted that there has been a change in the portfolio management team, effective May 2005, which was implemented in an attempt to improve the Fund’s results over time. Any potential impact of such changes were, therefore, not reflected in the Lipper materials.

Based on their review, which included careful consideration of all of the factors noted above, the Board, mindful of the proposed transaction with Legg Mason, concluded that it will continue to evaluate the Fund’s performance and the actions taken by the Manager to improve performance.

Management Fees and Expense Ratios

The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management services provided by the Manager. The Board also reviewed and considered that fee waiver and/or expense reimbursement arrangements are currently in place for the Fund and considered the actual fee rate (after taking waivers and reimbursements into account) (the “Actual Management Fee”) and that the Manager had agreed to continue its fee waivers and reimbursements until further notice.

Additionally, the Board received and considered information comparing the Fund’s Contractual Management Fees and Actual Management Fee and the Fund’s overall

Smith Barney Investment Series 2005 Annual Report         69

Board Approval of Management Agreement (unaudited) (continued)

expenses with those of funds in both the relevant expense group and a broader group of funds, each selected and provided by Lipper. The Board also reviewed information regarding fees charged by the Manager to other U.S. clients investing primarily in an asset class similar to that of the Fund including, where applicable, separate accounts. The Manager reviewed with the Board the significant differences in scope of services provided to the Fund and to these other clients, noting that the Fund is provided with administrative services, office facilities, Fund officers (including the Fund’s chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other Fund providers. The Board considered the fee comparisons in light of the differences required to manage these different types of accounts. The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a proposed framework of fees based on asset classes.

Management also discussed with the Board the Fund’s distribution arrangements. The Board was provided with information concerning revenues received by and certain expenses incurred by the Fund’s affiliated distributors and how the amounts received by the distributors are paid.

The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of a group of underlying VIPs (including the Fund) classified as “multi-cap growth funds” and chosen by Lipper to be comparable to the Fund, showed that the Fund’s Contractual Management Fee and Actual Management Fee (which reflects a fee waiver) were below the median. The Board noted that the Fund’s actual total expense ratio was also below the median. The Board also took into account that the Manager had agreed to institute fee breakpoints effective October 1, 2005. The Board also noted that the Manager was continuing its voluntary waiver until further notice, resulting in the same net effective fee as currently in place, which is lower than the current contractual fee.

Taking all of the above into consideration, the Board determined that the Management Fee was reasonable in light of the nature, extent and quality of the services provided to the Fund under the Management Agreement.

Manager Profitability

The Board received and considered a profitability analysis of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the CAM fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data as well as a report from an outside consultant that had reviewed the Manager’s methodology. The Manager’s profitability was considered not excessive in light of the nature, extent and quality of the services provided to the Fund.

Economies of Scale

The Board received and discussed information concerning whether the Manager realizes economies of scale as the Fund’s assets grow. The Board noted that the Manager had agreed to institute breakpoints in the Fund’s Contractual Management Fee, reflecting the

70         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

potential for reducing the Contractual Management Fee as the Fund grows. The Board considered whether the breakpoint fee structure was a reasonable means of sharing any economies of scale or other efficiencies that might accrue from increases in the Fund’s assets levels. The Board noted that the Fund had not yet reached the specified asset level at which a breakpoint to its Contractual Management Fee would be triggered. The Board also noted that as the Fund’s assets increase over time, certain expenses, such as fees for Board members, auditors and legal fees, become a smaller percentage of overall assets. The Board determined that the management fee structure, including the proposed breakpoints, was reasonable.

Other Benefits to the Manager

The Board considered other benefits received by the Manager and its affiliates as a result of their relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders.

In light of the costs of providing investment management and other services to the Fund and the Manager’s ongoing commitment to the Fund, the profits and other ancillary benefits that the Manager and its affiliates received were considered reasonable.

In light of all of the foregoing, the Board approved the Management Agreement to continue for another year.

No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreement, and each Board Member attributed different weight to the various factors. The Independent Board Members were advised by separate independent legal counsel throughout the process. The Board also discussed the proposed continuance of the Management Agreement in private sessions with their independent legal counsel at which no representatives of the Manager were present.

Additional Information

Smith Barney Premier Selections All Cap Growth Portfolio

On June 23, 2005, Citigroup Inc. entered into a definitive agreement (the “Transaction Agreement”) with Legg Mason, Inc. under which Citigroup agreed to sell substantially all of its asset management business, Citigroup Asset Management (“CAM”), which includes the Adviser, to Legg Mason in exchange for the broker-dealer and investment banking businesses of Legg Mason and certain other considerations (the “Transaction”). The Transaction closed on December 1, 2005.

The consummation of the Transaction resulted in the automatic termination of the Fund’s current management agreement in accordance with the Investment Company Act of 1940, as amended (the “1940 Act”). Prior to the closing of the Transaction, the Fund’s Board approved a new management agreement between the Fund and the Adviser (the “New Management Agreement”) and authorized the Fund’s officers to submit the New Management Agreement to shareholders for their approval.

On July 11, 2005, members of the Board discussed with CAM management and certain Legg Mason representatives the Transaction and Legg Mason’s general plans and

Smith Barney Investment Series 2005 Annual Report         71

Board Approval of Management Agreement (unaudited) (continued)

intentions regarding the Fund, including the preservation, strengthening and growth of CAM’s business and its combination with Legg Mason’s business. The Board Members also inquired about the plans for and anticipated roles and responsibilities of certain CAM employees and officers after the Transaction.

At a meeting held on August 7, 2005, the Fund’s Board, including a majority of the Board Members who are not “interested persons” of the Fund or the Adviser as defined in the 1940 Act (the “Independent Board Members”), approved the New Management Agreement. To assist the Board in its consideration of the New Management Agreement, Legg Mason previously provided materials and information about Legg Mason, including its financial condition and asset management capabilities and organization, and CAM provided materials and information about the Transaction between Legg Mason and Citigroup. Representatives of CAM and Legg Mason also made presentations to and responded to questions from the Board, including at meetings held prior to the August 2005 meeting. The Independent Board Members, through their independent legal counsel, also requested and received additional information from CAM and Legg Mason in connection with their consideration of the New Management Agreement. The additional information was provided in advance of and at the August meeting. After the presentations and after reviewing the written materials provided, the Independent Board Members met in executive session with their counsel to consider the New Management Agreement. The Independent Board Members also conferred separately and with their counsel about the Transaction on a number of occasions, including in connection with the July and August meetings.

In their deliberations concerning the New Management Agreement, among other things, the Board Members considered:

(i) the automatic termination of the current management agreement upon completion of the Transaction and the need for continuity of services provided under the current management agreement;

(ii) the reputation, financial strength and resources of Legg Mason and its investment advisory subsidiaries;

(iii) that, following the Transaction, CAM will be part of an organization focused on the asset management business;

(iv) that Legg Mason is an experienced and respected asset management firm, and that Legg Mason has advised the Board Members that (a) it may wish to combine certain CAM operations with those of certain Legg Mason subsidiaries; (b) it is expected that these combination processes will result in changes to portfolio managers or portfolio management teams for a number of the CAM funds, subject to Board consent and appropriate notice to shareholders, and that, in other cases, the current portfolio managers or portfolio management teams will remain in place; and (c) in the future, it may recommend that Legg Mason subsidiaries be appointed as the adviser or subadviser to some or all of the CAM funds, subject to applicable regulatory requirements;

(v) that CAM management had advised the Board that a number of portfolio managers and other key CAM personnel would be retained after the closing of the Transaction;

72         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

(vi) that CAM management and Legg Mason have advised the Board that following the Transaction, there is not expected to be any diminution in the nature, quality and extent of services provided to the Fund and their shareholders by the Adviser, including compliance services;

(vii) that Legg Mason has advised the Board that it has no present intention to alter the expense waivers and reimbursements currently in effect and, while it reserves the right to do so in the future, it would consult with the Board before making any changes;

(viii) that under the Transaction Agreement, Citigroup and Legg Mason have agreed not to take any action that is not contemplated by the Transaction or fail to take any action that to their respective knowledge would cause any of the requirements of Section 15(f) of the 1940 Act not to be met;

(ix) the assurances from Citigroup and Legg Mason that, for a three year period following the closing of the Transaction, Citigroup-affiliated broker-dealers will continue to offer the Fund as an investment product, and the potential benefits to Fund shareholders from this and other third-party distribution access;

(x) the potential benefits to Fund shareholders from being part of a combined fund family with Legg Mason sponsored funds including possible economies of scale and access to investment opportunities;

(xi) that Citigroup and Legg Mason would derive benefits from the Transaction and that, as a result, they have a financial interest in the matters that were being considered;

(xii) the potential effects of regulatory restrictions on the Fund if Citigroup-affiliated broker-dealers remain principal underwriters of the Fund after the closing of the Transaction;

(xiii) the fact that the Fund’s total advisory and administrative fees will not increase by virtue of the New Management Agreement, but will remain the same;

(xiv) the terms and conditions of the New Management Agreement, including the differences from the current management agreement, and the benefits of a single, uniform form of agreement covering these services;

(xv) that the Fund would not bear the costs of obtaining shareholder approval of the New Management Agreement;

(xvi) that Citigroup and Legg Mason were negotiating a license arrangement that would permit the Fund to maintain its current name for some agreed upon time period after the closing of the Transaction; and

(xvii) that, as discussed in detail above, within the past year the Board had performed a full annual review of the current management agreement as required by the 1940 Act. In that regard, the Board’s deliberations concerning the New Management Agreement reflected its prior evaluation of relevant factors, including the nature, quality and extent of services provided, costs of services provided, profitability, fall-out benefits, fees and economies of scale and investment performance considered in connection with the renewal of the current management agreement and its determination that information provided by CAM and Legg Mason management prior to and at the August meeting supported the continued appropriateness of such conclusions with respect to the New Management Agreement.

Smith Barney Investment Series 2005 Annual Report         73

Board Approval of Management Agreement (unaudited) (continued)

No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the New Management Agreement, and each Board Member attributed different weight to the various factors. The Independent Board Members were advised by separate independent legal counsel throughout the process. The Board also discussed the New Management Agreement in private sessions with their independent legal counsel at which no representatives of the Adviser were present. In light of all of the foregoing, the Board approved the New Management Agreement and authorized the Fund’s officers to submit the New Management Agreement to shareholders for their approval.

74         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

Smith Barney Dividend Strategy Portfolio

Background

The members of the Board of Smith Barney Dividend Strategy Portfolio (the “Fund”), a series of Smith Barney Investment Series, including the Fund’s Board members that are not considered to be “interested persons” under the Investment Company Act of 1940, as amended (the “Independent Board Members”), received information from the Fund’s manager (the “Manager”) to assist them in their consideration of the Fund’s management agreement (the “Management Agreement”). The Board received and considered a variety of information about the Manager and the Fund’s distributors, as well as the advisory and distribution arrangements for the Fund and other funds overseen by the Board, certain portions of which are discussed below. The presentation made to the Board encompassed the Fund and all the funds for which the Board has responsibility. The discussion below covers both advisory and administrative functions being rendered by the Manager, each function encompassed by the Management Agreement.

Board Approval of Management Agreement

In approving the Management Agreement, the Fund’s Board, including the Independent Board Members, considered the factors below. In all of the Board’s considerations with respect to the approval of the Management Agreement, the Board was mindful of the proposed acquisition of the Manager by Legg Mason, Inc.

Nature, Extent and Quality of the Services under the Management Agreement

The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager under the Management Agreement during the past year. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager in its management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager took into account the Board’s knowledge and familiarity gained as Board members of funds in the Citigroup Asset Management (“CAM”) fund complex, including the scope and quality of the Manager’s investment management and other capabilities and the quality of its administrative and other services. The Board observed that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Fund’s expanded compliance programs. The Board also considered the Manager’s response to recent regulatory compliance issues affecting it and the CAM fund complex. The Board reviewed information received from the Manager regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended.

The Board reviewed the qualifications, backgrounds and responsibilities of the Fund’s senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the degree to which the Manager implemented organizational changes to improve investment results and the

Smith Barney Investment Series 2005 Annual Report         75

Board Approval of Management Agreement (unaudited) (continued)

services provided to the CAM fund complex. The Board also considered, based on its knowledge of the Manager and its affiliates, the financial resources available to CAM and its parent organization, Citigroup Inc.

The Board also considered the Manager’s brokerage policies and practices, the standards applied in seeking best execution, the Manager’s policies and practices regarding soft dollars, the use of a broker affiliated with the Manager and the existence of quality controls applicable to brokerage allocation procedures. In addition, management also reported to the Board on, among other things, its business plans, recent organizational changes and portfolio manager compensation plan.

The Board concluded that, overall, the nature, extent and quality of services provided (and expected to be provided) under the Management Agreement were acceptable.

Fund Performance

The Board received and considered performance information for the Fund as well as for a group of funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the Fund with the funds included in the Performance Universe. The Board also noted that it had received and discussed with management information throughout the year at periodic intervals comparing the Fund’s performance against its benchmark(s).

The information comparing the Fund’s performance to that of its Performance Universe, consisting of all underlying variable insurance products (VIPs) classified as “large-cap core funds” by Lipper, showed, among other data, that the Fund’s performance for the 1-, 3-, and 5-year periods ended March 31, 2005 was lower than the median. Management noted that there had been a change in the Fund’s investment strategy, as well as its portfolio management team, effective November 2004, which was implemented in an attempt to improve the Fund’s results over time. Any potential impact of such changes were, therefore, not fully reflected in the Lipper report.

Based on their review, which included careful consideration of all of the factors noted above, the Board, mindful of the proposed transaction with Legg Mason, concluded that it will continue to evaluate the Fund’s performance and the actions taken by management to improve performance.

Management Fees and Expense Ratios

The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management services provided by the Manager. The Board also reviewed and considered that fee waiver and/or expense reimbursement arrangements are currently in place for the Fund and considered the actual fee rate (after taking waivers and reimbursements into account) (the “Actual Management Fee”) and that the Manager had agreed to continue its fee waivers and reimbursements until further notice.

Additionally, the Board received and considered information comparing the Fund’s Contractual Management Fees and Actual Management Fee and the Fund’s overall expenses with those of funds in both the relevant expense group and a broader group of

76         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

funds, each selected and provided by Lipper. The Board also reviewed information regarding fees charged by the Manager to other U.S. clients investing primarily in an asset class similar to that of the Fund including, where applicable, separate accounts. The Manager reviewed with the Board the significant differences in scope of services provided to the Fund and to these other clients, noting that the Fund is provided with administrative services, office facilities, Fund officers (including the Fund’s chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other Fund providers. The Board considered the fee comparisons in light of the differences required to manage these different types of accounts. The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a proposed framework of fees based on asset classes.

Management also discussed with the Board the Fund’s distribution arrangements. The Board was provided with information concerning revenues received by and certain expenses incurred by the Fund’s affiliated distributors and how the amounts received by the distributors are paid.

The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of a group of underlying VIPs (including the Fund) classified as “large-cap core funds” and chosen by Lipper to be comparable to the Fund, showed that the Fund’s Contractual Management Fee was below the median and the Actual Management Fee (which reflects a fee waiver) was above the median. The Board noted that the Fund’s actual total expense ratio was higher than the median. The Board noted that commencing September 1, 2004, the Manager reduced its Contractual Management Fee and implemented breakpoints and that the full benefit of this adjustment was therefore not reflected in the Lipper Report. The Board also noted that the Manager was continuing its voluntary waiver until further notice.

Taking all of the above into consideration, the Board determined that the Management Fee was reasonable in light of the nature, extent and quality of the services provided to the Fund under the Management Agreement.

Manager Profitability

The Board received and considered a profitability analysis of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the CAM fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data as well as a report from an outside consultant that had reviewed the Manager’s methodology. The Manager’s profitability was considered not excessive in light of the nature, extent and quality of the services provided to the Fund.

Economies of Scale

The Board received and discussed information concerning whether the Manager realizes economies of scale as the Fund’s assets grow. The Board noted that commencing September 1, 2004, the Manager reduced its Contractual Management Fee and implemented breakpoints, reflecting the potential for reducing the Contractual Management Fee as the Fund grows. The Board considered whether the breakpoint fee structure

Smith Barney Investment Series 2005 Annual Report         77

Board Approval of Management Agreement (unaudited) (continued)

was a reasonable means of sharing any economies of scale or other efficiencies that might accrue from increases in the Fund’s assets levels. The Board noted that the Fund had not yet reached the specified asset level at which a breakpoint to its Contractual Management Fee would be triggered. The Board also noted that as the Fund’s assets have increased over time, certain expenses, such as fees for Board members, auditors and legal fees, become a smaller percentage of overall assets. The Board determined that the management fee structure was reasonable.

Other Benefits to the Manager

The Board considered other benefits received by the Manager and its affiliates as a result of their relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders.

In light of the costs of providing investment management and other services to the Fund and the Manager’s ongoing commitment to the Fund, the profits and other ancillary benefits that the Manager and its affiliates received were considered reasonable.

In light of all of the foregoing, the Board approved the Management Agreement to continue for another year.

No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreement, and each Board Member attributed different weight to the various factors. The Independent Board Members were advised by separate independent legal counsel throughout the process. The Board also discussed the proposed continuance of the Management Agreement in private sessions with their independent legal counsel at which no representatives of the Manager were present.

Additional Information

Smith Barney Dividend Strategy Portfolio

On June 23, 2005, Citigroup Inc. entered into a definitive agreement (the “Transaction Agreement”) with Legg Mason, Inc. under which Citigroup agreed to sell substantially all of its asset management business, Citigroup Asset Management (“CAM”), which includes the Adviser, to Legg Mason in exchange for the broker-dealer and investment banking businesses of Legg Mason and certain other considerations (the “Transaction”). The Transaction closed on December 1, 2005.

The consummation of the Transaction resulted in the automatic termination of the Fund’s current management agreement in accordance with the Investment Company Act of 1940, as amended (the “1940 Act”). Prior to the closing of the Transaction, the Fund’s Board approved a new management agreement between the Fund and the Adviser (the “New Management Agreement”) and authorized the Fund’s officers to submit the New Management Agreement to shareholders for their approval.

On July 11, 2005, members of the Board discussed with CAM management and certain Legg Mason representatives the Transaction and Legg Mason’s general plans and intentions regarding the Fund, including the preservation, strengthening and growth of CAM’s business and its combination with Legg Mason’s business. The Board Members

78         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

also inquired about the plans for and anticipated roles and responsibilities of certain CAM employees and officers after the Transaction.

At a meeting held on August 7, 2005, the Fund’s Board, including a majority of the Board Members who are not “interested persons” of the Fund or the Adviser as defined in the 1940 Act (the “Independent Board Members”), approved the New Management Agreement. To assist the Board in its consideration of the New Management Agreement, Legg Mason previously provided materials and information about Legg Mason, including its financial condition and asset management capabilities and organization, and CAM provided materials and information about the Transaction between Legg Mason and Citigroup. Representatives of CAM and Legg Mason also made presentations to and responded to questions from the Board, including at meetings held prior to the August 2005 meeting. The Independent Board Members, through their independent legal counsel, also requested and received additional information from CAM and Legg Mason in connection with their consideration of the New Management Agreement. The additional information was provided in advance of and at the August meeting. After the presentations and after reviewing the written materials provided, the Independent Board Members met in executive session with their counsel to consider the New Management Agreement. The Independent Board Members also conferred separately and with their counsel about the Transaction on a number of occasions, including in connection with the July and August meetings.

In their deliberations concerning the New Management Agreement, among other things, the Board Members considered:

(i) the automatic termination of the current management agreement upon completion of the Transaction and the need for continuity of services provided under the current management agreement;

(ii) the reputation, financial strength and resources of Legg Mason and its investment advisory subsidiaries;

(iii) that, following the Transaction, CAM will be part of an organization focused on the asset management business;

(iv) that Legg Mason is an experienced and respected asset management firm, and that Legg Mason has advised the Board Members that (a) it may wish to combine certain CAM operations with those of certain Legg Mason subsidiaries; (b) it is expected that these combination processes will result in changes to portfolio managers or portfolio management teams for a number of the CAM funds, subject to Board consent and appropriate notice to shareholders, and that, in other cases, the current portfolio managers or portfolio management teams will remain in place; and (c) in the future, it may recommend that Legg Mason subsidiaries be appointed as the adviser or subadviser to some or all of the CAM funds, subject to applicable regulatory requirements;

(v) that CAM management had advised the Board that a number of portfolio managers and other key CAM personnel would be retained after the closing of the Transaction;

(vi) that CAM management and Legg Mason have advised the Board that following the Transaction, there is not expected to be any diminution in the nature,

Smith Barney Investment Series 2005 Annual Report         79

Board Approval of Management Agreement (unaudited) (continued)

quality and extent of services provided to the Fund and their shareholders by the Adviser, including compliance services;

(vii) that Legg Mason has advised the Board that it has no present intention to alter the expense waivers and reimbursements currently in effect and, while it reserves the right to do so in the future, it would consult with the Board before making any changes;

(viii) that under the Transaction Agreement, Citigroup and Legg Mason have agreed not to take any action that is not contemplated by the Transaction or fail to take any action that to their respective knowledge would cause any of the requirements of Section 15(f) of the 1940 Act not to be met;

(ix) the assurances from Citigroup and Legg Mason that, for a three year period following the closing of the Transaction, Citigroup-affiliated broker-dealers will continue to offer the Fund as an investment product, and the potential benefits to Fund shareholders from this and other third-party distribution access;

(x) the potential benefits to Fund shareholders from being part of a combined fund family with Legg Mason sponsored funds including possible economies of scale and access to investment opportunities;

(xi) that Citigroup and Legg Mason would derive benefits from the Transaction and that, as a result, they have a financial interest in the matters that were being considered;

(xii) the potential effects of regulatory restrictions on the Fund if Citigroup-affiliated broker-dealers remain principal underwriters of the Fund after the closing of the Transaction;

(xiii) the fact that the Fund’s total advisory and administrative fees will not increase by virtue of the New Management Agreement, but will remain the same;

(xiv) the terms and conditions of the New Management Agreement, including the differences from the current management agreement, and the benefits of a single, uniform form of agreement covering these services;

(xv) that the Fund would not bear the costs of obtaining shareholder approval of the New Management Agreement;

(xvi) that Citigroup and Legg Mason were negotiating a license arrangement that would permit the Fund to maintain its current name for some agreed upon time period after the closing of the Transaction; and

(xvii) that, as discussed in detail above, within the past year the Board had performed a full annual review of the current management agreement as required by the 1940 Act. In that regard, the Board’s deliberations concerning the New Management Agreement reflected its prior evaluation of relevant factors, including the nature, quality and extent of services provided, costs of services provided, profitability, fall-out benefits, fees and economies of scale and investment performance considered in connection with the renewal of the current management agreement and its determination that information provided by CAM and Legg Mason management prior to and at the August meeting supported the continued appropriateness of such conclusions with respect to the New Management Agreement.

80         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the New Management Agreement, and each Board Member attributed different weight to the various factors. The Independent Board Members were advised by separate independent legal counsel throughout the process. The Board also discussed the New Management Agreement in private sessions with their independent legal counsel at which no representatives of the Adviser were present. In light of all of the foregoing, the Board approved the New Management Agreement and authorized the Fund’s officers to submit the New Management Agreement to shareholders for their approval.

Smith Barney Investment Series 2005 Annual Report         81

Board Approval of Management Agreement (unaudited) (continued)

Smith Barney Growth and Income Portfolio

Background

The members of the Board of Smith Barney Growth and Income Portfolio (the “Fund”), a series of Smith Barney Investment Series, including the Fund’s Board members that are not considered to be “interested persons” under the Investment Company Act of 1940, as amended (the “Independent Board Members”), received information from the Fund’s manager (the “Manager”) to assist them in their consideration of the Fund’s management agreement (the “Management Agreement”). The Board received and considered a variety of information about the Manager and the Fund’s distributors, as well as the advisory and distribution arrangements for the Fund and other funds overseen by the Board, certain portions of which are discussed below. The presentation made to the Board encompassed the Fund and all the funds for which the Board has responsibility. The discussion below covers both advisory and administrative functions being rendered by the Manager, each function encompassed by the Management Agreement.

Board Approval of Management Agreement

In approving the Management Agreement, the Fund’s Board, including the Independent Board Members, considered the factors below. In all of the Board’s considerations with respect to the approval of the Management Agreement, the Board was mindful of the proposed acquisition of the Manager by Legg Mason, Inc.

Nature, Extent and Quality of the Services under the Management Agreement

The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager under the Management Agreement during the past year. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager in its management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager took into account the Board’s knowledge and familiarity gained as Board members of funds in the Citigroup Asset Management (“CAM”) fund complex, including the scope and quality of the Manager’s investment management and other capabilities and the quality of its administrative and other services. The Board observed that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Fund’s expanded compliance programs. The Board also considered the Manager’s response to recent regulatory compliance issues affecting it and the CAM fund complex. The Board reviewed information received from the Manager regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended.

The Board reviewed the qualifications, backgrounds and responsibilities of the Fund’s senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the degree to which the Manager implemented organizational changes to improve investment results and the

82         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

services provided to the CAM fund complex. The Board also considered, based on its knowledge of the Manager and its affiliates, the financial resources available to CAM and its parent organization, Citigroup Inc.

The Board also considered the Manager’s brokerage policies and practices, the standards applied in seeking best execution, the Manager’s policies and practices regarding soft dollars, the use of a broker affiliated with the Manager and the existence of quality controls applicable to brokerage allocation procedures. In addition, management also reported to the Board on, among other things, its business plans, recent organizational changes and portfolio manager compensation plan.

The Board concluded that, overall, the nature, extent and quality of services provided (and expected to be provided) under the Management Agreement were acceptable.

Fund Performance

The Board received and considered performance information for the Fund as well as for a group of funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the Fund with the funds included in the Performance Universe. The Board also noted that it had received and discussed with management information throughout the year at periodic intervals comparing the Fund’s performance against its benchmark(s).

The information comparing the Fund’s performance to that of its Performance Universe, consisting of underlying variable insurance products (VIPs) classified as “large-cap core funds” by Lipper, showed, among other data, that the Fund’s performance for the 1-year period ended March 31, 2005 was lower than the median while the performance for the 3- and 5- year periods ended March 31, 2005 was better than the median.

Based on their review, which included careful consideration of all of the factors noted above, the Board concluded that the Fund’s performance was satisfactory.

Management Fees and Expense Ratios

The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management services provided by the Manager. The Board also reviewed and considered that fee waiver and/or expense reimbursement arrangements are currently in place for the Fund and considered the actual fee rate (after taking waivers and reimbursements into account) (the “Actual Management Fee”) and that the Manager had agreed to continue its fee waivers and reimbursements until further notice.

Additionally, the Board received and considered information comparing the Fund’s Contractual Management Fees and Actual Management Fee and the Fund’s overall expenses with those of funds in both the relevant expense group and a broader group of funds, each selected and provided by Lipper. The Board also reviewed information regarding fees charged by the Manager to other U.S. clients investing primarily in an asset class similar to that of the Fund including, where applicable, separate accounts. The Manager reviewed with the Board the significant differences in scope of services provided to the Fund and to these other clients, noting that the Fund is provided with administrative

Smith Barney Investment Series 2005 Annual Report         83

Board Approval of Management Agreement (unaudited) (continued)

services, office facilities, Fund officers (including the Fund’s chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other Fund providers. The Board considered the fee comparisons in light of the differences required to manage these different types of accounts. The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a proposed framework of fees based on asset classes.

Management also discussed with the Board the Fund’s distribution arrangements. The Board was provided with information concerning revenues received by and certain expenses incurred by the Fund’s affiliated distributors and how the amounts received by the distributors are paid.

The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of a group of underlying VIPs (including the Fund) classified as “large-cap core funds” and chosen by Lipper to be comparable to the Fund, showed that the Fund’s Contractual Management Fee was below the median and the Actual Management Fee (which reflects a fee waiver) was above the median. The Board noted that the Fund’s actual total expense ratio was higher than the median. The Board also noted that commencing September 1, 2004, the Manager reduced its Contractual Management Fee and implemented breakpoints and that the full benefit of this adjustment was therefore not reflected in the Lipper Report. The Board noted that the Manager was continuing its voluntary waiver until further notice.

Taking all of the above into consideration, the Board determined that the Management Fee was reasonable in light of the nature, extent and quality of the services provided to the Fund under the Management Agreement.

Manager Profitability

The Board received and considered a profitability analysis of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the CAM fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data as well as a report from an outside consultant that had reviewed the Manager’s methodology. The Manager’s profitability was considered not excessive in light of the nature, extent and quality of the services provided to the Fund.

Economies of Scale

The Board received and discussed information concerning whether the Manager realizes economies of scale as the Fund’s assets grow. The Board noted that commencing September 1, 2004, the Manager reduced its Contractual Management Fee and implemented breakpoints, reflecting the potential for reducing the Contractual Management Fee as the Fund grows. The Board considered whether the breakpoint fee structure was a reasonable means of sharing any economies of scale or other efficiencies that might accrue from increases in the Fund’s assets levels. The Board noted that the Fund had not yet reached the specified asset level at which a breakpoint to its Contractual Management Fee would be triggered. The Board also noted that as the Fund’s assets have increased over time, certain expenses, such as

84         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

fees for Board members, auditors and legal fees, become a smaller percentage of overall assets. The Board determined that the management fee structure was reasonable.

Other Benefits to the Manager

The Board considered other benefits received by the Manager and its affiliates as a result of their relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders.

In light of the costs of providing investment management and other services to the Fund and the Manager’s ongoing commitment to the Fund, the profits and other ancillary benefits that the Manager and its affiliates received were considered reasonable.

In light of all of the foregoing, the Board approved the Management Agreement to continue for another year.

No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreement, and each Board Member attributed different weight to the various factors. The Independent Board Members were advised by separate independent legal counsel throughout the process. The Board also discussed the proposed continuance of the Management Agreement in private sessions with their independent legal counsel at which no representatives of the Manager were present.

Additional Information

Smith Barney Growth and Income Portfolio

On June 23, 2005, Citigroup Inc. entered into a definitive agreement (the “Transaction Agreement”) with Legg Mason, Inc. under which Citigroup agreed to sell substantially all of its asset management business, Citigroup Asset Management (“CAM”), which includes the Adviser, to Legg Mason in exchange for the broker-dealer and investment banking businesses of Legg Mason and certain other considerations (the “Transaction”). The Transaction closed on December 1, 2005.

The consummation of the Transaction resulted in the automatic termination of the Fund’s current management agreement in accordance with the Investment Company Act of 1940, as amended (the “1940 Act”). Prior to the closing of the Transaction, the Fund’s Board approved a new management agreement between the Fund and the Adviser (the “New Management Agreement”) and authorized the Fund’s officers to submit the New Management Agreement to shareholders for their approval.

On July 11, 2005, members of the Board discussed with CAM management and certain Legg Mason representatives the Transaction and Legg Mason’s general plans and intentions regarding the Fund, including the preservation, strengthening and growth of CAM’s business and its combination with Legg Mason’s business. The Board Members also inquired about the plans for and anticipated roles and responsibilities of certain CAM employees and officers after the Transaction.

At a meeting held on August 7, 2005, the Fund’s Board, including a majority of the Board Members who are not “interested persons” of the Fund or the Adviser as defined in the 1940 Act (the “Independent Board Members”), approved the New Management Agreement. To

Smith Barney Investment Series 2005 Annual Report         85

Board Approval of Management Agreement (unaudited) (continued)

assist the Board in its consideration of the New Management Agreement, Legg Mason previously provided materials and information about Legg Mason, including its financial condition and asset management capabilities and organization, and CAM provided materials and information about the Transaction between Legg Mason and Citigroup. Representatives of CAM and Legg Mason also made presentations to and responded to questions from the Board, including at meetings held prior to the August 2005 meeting. The Independent Board Members, through their independent legal counsel, also requested and received additional information from CAM and Legg Mason in connection with their consideration of the New Management Agreement. The additional information was provided in advance of and at the August meeting. After the presentations and after reviewing the written materials provided, the Independent Board Members met in executive session with their counsel to consider the New Management Agreement. The Independent Board Members also conferred separately and with their counsel about the Transaction on a number of occasions, including in connection with the July and August meetings.

In their deliberations concerning the New Management Agreement, among other things, the Board Members considered:

(i) the automatic termination of the current management agreement upon completion of the Transaction and the need for continuity of services provided under the current management agreement;

(ii) the reputation, financial strength and resources of Legg Mason and its investment advisory subsidiaries;

(iii) that, following the Transaction, CAM will be part of an organization focused on the asset management business;

(iv) that Legg Mason is an experienced and respected asset management firm, and that Legg Mason has advised the Board Members that (a) it may wish to combine certain CAM operations with those of certain Legg Mason subsidiaries; (b) it is expected that these combination processes will result in changes to portfolio managers or portfolio management teams for a number of the CAM funds, subject to Board consent and appropriate notice to shareholders, and that, in other cases, the current portfolio managers or portfolio management teams will remain in place; and (c) in the future, it may recommend that Legg Mason subsidiaries be appointed as the adviser or subadviser to some or all of the CAM funds, subject to applicable regulatory requirements;

(v) that CAM management had advised the Board that a number of portfolio managers and other key CAM personnel would be retained after the closing of the Transaction;

(vi) that CAM management and Legg Mason have advised the Board that following the Transaction, there is not expected to be any diminution in the nature, quality and extent of services provided to the Fund and their shareholders by the Adviser, including compliance services;

(vii) that Legg Mason has advised the Board that it has no present intention to alter the expense waivers and reimbursements currently in effect and, while it reserves the right to do so in the future, it would consult with the Board before making any changes;

86         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

(viii) that under the Transaction Agreement, Citigroup and Legg Mason have agreed not to take any action that is not contemplated by the Transaction or fail to take any action that to their respective knowledge would cause any of the requirements of Section 15(f) of the 1940 Act not to be met;

(ix) the assurances from Citigroup and Legg Mason that, for a three year period following the closing of the Transaction, Citigroup-affiliated broker-dealers will continue to offer the Fund as an investment product, and the potential benefits to Fund shareholders from this and other third-party distribution access;

(x) the potential benefits to Fund shareholders from being part of a combined fund family with Legg Mason sponsored funds including possible economies of scale and access to investment opportunities;

(xi) that Citigroup and Legg Mason would derive benefits from the Transaction and that, as a result, they have a financial interest in the matters that were being considered;

(xii) the potential effects of regulatory restrictions on the Fund if Citigroup-affiliated broker-dealers remain principal underwriters of the Fund after the closing of the Transaction;

(xiii) the fact that the Fund’s total advisory and administrative fees will not increase by virtue of the New Management Agreement, but will remain the same;

(xiv) the terms and conditions of the New Management Agreement, including the differences from the current management agreement, and the benefits of a single, uniform form of agreement covering these services;

(xv) that the Fund would not bear the costs of obtaining shareholder approval of the New Management Agreement;

(xvi) that Citigroup and Legg Mason were negotiating a license arrangement that would permit the Fund to maintain its current name for some agreed upon time period after the closing of the Transaction; and

(xvii) that, as discussed in detail above, within the past year the Board had performed a full annual review of the current management agreement as required by the 1940 Act. In that regard, the Board’s deliberations concerning the New Management Agreement reflected its prior evaluation of relevant factors, including the nature, quality and extent of services provided, costs of services provided, profitability, fall-out benefits, fees and economies of scale and investment performance considered in connection with the renewal of the current management agreement and its determination that information provided by CAM and Legg Mason management prior to and at the August meeting supported the continued appropriateness of such conclusions with respect to the New Management Agreement.

No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the New Management Agreement, and each Board Member attributed different weight to the various factors. The Independent Board Members were advised by separate independent legal counsel throughout the process. The Board also discussed the New Management Agreement in private sessions with their independent legal counsel at which no representatives of the Adviser were present. In light of all of the foregoing, the Board approved the New Management Agreement and authorized the Fund’s officers to submit the New Management Agreement to shareholders for their approval.

Smith Barney Investment Series 2005 Annual Report         87

Board Approval of Management Agreement (unaudited) (continued)

SB Government Portfolio

Background

The members of the Board of SB Government Portfolio (the “Fund”), a series of Smith Barney Investment Series, including the Fund’s Board members that are not considered to be “interested persons” under the Investment Company Act of 1940, as amended (the “Independent Board Members”), received information from the Fund’s manager (the “Manager”) to assist them in their consideration of the Fund’s management agreement (the “Management Agreement”). The Board received and considered a variety of information about the Manager and the Fund’s distributors, as well as the advisory and distribution arrangements for the Fund and other funds overseen by the Board, certain portions of which are discussed below. The presentation made to the Board encompassed the Fund and all the funds for which the Board has responsibility. The discussion below covers both advisory and administrative functions being rendered by the Manager, each function encompassed by the Management Agreement.

Board Approval of Management Agreement

In approving the Management Agreement, the Fund’s Board, including the Independent Board Members, considered the factors below. In all of the Board’s considerations with respect to the approval of the Management Agreement, the Board was mindful of the proposed acquisition of the Manager by Legg Mason, Inc.

Nature, Extent and Quality of the Services under the Management Agreement

The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager under the Management Agreement during the past year. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager in its management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager took into account the Board’s knowledge and familiarity gained as Board members of funds in the Citigroup Asset Management (“CAM”) fund complex, including the scope and quality of the Manager’s investment management and other capabilities and the quality of its administrative and other services. The Board observed that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Fund’s expanded compliance programs. The Board also considered the Manager’s response to recent regulatory compliance issues affecting it and the CAM fund complex. The Board reviewed information received from the Manager regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended.

The Board reviewed the qualifications, backgrounds and responsibilities of the Fund’s senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the degree to which the Manager implemented organizational changes to improve investment results and the services provided to the CAM fund complex. The Board also considered, based on its

88         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

knowledge of the Manager and its affiliates, the financial resources available to CAM and its parent organization, Citigroup Inc.

The Board also considered the Manager’s brokerage policies and practices, the standards applied in seeking best execution, the use of a broker affiliated with the Manager and the existence of quality controls applicable to brokerage allocation procedures. In addition, management also reported to the Board on, among other things, its business plans, recent organizational changes and portfolio manager compensation plan.

The Board concluded that, overall, the nature, extent and quality of services provided (and expected to be provided) under the Management Agreement were acceptable.

Fund Performance

The Board received and considered performance information for the Fund as well as for a group of funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the Fund with the funds included in the Performance Universe. The Board also noted that it had received and discussed with management information throughout the year at periodic intervals comparing the Fund’s performance against its benchmark(s).

The information comparing the Fund’s performance to that of its Performance Universe, consisting of all underlying variable insurance products (VIPs) classified as “U.S. government funds” by Lipper, showed, among other data, that the Fund’s performance for the 1-, 3-, and 5-year periods ended March 31, 2005 was lower than the median. The Board noted the explanations from the Manager concerning the underperformance versus the peer group, including the presence in the peer group of a number of funds with longer maturity portfolios.

Based on their review, which included careful consideration of all of the factors noted above, the Board, mindful of the proposed transaction with Legg Mason, will continue to evaluate the Fund’s performance and investment strategies and any actions taken by the Manager to improve performance.

Management Fees and Expense Ratios

The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management services provided by the Manager. The Board also reviewed and considered that fee waiver and/or expense reimbursement arrangements are currently in place for the Fund and considered the actual fee rate (after taking waivers and reimbursements into account) (the “Actual Management Fee”) and that the Manager had agreed to continue its fee waivers and reimbursements until further notice.

Additionally, the Board received and considered information comparing the Fund’s Contractual Management Fees and Actual Management Fee and the Fund’s overall expenses with those of funds in both the relevant expense group and a broader group of funds, each selected and provided by Lipper. The Board also reviewed information regarding fees charged by the Manager to other U.S. clients investing primarily in an asset class similar to that of the Fund including, where applicable, separate accounts. The Manager reviewed with the Board the significant differences in scope of services provided to the Fund and to these other clients, noting that the Fund is provided with administrative services, office facilities, Fund officers

Smith Barney Investment Series 2005 Annual Report         89

Board Approval of Management Agreement (unaudited) (continued)

(including the Fund’s chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other Fund providers. The Board considered the fee comparisons in light of the differences required to manage these different types of accounts. The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a proposed framework of fees based on asset classes.

Management also discussed with the Board the Fund’s distribution arrangements. The Board was provided with information concerning revenues received by and certain expenses incurred by the Fund’s affiliated distributors and how the amounts received by the distributors are paid.

The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of a group of underlying VIPs (including the Fund) classified as “U.S. government funds” and chosen by Lipper to be comparable to the Fund, showed that the Fund’s Contractual Management Fee and the Actual Management Fee were higher than the median. The Board noted that commencing September 1, 2004, the Manager reduced its Contractual Management Fee and implemented breakpoints and that the full benefit of this adjustment was therefore not reflected in the Lipper Report. The Board noted that the Fund’s actual total expense ratio was lower than the median. The Board also noted that the Manager was continuing its voluntary waiver until further notice.

Taking all of the above into consideration, the Board determined that the Management Fee was reasonable in light of the nature, extent and quality of the services provided to the Fund under the Management Agreement.

Manager Profitability

The Board received and considered a profitability analysis of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the CAM fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data as well as a report from an outside consultant that had reviewed the Manager’s methodology. The Manager’s profitability was considered not excessive in light of the nature, extent and quality of the services provided to the Fund.

Economies of Scale

The Board received and discussed information concerning whether the Manager realizes economies of scale as the Fund’s assets grow. The Board noted that commencing September 1, 2004, the Manager reduced its Contractual Management Fee and implemented breakpoints, reflecting the potential for reducing the Contractual Management Fee as the Fund grows. The Board considered whether the breakpoint fee structure was a reasonable means of sharing any economies of scale or other efficiencies that might accrue from increases in the Fund’s assets levels. The Board noted that the Fund had not yet reached the specified asset level at which a breakpoint to its Contractual Management Fee would be triggered. The Board also noted that as the Fund’s assets have increased over time, certain expenses, such as fees for Board members, auditors and legal fees, become a smaller percentage of overall assets. The Board determined that the management fee structure was reasonable.

90         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

Other Benefits to the Manager

The Board considered other benefits received by the Manager and its affiliates as a result of their relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders.

In light of the costs of providing investment management and other services to the Fund and the Manager’s ongoing commitment to the Fund, the profits and other ancillary benefits that the Manager and its affiliates received were considered reasonable.

In light of all of the foregoing, the Board approved the Management Agreement to continue for another year.

No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreement, and each Board Member attributed different weight to the various factors. The Independent Board Members were advised by separate independent legal counsel throughout the process. The Board also discussed the proposed continuance of the Management Agreement in private sessions with their independent legal counsel at which no representatives of the Manager were present.

Additional Information

SB Government Portfolio

On June 23, 2005, Citigroup Inc. entered into a definitive agreement (the “Transaction Agreement”) with Legg Mason, Inc. under which Citigroup agreed to sell substantially all of its asset management business, Citigroup Asset Management (“CAM”), which includes the Adviser, to Legg Mason in exchange for the broker-dealer and investment banking businesses of Legg Mason and certain other considerations (the “Transaction”). The Transaction closed on December 1, 2005.

The consummation of the Transaction resulted in the automatic termination of the Fund’s current management agreement in accordance with the Investment Company Act of 1940, as amended (the “1940 Act”). Prior to the closing of the Transaction, the Fund’s Board approved a new management agreement between the Fund and the Adviser (the “New Management Agreement”) and authorized the Fund’s officers to submit the New Management Agreement to shareholders for their approval.

On July 11, 2005, members of the Board discussed with CAM management and certain Legg Mason representatives the Transaction and Legg Mason’s general plans and intentions regarding the Fund, including the preservation, strengthening and growth of CAM’s business and its combination with Legg Mason’s business. The Board Members also inquired about the plans for and anticipated roles and responsibilities of certain CAM employees and officers after the Transaction.

At a meeting held on August 7, 2005, the Fund’s Board, including a majority of the Board Members who are not “interested persons” of the Fund or the Adviser as defined in the 1940 Act (the “Independent Board Members”), approved the New Management Agreement. To assist the Board in its consideration of the New Management Agreement, Legg Mason previously provided materials and information about Legg Mason, including its financial condition and asset management capabilities and organization, and CAM provided materials and information about the Transaction between Legg Mason and Citigroup. Representatives of CAM and Legg Mason also made presentations to and responded to questions from the Board, including at meetings held prior to the August 2005 meeting. The Independent

Smith Barney Investment Series 2005 Annual Report         91

Board Approval of Management Agreement (unaudited) (continued)

Board Members, through their independent legal counsel, also requested and received additional information from CAM and Legg Mason in connection with their consideration of the New Management Agreement. The additional information was provided in advance of and at the August meeting. After the presentations and after reviewing the written materials provided, the Independent Board Members met in executive session with their counsel to consider the New Management Agreement. The Independent Board Members also conferred separately and with their counsel about the Transaction on a number of occasions, including in connection with the July and August meetings.

In their deliberations concerning the New Management Agreement, among other things, the Board Members considered:

(i) the automatic termination of the current management agreement upon completion of the Transaction and the need for continuity of services provided under the current management agreement;

(ii) the reputation, financial strength and resources of Legg Mason and its investment advisory subsidiaries;

(iii) that, following the Transaction, CAM will be part of an organization focused on the asset management business;

(iv) that Legg Mason and its wholly-owned subsidiary, Western Asset, are experienced and respected asset management firms, and that Legg Mason has advised the Board Members that (a) it intends to combine the fixed income investment operations (including money market fund operations) of CAM with those of Western Asset and may also wish to combine other CAM operations with those of other Legg Mason subsidiaries; (b) after the closing of the Transaction, it will take steps to combine the investment management operations of Western Asset with the fixed income operations of the Adviser, which, among other things, may involve Western Asset and the Adviser sharing common systems and procedures, employees (including portfolio managers), investment and trading platforms, and other resources; (c) it is expected that these combination processes will result in changes to portfolio managers or portfolio management teams for a number of the CAM funds, subject to Board consent and appropriate notice to shareholders, and that, in other cases, the current portfolio managers or portfolio management teams will remain in place; and (d) in the future, it may recommend that Western Asset or other Legg Mason subsidiaries be appointed as the adviser or subadviser to some or all of the CAM funds, subject to applicable regulatory requirements;

(v) that CAM management had advised the Board that a number of portfolio managers and other key CAM personnel would be retained after the closing of the Transaction;

(vi) that CAM management and Legg Mason have advised the Board that following the Transaction, there is not expected to be any diminution in the nature, quality and extent of services provided to the Fund and their shareholders by the Adviser, including compliance services;

(vii) that Legg Mason has advised the Board that it has no present intention to alter the expense waivers and reimbursements currently in effect and, while it reserves the right to do so in the future, it would consult with the Board before making any changes;

92         Smith Barney Investment Series 2005 Annual Report

Board Approval of Management Agreement (unaudited) (continued)

(viii) that under the Transaction Agreement, Citigroup and Legg Mason have agreed not to take any action that is not contemplated by the Transaction or fail to take any action that to their respective knowledge would cause any of the requirements of Section 15(f) of the 1940 Act not to be met;

(ix) the assurances from Citigroup and Legg Mason that, for a three year period following the closing of the Transaction, Citigroup-affiliated broker-dealers will continue to offer the Fund as an investment product, and the potential benefits to Fund shareholders from this and other third-party distribution access;

(x) the potential benefits to Fund shareholders from being part of a combined fund family with Legg Mason sponsored funds including possible economies of scale and access to investment opportunities;

(xi) that Citigroup and Legg Mason would derive benefits from the Transaction and that, as a result, they have a financial interest in the matters that were being considered;

(xii) the potential effects of regulatory restrictions on the Fund if Citigroup-affiliated broker-dealers remain principal underwriters of the Fund after the closing of the Transaction;

(xiii) the fact that the Fund’s total advisory and administrative fees will not increase by virtue of the New Management Agreement, but will remain the same;

(xiv) the terms and conditions of the New Management Agreement, including the differences from the current management agreement, and the benefits of a single, uniform form of agreement covering these services;

(xv) that the Fund would not bear the costs of obtaining shareholder approval of the New Management Agreement;

(xvi) that Citigroup and Legg Mason were negotiating a license arrangement that would permit the Fund to maintain its current name for some agreed upon time period after the closing of the Transaction; and

(xvii) that, as discussed in detail above, within the past year the Board had performed a full annual review of the current management agreement as required by the 1940 Act. In that regard, the Board’s deliberations concerning the New Management Agreement reflected its prior evaluation of relevant factors, including the nature, quality and extent of services provided, costs of services provided, profitability, fall-out benefits, fees and economies of scale and investment performance considered in connection with the renewal of the current management agreement and its determination that information provided by CAM and Legg Mason management prior to and at the August meeting supported the continued appropriateness of such conclusions with respect to the New Management Agreement.

No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the New Management Agreement, and each Board Member attributed different weight to the various factors. The Independent Board Members were advised by separate independent legal counsel throughout the process. The Board also discussed the New Management Agreement in private sessions with their independent legal counsel at which no representatives of the Adviser were present. In light of all of the foregoing, the Board approved the New Management Agreement and authorized the Fund’s officers to submit the New Management Agreement to shareholders for their approval.

Smith Barney Investment Series 2005 Annual Report         93

Additional Information (unaudited)

Information about Trustees and Officers

The business and affairs of Smith Barney Investment Series (“Trust”) are managed under the direction of the Trust’s Board of Trustees. Information pertaining to the Trustees and officers of the Trust is set forth below. Each Trustee and Officer holds office for his or her lifetime, unless that individual resigns, retires or is otherwise removed. The Statement of Additional Information includes additional information about the Trustees and is available without charge, upon request by calling 1-800-451-2010.

Name, Address and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past 5 Years
Non-Interested Trustees:
Elliott J. Berv c/o R. Jay Gerken, CFA Citigroup Asset Management (“CAM”) 399 Park Avenue New York, NY 10022 Birth Year: 1943	Trustee	Since 2001	Executive Vice President and Chief Operations Officer, DigiGym Systems (on-line personal training systems) (since 2001); Consultant Catalyst (Consulting) (since 1984); Chief Executive Officer, Motorcity USA (motorsport racing) (Since 2004)	37	Board Member, American Identity Corp. (doing business as Morpheus Technologies) (Biometric information management) (since 2001); Director, Lapoint Industries (Industrial Filter Company) (since 2002); Director. Alzheimer’s Association (New England Chapter) (since 1998)
Donald M. Carlton c/o R. Jay Gerken, CFA CAM 399 Park Avenue New York, NY 10022 Birth Year: 1937	Trustee	Since 1997	Consultant, URS Corporation (Engineering) (since 1999); former Chief Executive Officer, Radian International L.L.C. (Engineering) (from 1996 to 1998), Member of Management Committee, Signature Science (Research and Development) (since 2000)	37	Director, Temple-Inland (forest products) (since 2003); Director, American Electric Power Co. (Electric Utility) (since 1999); Former Director, National Instruments Corp. (Technology) (since 1994); Director, Valero Energy (Petroleum Refining) (since 1999)

94         Smith Barney Investment Series 2005 Annual Report

Additional Information (unaudited) (continued)

Name, Address and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past 5 Years
Non-Interested Trustees:
A. Benton Cocanougher c/o R. Jay Gerken, CFA CAM 399 Park Avenue New York, NY 10022 Birth Year: 1938	Trustee	Since 1991	Dean Emeritus and Professor, Texas A&M University (since 2004); former Interim Chancellor, Texas A&M University System (from 2003 to 2004); former Special Advisor to the President, Texas A&M University (from 2002-2003); former Dean Emeritus and Wiley Professor, Texas A&M University (from 2001 to 2002); former Dean and Professor of Marketing, College and Graduate School of Business of Texas A&M University (from 1987 to 2001)	32	None
Mark T. Finn c/o R. Jay Gerken, CFA CAM 399 Park Avenue New York, NY 10022 Birth Year: 1943	Trustee	Since 2001	Adjunct Professor, William & Mary College (since September 2002); Principal/Member, Belvan Partners/Balfour Vantage–Manager and General Partner to the Vantage Hedge Fund, LP (since March 2002); Chairman and Owner, Vantage Consulting Group, Inc. (Investment Advisory and Consulting Firm) (since 1988); former Vice Chairman and Chief Operating Officer, Lindner Asset Management Company (Mutual Fund Company) (from March 1999 to 2001); former General Partner and Shareholder, Greenwich Ventures, LLC (Investment Partnership) (from 1996 to 2001); former President, Secretary, and Owner, Phoenix Trading Co. (Commodity Trading Advisory Firm) (from 1997 to 2000)	37	Former President and Director, Delta Financial, Inc. (Investment Advisory Firm) (from 1983 to 1999)

Smith Barney Investment Series 2005 Annual Report         95

Additional Information (unaudited) (continued)

Name, Address and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past 5 Years
Non-Interested Trustees:
Stephen Randolph Gross c/o R. Jay Gerken, CFA CAM 399 Park Avenue New York, NY 10022 Birth Year: 1947	Trustee	Since 1986	Chairman, HLB Gross Collins, PC (accounting and consulting firm (since 1979); Treasurer, Coventry Limited, Inc. (Senior Living Facilities) (since 1985); former Managing Director, Fountainhead Ventures, LLC (technology accelerator) (from 1998 to 2003); former Treasurer, Hank Aaron Enterprises (fast food franchise) (from 1985 to 2001); former Partner, Capital Investment Advisory Partners (leverage buyout consulting) (from 2000 to 2002); former Secretary, Carint N.A. (manufacturing) (from 1998 to 2002)	37	Director, Andersen Calhoun (assisted living) (since 1987); former Director, Yu Save, Inc. (internet company) (from 1998 to 2000); former Director, Hotpalm.com, Inc. (wireless applications) from 1998 to 2000); former Director, United Telesis, Inc. (telecommunications) (from 1997 to 2002); former Director ebank.com, Inc. (from 1997 to 2004)
Diana R. Harrington c/o R. Jay Gerken, CFA CAM 399 Park Avenue New York, NY 10022 Birth Year: 1940	Trustee	Since 2001	Professor, Babson College (since 1993)	37	Former Trustee, The Highland Family of Funds (Investment Company) (from 1997 to 1998)
Susan B. Kerley c/o R. Jay Gerken, CFA CAM 399 Park Avenue New York, NY 10022 Birth Year: 1951	Trustee	Since 2001	Consultant, Strategic Management Advisors, LLC (Investment Consulting) (since 1990)	37	Chairperson and Independent Board Member of Eclipse Fund, Inc. and Eclipse Funds (which trade as Mainstay Funds) (currently supervises 16 investment companies in the fund complex)

96         Smith Barney Investment Series 2005 Annual Report

Additional Information (unaudited) (continued)

Name, Address and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past 5 Years
Non-Interested Trustees:
Alan G. Merten c/o R. Jay Gerken, CFA CAM 399 Park Avenue New York, NY 10022 Birth Year: 1941	Trustee	Since 1990	President, George Mason University (since 1996)	37	Director, Xybernaut Corporation (information technology) (since 2004); Director, Digital Net Holdings, Inc. (since 2003); Director, Comshare, Inc. (information technology) (from 1985 to 2003)
R. Richardson Pettit c/o R. Jay Gerken, CFA CAM 399 Park Avenue New York, NY 10022 Birth Year: 1942	Trustee	Since 1990	Professor of Finance, University of Houston (from 1977 to 2002); Independent Consultant (since 1984)	37	None
Interested Trustee:
R. Jay Gerken, CFA ** CAM 399 Park Avenue, Mezzanine New York, NY 10022 Birth Year: 1951	Chairman, President and Chief Executive Officer	Since 2002	Managing Director of CAM; Chairman, President, Chief Executive Officer and Director SBFM, and CFM; President and Chief Executive Officer of certain mutual funds associated with Legg Mason, Inc. (“Legg Mason”); formerly Portfolio Manager of Smith Barney Allocation Series, Inc. (from 1996 to 2001) and Smith Barney Growth and Income Fund (from 1996 to 2000); formerly Chairman, President and Chief Executive Officer of Travelers Investment Adviser, Inc. (“TIA”) (from 2002 to 2005)	171	N/A

Smith Barney Investment Series 2005 Annual Report         97

Additional Information (unaudited) (continued)

Name, Address and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past 5 Years
Officers:
Andrew B. Shoup CAM 125 Broad Street, 11th Floor New York, NY 10004 Birth Year: 1956	Senior Vice President and Chief Administrative Officer	Since 2003	Director of CAM; Senior Vice President and Chief Administrative Officer of mutual funds associated with CAM; Head of International Funds Administration of CAM from 2001 to 2003; Director of Global Funds Administration of CAM (from 2000 to 2001); Head of U.S. Citibank Funds Administration of CAM (from 1998 to 2000)	N/A	N/A
Frances M. Guggino CAM 125 Broad Street, 10th Floor New York, NY 10004 Birth Year: 1957	Chief Financial Officer and Treasurer	Since 2004	Director of CAM; Chief Financial Officer and Treasurer of certain mutual funds associated with CAM; Controller of certain mutual funds associated with CAM	N/A	N/A
Alan J. Blake CAM 399 Park Avenue, 4th Floor New York, NY 10022 Birth Year: 1949	Vice President and Investment Officer	Since 2001	Managing Director of CAM	N/A	N/A
Kevin Caliendo CAM 399 Park Avenue, 4th Floor New York, NY 10004 Birth Year: 1970	Vice President and Investment Officer	Since 2003	Managing Director of CAM	N/A	N/A
Scott K. Glasser CAM 399 Park Avenue 4th Floor New York, NY 10022 Birth Year: 1966	Vice President and Investment Officer	Since 1996	Managing Director of CAM; Investment Officer of SBFM	N/A	N/A
Peter J. Hable CAM One Sansome Street San Francisco, CA 94104 Birth Year: 1958	Vice President and Investment Officer	Since 1999	Managing Director of CAM and Investment Officer of SBFM	N/A	N/A

98         Smith Barney Investment Series 2005 Annual Report

Additional Information (unaudited) (continued)

Name, Address and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past 5 Years
Michael A. Kagan CAM 399 Park Avenue, 4th Floor New York, NY 10022 Birth Year: 1960	Vice President and Investment Officer	Since 2000	Managing Director of CAM	N/A	N/A
Officers:
Roger M. Lavan, CFA CAM 399 Park Avenue, 4th Floor New York, NY 10022 Birth Year: 1963	Vice President and Investment Officer	Since 2002	Managing Director of CAM and Salomon Brothers Asset Management Inc. (“SBAM”)	N/A	N/A
Francis L. Mustaro CAM 399 Park Avenue, 4th Floor New York, NY 10022 Birth Year: 1950	Vice President and Investment Officer	Since 2002	Managing Director of CAM	N/A	N/A
Timothy Woods, CFA CAM 100 First Stamford Place Stamford, CT 06902 Birth Year: 1960	Vice President and Investment Officer	Since 2001	Managing Director of CAM	N/A	N/A
Andrew Beagley CAM 399 Park Avenue, 4th Floor New York, NY 10022 Birth Year: 1962	Chief Anti-Money Laundering Compliance Officer Chief Compliance Officer	Since 2002 Since 2004	Chief Anti-Money Laundering Compliance Officer and Chief Compliance Officer of certain mutual funds associated with CAM; Managing Director of CAM (since 2005); Director of CAM (2000-2005); Director of Compliance, North America, CAM (2000-2005); Director of Compliance, Europe, the Middle East and Africa, CAM (from 1999 to 2000); Compliance Officer, SBFM, CFM, TIA, Salomon Brothers Asset Management Limited, Smith Barney Global Capital Management Inc., Salomon Brothers Asset Management Asia Pacific Limited (from 1997 to 1999)	N/A	N/A

Smith Barney Investment Series 2005 Annual Report         99

Additional Information (unaudited) (continued)

Name, Address and Birth Year	Position(s) Held with Fund	Term of Office* and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Board Memberships Held by Trustee During Past 5 Years
Officers:
Wendy S. Setnicka CAM 125 Broad Street, 10th Floor New York, NY 10004 Birth Year: 1964	Controller	Since 2004	Vice President of CAM; Controller of certain mutual funds associated with CAM; Assistant Controller of CAM (Since 2002)	N/A	N/A
Robert I. Frenkel CAM 300 First Stamford Place Stamford, CT 06902 Birth Year: 1954	Secretary and Chief Legal Officer	Since 2003	Managing Director and General Counsel of Global Mutual Funds for CAM and its predecessor (since 1994); Secretary and Chief Legal Officer of mutual funds associated with CAM	N/A	N/A

* Each Trustee and Officer serves until his or her successor has been duly elected and qualified.

** Mr. Gerken is an “interested person” of the Funds as defined in the Investment Company Act of 1940, as amended, because Mr. Gerken is an officer of SBFM and certain of its affiliates.

100         Smith Barney Investment Series 2005 Annual Report

Additional Shareholder Information (unaudited)

Smith Barney Premier Selections All Cap Growth Portfolio

Results of a Special Meeting of Shareholders

On October 21, 2005, a Special Meeting of Shareholders was held to elect Trustees. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter voted on at the Special Meeting of Shareholders.

Item Voted On	Votes For	Votes Against	Abstentions	Broker Non-Votes
Election of Trustees1
Nominees:
Elliot J. Berv	1,373,101,980.622	72,611,605.603	78,283.260	0
Donald M. Carlton	1,372,667,931.470	73,045,654.755	78,283.260	0
A. Benton Cocanougher	1,372,238,417.747	73,475,168.477	78,283.260	0
Mark T. Finn	1,372,966,510.879	72,747,075.345	78,283.260	0
Stephen Randolph Gross	1,372,665,788.992	73,047,797.233	78,283.260	0
Diana R. Harrington	1,372,790,017.323	72,923,568.902	78,283.260	0
Susan B. Kerley	1,372,864,058.699	72,849,527.525	78,283.260	0
Alan G. Merten	1,373,132,217.647	72,581,368.578	78,283.260	0
R. Richardson Pettit	1,372,801,010.747	72,912,575.478	78,283.260	0
R. Jay Gerken	1,371,873,090.739	73,840,495.485	78,283.260	0

¹ Trustees are elected by the shareholders of all of the series of the Trust of which the Fund is a series.

Smith Barney Dividend Strategy Portfolio

Results of a Special Meeting of Shareholders

On October 21, 2005, a Special Meeting of Shareholders was held to elect Trustees. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter voted on at the Special Meeting of Shareholders.

Item Voted On	Votes For	Votes Against	Abstentions	Broker Non-Votes
Election of Trustees1
Nominees:
Elliot J. Berv	1,373,101,980.622	72,611,605.603	78,283.260	0
Donald M. Carlton	1,372,667,931.470	73,045,654.755	78,283.260	0
A. Benton Cocanougher	1,372,238,417.747	73,475,168.477	78,283.260	0
Mark T. Finn	1,372,966,510.879	72,747,075.345	78,283.260	0
Stephen Randolph Gross	1,372,665,788.992	73,047,797.233	78,283.260	0
Diana R. Harrington	1,372,790,017.323	72,923,568.902	78,283.260	0
Susan B. Kerley	1,372,864,058.699	72,849,527.525	78,283.260	0
Alan G. Merten	1,373,132,217.647	72,581,368.578	78,283.260	0
R. Richardson Pettit	1,372,801,010.747	72,912,575.478	78,283.260	0
R. Jay Gerken	1,371,873,090.739	73,840,495.485	78,283.260	0

¹ Trustees are elected by the shareholders of all of the series of the Trust of which the Fund is a series.

Smith Barney Investment Series 2005 Annual Report         101

Additional Shareholder Information (unaudited) (continued)

Smith Barney Growth and Income Portfolio

Results of a Special Meeting of Shareholders

On October 21, 2005, a Special Meeting of Shareholders was held to elect Trustees. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter voted on at the Special Meeting of Shareholders.

Item Voted On	Votes For	Votes Against	Abstentions	Broker Non-Votes
Election of Trustees1
Nominees:
Elliot J. Berv	1,373,101,980.622	72,611,605.603	78,283.260	0
Donald M. Carlton	1,372,667,931.470	73,045,654.755	78,283.260	0
A. Benton Cocanougher	1,372,238,417.747	73,475,168.477	78,283.260	0
Mark T. Finn	1,372,966,510.879	72,747,075.345	78,283.260	0
Stephen Randolph Gross	1,372,665,788.992	73,047,797.233	78,283.260	0
Diana R. Harrington	1,372,790,017.323	72,923,568.902	78,283.260	0
Susan B. Kerley	1,372,864,058.699	72,849,527.525	78,283.260	0
Alan G. Merten	1,373,132,217.647	72,581,368.578	78,283.260	0
R. Richardson Pettit	1,372,801,010.747	72,912,575.478	78,283.260	0
R. Jay Gerken	1,371,873,090.739	73,840,495.485	78,283.260	0

¹ Trustees are elected by the shareholders of all of the series of the Trust of which the Fund is a series.

SB Government Portfolio

Results of a Special Meeting of Shareholders

On October 21, 2005, a Special Meeting of Shareholders was held to elect Trustees. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter voted on at the Special Meeting of Shareholders.

Item Voted On	Votes For	Votes Against	Abstentions	Broker Non-Votes
Election of Trustees1
Nominees:
Elliot J. Berv	1,373,101,980.622	72,611,605.603	78,283.260	0
Donald M. Carlton	1,372,667,931.470	73,045,654.755	78,283.260	0
A. Benton Cocanougher	1,372,238,417.747	73,475,168.477	78,283.260	0
Mark T. Finn	1,372,966,510.879	72,747,075.345	78,283.260	0
Stephen Randolph Gross	1,372,665,788.992	73,047,797.233	78,283.260	0
Diana R. Harrington	1,372,790,017.323	72,923,568.902	78,283.260	0
Susan B. Kerley	1,372,864,058.699	72,849,527.525	78,283.260	0
Alan G. Merten	1,373,132,217.647	72,581,368.578	78,283.260	0
R. Richardson Pettit	1,372,801,010.747	72,912,575.478	78,283.260	0
R. Jay Gerken	1,371,873,090.739	73,840,495.485	78,283.260	0

¹ Trustees are elected by the shareholders of all of the series of the Trust of which the Fund is a series.

102         Smith Barney Investment Series 2005 Annual Report

Important Tax Information (unaudited)

The following information is provided with respect to the distributions paid during the taxable year ended October 31, 2005:

	Smith Barney Dividend Strategy Portfolio		Smith Barney Growth and Income Portfolio
Record Date:	12/27/2004		12/27/2004
Payable Date:	12/28/2004		12/28/2004
Dividends Qualifying for the Dividends Received Deduction for Corporations	94.65	%	100.00	%

Please retain this information for your records.

Smith Barney Investment Series 2005 Annual Report         103

Smith Barney Investment Series

TRUSTEES Elliott J. Berv Donald M. Carlton A. Benton Cocanougher Mark T. Finn R. Jay Gerken, CFA
Chairman Stephen Randolph Gross Diana R. Harrington Susan B. Kerley Alan G. Merten R. Richardson Pettit OFFICERS R. Jay Gerken, CFA President and Chief Executive Officer Andrew B. Shoup Senior Vice President and Chief Administrative Officer Frances M. Guggino Chief Financial Officer
and Treasurer Alan J. Blake Vice President and Investment Officer Kevin Caliendo Vice President and Investment Officer Scott K. Glasser Vice President
and Investment Officer Peter J. Hable Vice President
and Investment Officer Michael A. Kagan Vice President and Investment Officer Roger M. Lavan, CFA Vice President and
Investment Officer OFFICERS (continued) Francis L. Mustaro Vice President and Investment Officer Timothy Woods, CFA Vice President and Investment Officer Andrew Beagley Chief Anti-Money Laundering Compliance Officer and Chief Compliance Officer Wendy S. Setnicka Controller Robert I. Frenkel Secretary and
Chief Legal Officer INVESTMENT MANAGER Smith Barney Fund
    Management LLC DISTRIBUTORS Citigroup Global Markets Inc. Legg Mason Investors
    Services, LLC CUSTODIAN State Street Bank and
    Trust Company TRANSFER AGENT PFPC Inc. P.O. Box 9699 Providence, Rhode Island 02940-9699 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 345 Park Avenue New York, New York 10154

This report is submitted for general information of the shareholders of the Smith Barney Investment Series — Smith Barney Premier Selections All Cap Growth, Smith Barney Dividend Strategy, Smith Barney Growth and Income and SB Government Portfolios.

This report must be preceded or accompanied by a free prospectus. Investors should consider the Funds’ investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the Funds. Please read the prospectus carefully before investing.

www.citigroupam.com

©2005 Legg Mason Investor Services, LLC

Member NASD, SIPC

FD02461 12/05 05-9454

Smith Barney Investment Series

Smith Barney Premier Selections All Cap Growth Portfolio

Smith Barney Dividend Strategy Portfolio

Smith Barney Growth and Income Portfolio

SB Government Portfolio

The Funds are separate investment funds of the Smith Barney Investment Series, a Massachusetts business trust.

SMITH BARNEY INVESTMENT SERIES

Smith Barney Mutual Funds

125 Broad Street

10th Floor, MF-2

New York, New York 10004

The Funds files their complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington D.C., and how information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. To obtain information on Form N-Q from the Funds, shareholders can call 800-451-2010.

Information on how the Funds voted proxies relating to portfolio securities during the most recent 12 month period ended June 30, and a description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the Funds’ website at www.citigroupam.com and (3) on the SEC’s website at www.sec.gov.

EX-99.17.J

SEMI-ANNUAL

REPORT

APRIL 30, 2006

Legg Mason Partners Investment Series

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

Legg Mason Partners Variable Dividend Strategy Portfolio

Legg Mason Partners Variable Growth and Income Portfolio

Legg Mason Partners Variable Government Portfolio

INVESTMENT PRODUCTS: NOT FDIC INSURED Ÿ NO BANK GUARANTEE Ÿ MAY LOSE VALUE

Legg Mason Partners Investment Series

Semi-Annual Report Ÿ April 30, 2006

What’s

Inside

Letter from the Chairman	I
Fund at a Glance
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	1
Legg Mason Partners Variable Dividend Strategy Portfolio	2
Legg Mason Partners Variable Growth and Income Portfolio	3
Legg Mason Partners Variable Government Portfolio	4
Fund Expenses	5
Schedules of Investments	7
Statements of Assets and Liabilities	24
Statements of Operations	25
Statements of Changes in Net Assets	26
Financial Highlights	30
Notes to Financial Statements	34
Additional Shareholder Information	45

“Smith Barney” and “Salomon Brothers” and “Citi” are service marks of Citigroup, licensed for use by Legg Mason as the names of funds and investment managers. Legg Mason and its affiliates, as well as the Fund’s investment manager, are not affiliated with Citigroup.

Letter from the Chairman

R. JAY GERKEN

Chairman, President and Chief Executive Officer

Dear Shareholder,

The U.S. economy was mixed during the six-month reporting period. After a 4.1% advance in the third quarter of 2005, fourth quarter gross domestic product (“GDP”)ⁱ slipped to 1.7%. This marked the first quarter that GDP growth did not surpass 3.0% since the first three months of 2003. However, as expected, the economy rebounded sharply in the first quarter of 2006, with GDP rising an estimated 5.3%. The economic turnaround was prompted by both strong consumer and business spending. In addition, the U.S. Labor Department reported that unemployment hit a five-year low in March.

The Federal Reserve Board (“Fed”)ⁱⁱ continued to raise interest rates during the reporting period. Despite the “changing of the guard” from Fed Chairman Alan Greenspan to Ben Bernanke in early 2006, it was “business as usual” for the Fed, as it raised short-term interest rates four times during the reporting period. Since it began its tightening campaign in June 2004, the Fed has increased rates 15 consecutive times, bringing the federal funds rateⁱⁱⁱ from 1.00% to 4.75%. The Fed then raised rates to 5.00% on May 10^th, after the end of the reporting period. Coinciding with this latest move, the Fed said that the “extent and timing” of further rate hikes would depend on future economic data.

For the six-month period ended April 30, 2006, the U.S. stock market generated solid results, with the S&P 500 Index^iv returning 9.63%. While high oil and commodity prices, steadily rising interest rates, and geopolitical issues triggered periods of market volatility, investors generally remained focused on the positive economic environment and strong corporate profits. Looking at the market more closely, small-cap stocks outperformed their mid- and large-cap counterparts, with the Russell 2000^v, Russell Midcap^vi and Russell 1000^vii Indexes returning 18.91%, 14.35%, and 9.92%, respectively. From an investment style perspective,

Legg Mason Partners Investment Series         I

value stocks outperformed growth stocks, with the Russell 3000 Value^viii and Russell 3000 Growth^ix Indexes returning 13.27% and 8.19%, respectively, over the reporting period.

Both short- and long term yields rose over the reporting period. During the six-months ended April 30, 2006, two-year Treasury yields increased from 4.42% to 4.87%. Over the same period, 10-year Treasury yields moved from 4.58% to 5.07%. During part of the reporting period the yield curve was inverted, with the yield on two-year Treasuries surpassing that of 10-year Treasuries. An inverted yield curve has historically foreshadowed an economic slowdown or recession. However, some experts, including new Chairman Bernanke, believe the inverted yield curve was largely a function of strong foreign demand for longer-term bonds. Looking at the six-month period as a whole, the overall bond market, as measured by the Lehman Brothers U.S. Aggregate Index^x, returned 0.56%.

II         Legg Mason Partners Investment Series

Performance Snapshot as of April 30, 2006 (unaudited)
	6 months
Variable Premier Selections All Cap Growth Portfolio1	9.52%
Russell 1000 Growth Index	7.06%
Russell 2000 Growth Index	20.31%
S&P 400 MidCap Index	15.26%
Lipper Variable Multi-Cap Growth Funds Category Average	11.97%
Variable Dividend Strategy Portfolio1	9.03%
S&P 500 Index	9.63%
Lipper Variable Large-Cap Core Funds Category Average	9.27%
Variable Growth and Income Portfolio1	10.36%
S&P 500 Index	9.63%
Lipper Variable Large-Cap Core Funds Category Average	9.27%
Variable Government Portfolio1	0.23%
Lehman Brothers Government Bond Index	0.18%
Lipper Variable General U.S. Government Funds Category Average	-0.21%
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.leggmason.com/InvestorServices.
Performance figures reflect reimbursements and/or fee waivers, without which the performance would have been lower.
Fund returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the deduction of all fund expenses.
Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended April 30, 2006 and include the reinvestment of all distributions, including returns of capital, if any. Returns were calculated among the 124 funds in the Variable Multi-Cap Growth Funds Category. Returns were calculated among the 227 funds in the Variable Large Cap Core Funds Category. Returns were calculated among the 63 funds in the Variable General U.S. Government Funds Category.

¹ The fund is an underlying investment option of various variable annuity and variable life insurance products. The fund’s performance return does not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the fund. Past performance is no guarantee of future results.

Legg Mason Partners Investment Series         III

Performance Update¹

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

For the six months ended April 30, 2006, the Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio returned 9.52%. In comparison, the fund’s unmanaged benchmarks, the Russell 1000 Growth Index^xi, the Russell 2000 Growth Index^xii and the S&P MidCap 400 Index^xiii returned 7.06%, 20.31%, and 15.26%, respectively, for the same period. The Lipper Variable Multi-Cap Growth Funds Category Average², increased 11.97% over the same time frame.

Legg Mason Partners Variable Dividend Strategy Portfolio

For the six months ended April 30, 2006, the Legg Mason Partners Variable Dividend Strategy Portfolio returned 9.03%. In comparison, the fund’s unmanaged benchmark, the S&P 500 Index, returned 9.63% for the same period. The Lipper Variable Large-Cap Core Funds Category Average³, increased 9.27% over the same time frame.

Legg Mason Partners Variable Growth and Income Portfolio

For the six months ended April 30, 2006, the Legg Mason Partners Variable Growth and Income Portfolio returned 10.36%. In comparison, the fund’s unmanaged benchmark, the S&P 500 Index, returned 9.63% for the same period. The Lipper Variable Large-Cap Core Funds Category Average⁴, increased 9.27% over the same time frame.

¹ The fund is an underlying investment option of various variable annuity and variable life insurance products. The fund’s performance return does not reflect the deduction of initial sales charges and expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges, and surrender charges, which, if reflected, would reduce the performance of the fund. Past performance is no guarantee of future results.

² Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 6-month period ended April 30, 2006, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 124 funds in the fund’s Lipper category, and excluding sales charges.

³ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 6-month period ended April 30, 2006, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 227 funds in the fund’s Lipper category, and excluding sales charges.

⁴ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 6-month period ended April 30, 2006, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 227 funds in the fund’s Lipper category, and excluding sales charges.

IV         Legg Mason Partners Investment Series

Legg Mason Partners Variable Government Portfolio

For the six months ended April 30, 2006, the Legg Mason Partners Variable Government Portfolio returned 0.23%. In comparison, the fund’s unmanaged benchmark, the Lehman Brothers Government Bond Index^xiv returned 0.18% for the same period. The Lipper Variable General U.S. Government Funds Category Average⁵, decreased 0.21% over the same time frame.

Special Shareholder Notices

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business to Legg Mason, Inc. (“Legg Mason”). As a result, the funds’ investment adviser (the “Manager”), previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused the funds’ then existing investment management contracts to terminate. The funds’ shareholders previously approved new investment management contracts between the funds and the Manager, each of which became effective on December 1, 2005.

Effective March 17, 2006 the Manager has appointed the following individuals to assume the day-to-day portfolio management responsibilities for the Legg Mason Partners Variable Government Portfolio: S. Kenneth Leech, Stephen A. Walsh, Ronald D. Mass, Carl L. Eichstaedt, and Mark Lindbloom.

Each of the new portfolio managers is a portfolio manager of Western Asset Management Company (“Western Asset”), which, like the Manager, is a subsidiary of Legg Mason.

Mr. Leech, Mr. Walsh, Mr. Mass, and Mr. Eichstaedt have been employed as portfolio managers for Western Asset for more than five years.

Mr. Lindbloom joined Western Asset in 2006. Prior to this, Mr. Lindbloom was a managing director of Salomon Brothers Asset Management Inc and a senior portfolio

⁵ Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 6-month period ended April 30, 2006, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 63 funds in the fund’s Lipper category, and excluding sales charges.

Legg Mason Partners Investment Series         V

manager responsible for managing its Mortgage/Corporate Group and was associated with Citigroup Inc. or its predecessor companies since 1986.

Effective April 7, 2006, the registrant, “Smith Barney Investment Series” was renamed “Legg Mason Partners Investment Series.”

Effective May 1, 2006, the funds were renamed by replacing “Smith Barney” or “SB” with “Legg Mason Partners Variable.” The new fund names read as follows: Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, Legg Mason Partners Variable Dividend Strategy Portfolio, Legg Mason Partners Variable Growth and Income Portfolio and Legg Mason Partners Variable Government Portfolio. The funds’ investment objectives and strategies were not affected as a result of these name changes.

Information About Your Funds

As you may be aware, several issues in the mutual fund industry have come under the scrutiny of federal and state regulators. The funds’ Manager and some of its affiliates have received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the funds’ response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The funds have been informed that the Manager and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.

Important information concerning the funds and their Manager with regard to recent regulatory developments is contained in the Notes to Financial Statements included in this report.

VI         Legg Mason Partners Investment Series

As always, thank you for your continued confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.

Sincerely,

R. Jay Gerken, CFA

Chairman, President and Chief Executive Officer

May 25, 2006

Legg Mason Partners Investment Series         VII

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

RISKS: The fund may invest in small- and mid-cap companies that may involve a higher degree of risk and volatility than investments in large-cap companies. The fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on fund performance. The fund may invest in foreign securities that may be subject to certain risks not associated with domestic investing, such as currency fluctuations, and changes in political and economic conditions. These risks are magnified in emerging or developing markets. Please see the fund’s prospectus for more information on these and other risks.

Legg Mason Partners Variable Dividend Strategy Portfolio

RISKS: The fund may invest in foreign securities that may be subject to certain risks not associated with domestic investing, such as currency fluctuations, and changes in political and economic conditions. The fund may engage in active and frequent trading, resulting in increased transaction costs, which could detract from the fund’s performance. The fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses and have a potentially large impact on fund performance. Please see the fund’s prospectus for more information on these and other risks.

Legg Mason Partners Variable Growth and Income Portfolio

RISKS: The fund may invest in foreign securities, which are subject to certain risks not associated with domestic investing, such as currency fluctuations, and changes in political and economic conditions. The fund may also invest in lower-rated, higher-yielding bonds, known as “junk bonds,” which are subject to greater credit risk, including the risk of default, than higher-rated obligations. The fund may engage in short sales. Losses from short sales may be unlimited. The fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on the fund performance. Please see the Fund’s prospectus for more information on these and other risks.

Legg Mason Partners Variable Government Portfolio

RISKS: Keep in mind, bond and mortgage-related securities are subject to interest rate and market risks. The U.S. government guarantee of principal and interest payment only applies to underlying securities in the fund’s portfolio. Please note that the fund’s shares are not guaranteed by the U.S. government or its agencies. The fund may use derivatives, such as options and futures, which can have a potentially large impact on the fund performance. Please see the fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ Gross domestic product is a market value of goods and services produced by labor and property in a given country.

ⁱⁱ The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱⁱ The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.

^iv The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

^v The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

^vi The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represents approximately 25% of the total market capitalization of the Russell 1000 Index.

^vii The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.

^viii The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.)

^ix The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

^x The Lehman Brothers U.S. Aggregate Index is a broad-based bond index comprised of Government, Corporate, Mortgage and Asset-backed issues, rated investment grade or higher, and having at least one year to maturity. Please note an investor cannot invest directly in an index.

^xi The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

^xii The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.

^xiii The S&P MidCap 400 Index is a market-value weighted index which consists of 400 domestic stocks chosen for market size, liquidity, and industry group representation.

^xiv The Lehman Brothers Government Bond Index is a broad-based index of all public debt obligations of the U.S. government and its agencies that have an average maturity of roughly nine years.

VIII         Legg Mason Partners Investment Series

Fund at a Glance (unaudited)

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

Legg Mason Partners Investment Series 2006 Semi-Annual Report         1

Fund at a Glance (unaudited)

Legg Mason Partners Variable Dividend Strategy Portfolio

2         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Fund at a Glance (unaudited)

Legg Mason Partners Variable Growth and Income Portfolio

Legg Mason Partners Investment Series 2006 Semi-Annual Report         3

Fund at a Glance (unaudited)

Legg Mason Partners Variable Government Portfolio

4         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Fund Expenses (unaudited)

Example

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested on November 1, 2005 and held for the six months ended April 30, 2006.

Actual Expenses

The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

Based on Actual Total Return(1)
	Actual Total Return(2)		Beginning Account Value		Ending Account Value		Annualized Expense Ratio		Expenses Paid During the Period(3)
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	9.52	%	$	1,000.00	$	1,095.20	0.93	%	$	4.83
Legg Mason Partners Variable Dividend Strategy Portfolio	9.03			1,000.00		1,090.30	0.86			4.46
Legg Mason Partners Variable Growth and Income Portfolio	10.36			1,000.00		1,103.60	0.78			4.07
Legg Mason Partners Variable Government Portfolio	0.23			1,000.00		1,002.30	0.64			3.18

⁽¹⁾ For the six months ended April 30, 2006.

⁽²⁾ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect voluntary fee waivers and/or expense reimbursements . Past performance is no guarantee of future results. In the absence of voluntary fee waivers, the total return would have been lower.

⁽³⁾ Expenses (net of voluntary fee waivers and/or expense reimbursements) are equal to each Fund’s respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         5

Fund Expenses (unaudited) (continued)

Hypothetical Example for Comparison Purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore, this table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

Based on Hypothetical Total Return(1)
	Hypothetical Annualized Total Return		Beginning Account Value		Ending Account Value		Annualized Expense Ratio		Expenses Paid During the Period(2)
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	5.00	%	$	1,000.00	$	1,020.18	0.93	%	$	4.66
Legg Mason Partners Variable Dividend Strategy Portfolio	5.00			1,000.00		1,020.53	0.86			4.31
Legg Mason Partners Variable Growth and Income Portfolio	5.00			1,000.00		1,020.93	0.78			3.91
Legg Mason Partners Variable Government Portfolio	5.00			1,000.00		1,021.62	0.64			3.21

⁽¹⁾ For the six months ended April 30, 2006.

⁽²⁾ Expenses (net of voluntary fee waivers and/or expense reimbursements) are equal to each Fund’s respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.

6         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited)

LEGG MASON PARTNERS VARIABLE PREMIER SELECTIONS ALL CAP GROWTH PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 100.3%
CONSUMER DISCRETIONARY — 19.7%
Diversified Consumer Services — 0.8%
36,100	ServiceMaster Co.	$	434,643
Hotels, Restaurants & Leisure — 5.0%
7,300	CBRL Group Inc.		297,183
8,950	GTECH Holdings Corp.		305,732
20,850	Shuffle Master Inc.*		770,408
8,700	Station Casinos Inc.		670,596
10,200	Texas Roadhouse Inc., Class A Shares*		154,020
13,900	WMS Industries Inc.*		434,375
	Total Hotels, Restaurants & Leisure		2,632,314
Household Durables — 1.2%
3,080	Black & Decker Corp.		288,319
3,270	Mohawk Industries Inc.*		261,927
2,400	Toll Brothers Inc.*		77,160
	Total Household Durables		627,406
Internet & Catalog Retail — 4.9%
28,200	Amazon.com Inc.*		992,922
25,700	eBay Inc.*		884,337
17,800	IAC/InterActiveCorp.		513,886
4,800	VistaPrint Ltd.*		153,504
	Total Internet & Catalog Retail		2,544,649
Media — 1.4%
41,600	Time Warner Inc.		723,840
Multiline Retail — 0.6%
18,400	Dollar General Corp.		321,264
Specialty Retail — 5.8%
11,230	Bed Bath & Beyond Inc.*		430,670
11,800	Chico’s FAS Inc.*		437,308
11,200	Dick’s Sporting Goods Inc.*		472,080
23,500	Home Depot Inc.		938,355
4,625	Jos. A. Bank Clothiers Inc.*		194,250
11,000	Sherwin-Williams Co.		560,340
	Total Specialty Retail		3,033,003
	TOTAL CONSUMER DISCRETIONARY		10,317,119
CONSUMER STAPLES — 7.2%
Beverages — 3.2%
16,500	Coca-Cola Co.		692,340
4,000	Molson Coors Brewing Co., Class B Shares		295,440
11,500	PepsiCo Inc.		669,760
	Total Beverages		1,657,540

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         7

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
Food Products — 2.3%
14,600	Hormel Foods Corp.	$	489,976
12,600	Wm. Wrigley Jr. Co.		593,082
3,150	Wm. Wrigley Jr. Co., Class B Shares		148,365
	Total Food Products		1,231,423
Household Products — 1.7%
15,422	Procter & Gamble Co.		897,715
	TOTAL CONSUMER STAPLES		3,786,678
ENERGY — 4.9%
Energy Equipment & Services — 2.7%
16,600	FMC Technologies Inc.*		906,028
6,600	Nabors Industries Ltd.*		246,378
6,300	Smith International Inc.		266,049
	Total Energy Equipment & Services		1,418,455
Oil, Gas & Consumable Fuels — 2.2%
10,900	Bois d’Arc Energy Inc.*		184,864
6,050	Murphy Oil Corp.		303,589
10,450	Newfield Exploration Co.*		466,070
4,200	Pioneer Natural Resources Co.		179,844
	Total Oil, Gas & Consumable Fuels		1,134,367
	TOTAL ENERGY		2,552,822
FINANCIALS — 14.4%
Capital Markets — 4.9%
6,950	Affiliated Managers Group Inc.*		704,035
2,200	Bear Stearns Cos. Inc.		313,522
7,100	Investment Technology Group Inc.*		376,229
15,100	Merrill Lynch & Co. Inc.		1,151,526
	Total Capital Markets		2,545,312
Commercial Banks — 1.1%
300	Comerica Inc.		17,061
6,900	East-West Bancorp Inc.		273,723
5,800	Westamerica Bancorporation		296,612
	Total Commercial Banks		587,396
Consumer Finance — 0.5%
7,100	Nelnet Inc., Class A Shares*		276,190
Diversified Financial Services — 0.6%
9,000	optionsXpress Holdings Inc.		283,500
Insurance — 4.5%
13,900	American International Group Inc.		906,975
320	Berkshire Hathaway Inc., Class B Shares*		944,640
4,800	National Financial Partners Corp.		249,600
12,625	Old Republic International Corp.		280,906
	Total Insurance		2,382,121

See Notes to Financial Statements.

8         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
Real Estate Investment Trusts (REITs) — 0.8%
2,600	Alexandria Real Estate Equities Inc.	$	235,560
17,660	Spirit Finance Corp.		204,856
	Total Real Estate Investment Trusts (REITs)		440,416
Thrifts & Mortgage Finance — 2.0%
18,300	Hudson City Bancorp Inc.		245,403
2,400	MGIC Investment Corp.		169,680
19,600	New York Community Bancorp Inc.		337,316
5,900	PMI Group Inc.		272,285
	Total Thrifts & Mortgage Finance		1,024,684
	TOTAL FINANCIALS		7,539,619
HEALTH CARE — 19.5%
Biotechnology — 6.3%
16,000	Amgen Inc.*		1,083,200
15,000	Biogen Idec Inc.*		672,750
11,200	Genentech Inc.*		892,752
10,100	ImClone Systems Inc.*		364,610
8,400	Vertex Pharmaceuticals Inc.*		305,508
	Total Biotechnology		3,318,820
Health Care Equipment & Supplies — 4.5%
6,700	Fisher Scientific International Inc.*		472,685
5,800	Gen-Probe Inc.*		310,126
5,600	Hologic Inc.*		266,952
9,400	Kyphon Inc.*		390,570
9,600	ResMed Inc.*		414,240
6,000	Thermo Electron Corp.*		231,240
5,000	Ventana Medical Systems Inc.*		243,500
	Total Health Care Equipment & Supplies		2,329,313
Health Care Providers & Services — 6.4%
17,800	Allscripts Healthcare Solutions Inc.*		303,134
8,925	Coventry Health Care Inc.*		443,305
9,000	Eclipsys Corp.*		198,180
6,370	Manor Care Inc.		279,325
2,300	Omnicare Inc.		130,433
5,600	Pediatrix Medical Group Inc.*		283,472
25,000	Sierra Health Services Inc.*		980,250
24,200	VCA Antech Inc.*		752,378
	Total Health Care Providers & Services		3,370,477
Life Sciences Tools & Services — 0.2%
4,220	Parexel International Corp.*		124,532
Pharmaceuticals — 2.1%
11,700	MGI Pharma Inc.*		218,556
33,800	Pfizer Inc.		856,154
	Total Pharmaceuticals		1,074,710
	TOTAL HEALTH CARE		10,217,852

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         9

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
INDUSTRIALS — 8.7%
Aerospace & Defense — 1.4%
3,385	Alliant Techsystems Inc.*	$	270,766
4,000	Armor Holdings Inc.*		244,280
2,900	L-3 Communications Holdings Inc.		236,930
	Total Aerospace & Defense		751,976
Commercial Services & Supplies — 1.5%
6,000	FTI Consulting Inc.*		172,440
12,300	Labor Ready Inc.*		325,089
8,920	R.R. Donnelley & Sons Co.		300,515
	Total Commercial Services & Supplies		798,044
Electrical Equipment — 1.0%
11,280	Roper Industries Inc.		535,349
Industrial Conglomerates — 1.3%
18,800	General Electric Co.		650,292
Machinery — 1.3%
15,100	AGCO Corp.*		357,417
4,300	Eaton Corp.		329,595
	Total Machinery		687,012
Road & Rail — 1.0%
20,750	Heartland Express Inc.		504,432
Trading Companies & Distributors — 1.2%
12,000	MSC Industrial Direct Co. Inc., Class A Shares		622,320
	TOTAL INDUSTRIALS		4,549,425
INFORMATION TECHNOLOGY — 23.7%
Communications Equipment — 4.0%
36,300	Cisco Systems Inc.*		760,485
24,000	Juniper Networks Inc.*		443,520
42,400	Motorola Inc.		905,240
	Total Communications Equipment		2,109,245
Computers & Peripherals — 2.3%
6,100	Avid Technology Inc.*		235,155
7,900	Dell Inc.*		206,980
32,000	EMC Corp.*		432,320
6,100	Intergraph Corp.*		268,522
4,200	Western Digital Corp.*		88,368
	Total Computers & Peripherals		1,231,345
Electronic Equipment & Instruments — 2.9%
21,750	Benchmark Electronics Inc.*		593,775
3,850	CDW Corp.		229,152
13,100	Ingram Micro Inc., Class A Shares*		240,909
10,000	Trimble Navigation Ltd.*		473,800
	Total Electronic Equipment & Instruments		1,537,636

See Notes to Financial Statements.

10         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
Internet Software & Services — 2.1%
2,890	j2 Global Communications Inc.*	$	141,870
8,400	WebEx Communications Inc.*		296,940
20,300	Yahoo! Inc.*		665,434
	Total Internet Software & Services		1,104,244
IT Services — 2.1%
9,930	Acxiom Corp.		257,386
32,000	MPS Group Inc.*		510,720
13,400	Sabre Holdings Corp., Class A Shares		309,406
	Total IT Services		1,077,512
Semiconductors & Semiconductor Equipment — 7.4%
10,500	Cypress Semiconductor Corp.*		180,180
6,600	Diodes Inc.*		268,884
17,200	Entegris Inc.*		175,096
7,700	FormFactor Inc.*		321,013
25,900	Intel Corp.		517,482
18,290	MEMC Electronic Materials Inc.*		742,574
8,400	Microchip Technology Inc.		312,984
17,620	Microsemi Corp.*		481,378
25,100	Texas Instruments Inc.		871,221
	Total Semiconductors & Semiconductor Equipment		3,870,812
Software — 2.9%
7,000	Electronic Arts Inc.*		397,600
2,030	Internet Security Systems Inc.*		45,553
31,100	Microsoft Corp.		751,065
19,800	Quest Software Inc.*		340,758
	Total Software		1,534,976
	TOTAL INFORMATION TECHNOLOGY		12,465,770
MATERIALS — 1.6%
Chemicals — 0.7%
5,050	Air Products & Chemicals Inc.		346,026
Construction Materials — 0.3%
12,000	U.S. Concrete Inc.*		164,640
Metals & Mining — 0.6%
5,500	Steel Dynamics Inc.		343,420
	TOTAL MATERIALS		854,086
UTILITIES — 0.6%
Multi-Utilities — 0.6%
8,250	SCANA Corp.		322,905
	TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $42,189,822)		52,606,276

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         11

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Face Amount		Security	Value
	SHORT-TERM INVESTMENT — 0.6%
	Repurchase Agreement — 0.6%
$	337,000	Interest in $604,665,000 joint tri-party repurchase agreement dated 4/28/06 with Deutsche Bank Securities Inc., 4.790% due 5/1/06; Proceeds at maturity — $337,135; (Fully collateralized by various U.S. government agency obligations, 0.000% to 22.305% due 2/15/17 to 4/15/36; Market value - $343,740) (Cost — $337,000)	$	337,000
		TOTAL INVESTMENTS — 100.9% (Cost — $42,526,822#)		52,943,276
		Liabilities in Excess of Other Assets — (0.9)%		(472,098	)
		TOTAL NET ASSETS — 100.0%	$	52,471,178

* Non-income producing security.

# Aggregate cost for federal income tax purposes is substantially the same.

See Notes to Financial Statements.

12         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

LEGG MASON PARTNERS VARIABLE DIVIDEND STRATEGY PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 97.2%
CONSUMER DISCRETIONARY — 6.4%
Hotels, Restaurants & Leisure — 1.3%
8,400	International Game Technology	$	318,612
18,621	McDonald’s Corp.		643,728
	Total Hotels, Restaurants & Leisure		962,340
Leisure Equipment & Products — 0.2%
9,700	Hasbro Inc.		191,187
Media — 4.2%
25,700	Clear Channel Communications Inc.		733,221
8,536	Gannett Co. Inc.		469,480
15,200	News Corp., Class B Shares		277,096
68,400	Pearson PLC		947,070
19,270	Regal Entertainment Group, Class A Shares		405,055
22,800	Time Warner Inc.		396,720
	Total Media		3,228,642
Specialty Retail — 0.7%
12,799	Home Depot Inc.		511,064
	TOTAL CONSUMER DISCRETIONARY		4,893,233
CONSUMER STAPLES — 11.9%
Beverages — 1.5%
9,800	Coca-Cola Co.		411,208
12,897	PepsiCo Inc.		751,121
	Total Beverages		1,162,329
Food & Staples Retailing — 2.0%
34,100	Wal-Mart Stores Inc.		1,535,523
Food Products — 5.2%
11,250	Campbell Soup Co.		361,575
12,800	General Mills Inc.		631,552
11,400	H.J. Heinz Co.		473,214
5,600	Kellogg Co.		259,336
39,404	Kraft Foods Inc., Class A Shares		1,230,981
23,423	Unilever PLC, Sponsored ADR		1,000,865
	Total Food Products		3,957,523
Household Products — 3.2%
28,606	Kimberly-Clark Corp.		1,674,309
12,800	Procter & Gamble Co.		745,088
	Total Household Products		2,419,397
	TOTAL CONSUMER STAPLES		9,074,772

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         13

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
ENERGY — 8.9%
Oil, Gas & Consumable Fuels — 8.9%
30,801	BP PLC, Sponsored ADR	$	2,270,650
27,946	Chevron Corp.		1,705,265
44,142	Exxon Mobil Corp.		2,784,477
	TOTAL ENERGY		6,760,392
EXCHANGE TRADED FUND — 0.5%
11,400	Health Care Select Sector SPDR Fund		353,172
FINANCIALS — 13.5%
Capital Markets — 2.9%
2,800	Goldman Sachs Group Inc.		448,812
12,100	Merrill Lynch & Co. Inc.		922,746
7,163	UBS AG, Registered Shares		836,996
	Total Capital Markets		2,208,554
Commercial Banks — 5.2%
37,678	Bank of America Corp.		1,880,886
7,200	Wachovia Corp.		430,920
24,573	Wells Fargo & Co.		1,687,919
	Total Commercial Banks		3,999,725
Diversified Financial Services — 2.8%
47,141	JPMorgan Chase & Co.		2,139,259
Insurance — 2.3%
9,300	Assurant Inc.		447,981
25,842	Chubb Corp.		1,331,897
	Total Insurance		1,779,878
Real Estate Investment Trusts (REITs) — 0.3%
14,500	Annaly Mortgage Management Inc.		195,315
	TOTAL FINANCIALS		10,322,731
HEALTH CARE — 16.5%
Health Care Equipment & Supplies — 1.4%
19,192	Baxter International Inc.		723,538
7,150	Medtronic Inc.		358,358
	Total Health Care Equipment & Supplies		1,081,896
Pharmaceuticals — 15.1%
45,256	Abbott Laboratories		1,934,241
8,500	Bristol-Myers Squibb Co.		215,730
12,200	Eli Lilly & Co.		645,624
26,994	GlaxoSmithKline PLC, Sponsored ADR		1,535,419
39,950	Johnson & Johnson		2,341,470
14,400	Novartis AG, Sponsored ADR		828,144
67,657	Pfizer Inc.		1,713,752

See Notes to Financial Statements.

14         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
Pharmaceuticals — 15.1% (continued)
46,905	Wyeth	$	2,282,866
	Total Pharmaceuticals		11,497,246
	TOTAL HEALTH CARE		12,579,142
INDUSTRIALS — 17.3%
Aerospace & Defense — 4.8%
43,682	Honeywell International Inc.		1,856,485
12,800	Raytheon Co.		566,656
20,000	United Technologies Corp.		1,256,200
	Total Aerospace & Defense		3,679,341
Air Freight & Logistics — 0.7%
6,400	United Parcel Service Inc., Class B Shares		518,848
Building Products — 0.4%
9,900	Masco Corp.		315,810
Commercial Services & Supplies — 2.5%
11,350	Pitney Bowes Inc.		474,998
14,300	R.R. Donnelley & Sons Co.		481,767
24,200	Waste Management Inc.		906,532
	Total Commercial Services & Supplies		1,863,297
Electrical Equipment — 3.4%
7,200	American Power Conversion Corp.		160,128
7,100	Cooper Industries Ltd., Class A Shares		649,295
20,710	Emerson Electric Co.		1,759,314
	Total Electrical Equipment		2,568,737
Industrial Conglomerates — 5.5%
12,800	3M Co.		1,093,504
77,525	General Electric Co.		2,681,590
17,100	Tyco International Ltd.		450,585
	Total Industrial Conglomerates		4,225,679
	TOTAL INDUSTRIALS		13,171,712
INFORMATION TECHNOLOGY — 5.7%
Computers & Peripherals — 1.5%
5,550	Hewlett-Packard Co.		180,209
11,330	International Business Machines Corp.		932,912
	Total Computers & Peripherals		1,113,121
IT Services — 1.1%
18,500	Automatic Data Processing Inc.		815,480
Semiconductors & Semiconductor Equipment — 0.5%
18,500	Intel Corp.		369,630
Software — 2.6%
83,721	Microsoft Corp.		2,021,862
	TOTAL INFORMATION TECHNOLOGY		4,320,093

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         15

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
MATERIALS — 10.0%
Chemicals — 6.5%
32,267	Dow Chemical Co.	$	1,310,363
48,100	E.I. du Pont de Nemours & Co.		2,121,210
42,600	Olin Corp.		875,430
9,980	PPG Industries Inc.		669,858
	Total Chemicals		4,976,861
Metals & Mining — 1.7%
38,444	Alcoa Inc.		1,298,638
Paper & Forest Products — 1.8%
18,688	Weyerhaeuser Co.		1,316,943
	TOTAL MATERIALS		7,592,442
TELECOMMUNICATION SERVICES — 4.6%
Diversified Telecommunication Services — 3.1%
32,511	BellSouth Corp.		1,098,222
37,919	Verizon Communications Inc.		1,252,464
	Total Diversified Telecommunication Services		2,350,686
Wireless Telecommunication Services — 1.5%
50,500	Vodafone Group PLC, Sponsored ADR		1,196,850
	TOTAL TELECOMMUNICATION SERVICES		3,547,536
UTILITIES — 1.9%
Electric Utilities — 1.1%
13,416	Duke Energy Corp.		390,674
11,600	FPL Group Inc.		459,360
	Total Electric Utilities		850,034
Multi-Utilities — 0.8%
5,700	Ameren Corp.		287,109
15,300	NiSource Inc.		322,983
	Total Multi-Utilities		610,092
	TOTAL UTILITIES		1,460,126
	TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $66,042,822)		74,075,351

See Notes to Financial Statements.

16         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Face Amount		Security	Value
	SHORT-TERM INVESTMENTS — 2.5%
	Repurchase Agreements — 2.5%
$	1,000,000	Interest in $513,793,000 joint tri-party repurchase agreement dated 4/28/06 with Merrill Lynch, Pierce, Fenner & Smith Inc., 4.790% due 5/1/06; Proceeds at maturity — $1,000,399; (Fully collateralized by U.S. Treasury obligations, 0.000% to 2.375% due 4/3/06 to 4/15/11; Market value — $1,020,006)	$	1,000,000
	913,000	Interest in $604,665,000 joint tri-party repurchase agreement dated 4/28/06 with Deutsche Bank Securities Inc., 4.790% due 5/1/06; Proceeds at maturity — $913,364; (Fully collateralized by various U.S. government agency obligations, 0.000% to 22.305% due 2/15/17 to 4/15/36; Market value — $931,260)		913,000
		TOTAL SHORT-TERM INVESTMENTS (Cost — $1,913,000)		1,913,000
		TOTAL INVESTMENTS — 99.7% (Cost — $67,955,822#)		75,988,351
		Other Assets in Excess of Liabilities — 0.3%		263,466
		TOTAL NET ASSETS — 100.0%	$	76,251,817

# Aggregate cost for federal income tax purposes is substantially the same.

Abbreviations used in this schedule:
ADR	— American Depositary Receipt
SPDR	— Standard & Poor’s Depositary Receipts

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         17

Schedules of Investments (April 30, 2006) (unaudited) (continued)

LEGG MASON PARTNERS VARIABLE GROWTH AND INCOME PORTFOLIO

Shares	Security	Value
COMMON STOCKS — 98.6%
CONSUMER DISCRETIONARY — 10.9%
Hotels, Restaurants & Leisure — 2.5%
32,540	McDonald’s Corp.	$	1,124,908
11,400	Station Casinos Inc.		878,712
	Total Hotels, Restaurants & Leisure		2,003,620
Household Durables — 2.0%
30,920	Newell Rubbermaid Inc.		847,826
23,700	Toll Brothers Inc.*		761,955
	Total Household Durables		1,609,781
Media — 3.8%
24,700	EchoStar Communications Corp., Class A Shares*		763,230
64,520	News Corp., Class B Shares		1,176,200
58,400	Time Warner Inc.		1,016,160
	Total Media		2,955,590
Specialty Retail — 2.6%
20,600	Best Buy Co. Inc.		1,167,196
33,100	Staples Inc.		874,171
	Total Specialty Retail		2,041,367
	TOTAL CONSUMER DISCRETIONARY		8,610,358
CONSUMER STAPLES — 9.7%
Beverages — 1.9%
26,310	PepsiCo Inc.		1,532,295
Food & Staples Retailing — 2.3%
39,400	Wal-Mart Stores Inc.		1,774,182
Food Products — 4.0%
28,760	Kellogg Co.		1,331,876
24,850	McCormick & Co. Inc., Non Voting Shares		865,525
54,500	Sara Lee Corp.		973,915
	Total Food Products		3,171,316
Household Products — 1.5%
20,240	Procter & Gamble Co.		1,178,170
	TOTAL CONSUMER STAPLES		7,655,963
ENERGY — 10.1%
Energy Equipment & Services — 2.1%
12,810	ENSCO International Inc.		685,207
15,320	GlobalSantaFe Corp.		937,737
	Total Energy Equipment & Services		1,622,944

See Notes to Financial Statements.

18         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
Oil, Gas & Consumable Fuels — 8.0%
11,836	ConocoPhillips	$	791,828
32,220	Exxon Mobil Corp.		2,032,438
13,800	Nexen Inc.		807,300
9,480	Suncor Energy Inc.		812,815
13,650	Total SA, Sponsored ADR		1,883,973
	Total Oil, Gas & Consumable Fuels		6,328,354
	TOTAL ENERGY		7,951,298
FINANCIALS — 21.7%
Capital Markets — 3.8%
9,090	Goldman Sachs Group Inc.		1,457,036
19,820	Merrill Lynch & Co. Inc.		1,511,473
	Total Capital Markets		2,968,509
Commercial Banks — 6.0%
33,636	Bank of America Corp.		1,679,109
15,720	Wachovia Corp.		940,842
31,240	Wells Fargo & Co.		2,145,876
	Total Commercial Banks		4,765,827
Consumer Finance — 3.0%
24,710	American Express Co.		1,329,645
11,770	Capital One Financial Corp.		1,019,753
	Total Consumer Finance		2,349,398
Diversified Financial Services — 2.5%
42,848	JPMorgan Chase & Co.		1,944,442
Insurance — 4.9%
21,170	AFLAC Inc.		1,006,422
17,460	American International Group Inc.		1,139,265
8	Berkshire Hathaway Inc., Class A Shares *		712,000
19,920	Chubb Corp.		1,026,677
	Total Insurance		3,884,364
Thrifts & Mortgage Finance — 1.5%
17,060	Golden West Financial Corp.		1,226,102
	TOTAL FINANCIALS		17,138,642
HEALTH CARE — 8.8%
Biotechnology — 1.9%
21,870	Amgen Inc.*		1,480,599
Health Care Providers & Services — 2.3%
14,755	Coventry Health Care Inc.*		732,881
21,300	UnitedHealth Group Inc.		1,059,462
	Total Health Care Providers & Services		1,792,343
Pharmaceuticals — 4.6%
29,700	Sanofi-Aventis, ADR		1,397,088
37,280	Teva Pharmaceutical Industries Ltd., Sponsored ADR		1,509,840

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         19

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares	Security	Value
Pharmaceuticals — 4.6% (continued)
16,000	Wyeth	$	778,720
	Total Pharmaceuticals		3,685,648
	TOTAL HEALTH CARE		6,958,590
INDUSTRIALS — 12.2%
Aerospace & Defense — 4.2%
23,720	Boeing Co.		1,979,434
18,800	Orbital Sciences Corp.*		294,220
22,370	Raytheon Co.		990,320
	Total Aerospace & Defense		3,263,974
Building Products — 2.0%
49,300	Masco Corp.		1,572,670
Industrial Conglomerates — 4.8%
88,200	General Electric Co.		3,050,838
8,480	Textron Inc.		762,776
	Total Industrial Conglomerates		3,813,614
Machinery — 1.2%
12,000	Parker Hannifin Corp.		972,600
	TOTAL INDUSTRIALS		9,622,858
INFORMATION TECHNOLOGY — 14.7%
Communications Equipment — 4.3%
35,688	ADC Telecommunications Inc.*		799,054
52,200	Cisco Systems Inc.*		1,093,590
15,800	Motorola Inc.		337,330
23,000	QUALCOMM Inc.		1,180,820
	Total Communications Equipment		3,410,794
Computers & Peripherals — 1.1%
10,810	International Business Machines Corp.		890,095
Electronic Equipment & Instruments — 0.7%
21,070	Dolby Laboratories Inc., Class A Shares*		495,988
Internet Software & Services — 0.8%
19,800	Yahoo! Inc.*		649,044
IT Services — 1.1%
21,400	Paychex Inc.		864,346
Semiconductors & Semiconductor Equipment — 1.5%
38,700	ASML Holding NV, NY Registered Shares*		818,505
10,800	Texas Instruments Inc.		374,868
	Total Semiconductors & Semiconductor Equipment		1,193,373
Software — 5.2%
21,900	Adobe Systems Inc.*		858,480
13,660	Electronic Arts Inc.*		775,888
103,120	Microsoft Corp.		2,490,348
	Total Software		4,124,716
	TOTAL INFORMATION TECHNOLOGY		11,628,356

See Notes to Financial Statements.

20         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Shares		Security	Value
	MATERIALS — 5.9%
	Chemicals — 2.6%
	27,400	E.I. du Pont de Nemours & Co.	$	1,208,340
	22,300	Ecolab Inc.		842,940
		Total Chemicals		2,051,280
	Metals & Mining — 3.3%
	85,423	Barrick Gold Corp.		2,603,693
		TOTAL MATERIALS		4,654,973
	TELECOMMUNICATION SERVICES — 3.4%
	Wireless Telecommunication Services — 3.4%
	11,680	ALLTEL Corp.		751,842
	76,109	Sprint Nextel Corp.		1,887,503
		TOTAL TELECOMMUNICATION SERVICES		2,639,345
	UTILITIES — 1.2%
	Multi-Utilities — 1.2%
	20,400	Sempra Energy		938,808
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $63,478,026)		77,799,191
Face Amount
	SHORT-TERM INVESTMENT — 1.9%
	Repurchase Agreement — 1.9%
$	1,525,000	Interest in $513,793,000 joint tri-party repurchase agreement dated 4/28/06 with Merrill Lynch, Pierce, Fenner & Smith Inc., 4.790% due 5/1/06; Proceeds at maturity — $1,525,609; (Fully collateralized by U.S. Treasury obligations, 0.000% to 2.375% due 4/30/06 to 4/15/11; Market value — $1,555,510) (Cost — $1,525,000)		1,525,000
		TOTAL INVESTMENTS — 100.5% (Cost — $65,003,026#)		79,324,191
		Liabilities in Excess of Other Assets — (0.5)%		(369,823	)
		TOTAL NET ASSETS — 100.0%	$	78,954,368

* Non-income producing security.

# Aggregate cost for federal income tax purposes is substantially the same.

Abbreviation used in this schedule:
ADR	— American Depositary Receipt

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         21

Schedules of Investments (April 30, 2006) (unaudited) (continued)

LEGG MASON PARTNERS VARIABLE GOVERNMENT PORTFOLIO

Face Amount		Security	Value
	U.S. GOVERNMENT & AGENCY OBLIGATIONS (a) — 51.9%
	U.S. Government Agencies — 2.1%
		Federal National Mortgage Association (FNMA):
$	1,700,000	5.250% due 1/15/09	$	1,705,168
	1,000,000	Notes, 5.125% due 2/17/09 (b)		981,260
		Total U.S. Government Agencies		2,686,428
	U.S. Government Obligations — 49.8%
		U.S. Treasury Bonds:
	300,000	7.250% due 5/15/16		349,735
	200,000	9.000% due 11/15/18 (c)		268,891
	700,000	7.625% due 2/15/25		890,751
	8,000,000	5.375% due 2/15/31		8,122,504
		U.S. Treasury Notes:
	1,500,000	3.625% due 4/30/07		1,481,369
	7,700,000	3.500% due 5/31/07		7,587,210
	8,500,000	3.250% due 8/15/08		8,206,155
	7,500,000	3.375% due 10/15/09		7,141,995
	5,000,000	4.000% due 4/15/10		4,840,235
	5,000,000	4.125% due 8/15/10		4,851,175
	6,300,000	4.250% due 8/15/13		6,011,825
	8,000,000	4.000% due 2/15/15		7,415,008
	2,000,000	4.250% due 8/15/15		1,881,172
	4,000,000	4.500% due 11/15/15		3,829,376
		Total U.S. Government Obligations		62,877,401
		TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost — $68,267,285)		65,563,829
	COLLATERALIZED MORTGAGE OBLIGATIONS — 0.9%
		Federal Home Loan Mortgage Corp. (FHLMC):
	121,832	Series 2525, Class AM, 4.500% due 4/15/32		104,585
	2,328,228	Series 2686, Class QI, PAC IO, 5.500% due 1/15/23		79,839
	992,581	Series 2780, Class SL, PAC, 6.000% due 4/15/34 (b)		961,880
		TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost — $1,164,795)		1,146,304
	MORTGAGE-BACKED SECURITIES — 44.1%
	FHLMC — 2.5%
		Federal Home Loan Mortgage Corp. (FHLMC), Gold:
	269,365	6.500% due 9/1/31 (a)		274,925
	120,697	6.000% due 12/1/31 (a)		120,680
	314,565	5.000% due 8/1/33 (a)		298,584
	2,600,000	5.000% due 5/11/36 (d)(e)		2,458,625
		Total FHLMC		3,152,814

See Notes to Financial Statements.

22         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Schedules of Investments (April 30, 2006) (unaudited) (continued)

Face Amount		Security	Value
	FNMA — 35.4%
		Federal National Mortgage Association (FNMA):
$	1,734,223	6.000% due 8/1/16-1/1/33 (a)	$	1,731,671
	17,900,000	5.000% due 5/16/21-5/11/36 (d)(e)		17,012,945
	6,500,000	5.500% due 5/16/21-5/11/36 (d)(e)		6,398,125
	2,600,000	6.000% due 5/16/21-5/11/36 (d)(e)		2,605,812
	127,305	6.500% due 4/1/29-5/1/32 (a)		129,912
	120,117	7.000% due 11/1/31 (a)		123,686
	132,421	7.500% due 3/1/32-12/1/32 (a)		137,855
	2,400,000	4.500% due 5/11/36 (d)(e)		2,197,500
	6,000,000	6.500% due 5/11/36 (d)		6,103,128
	6,000,000	5.500% due 6/13/36 (d)		5,823,750
	2,500,000	6.000% due 6/13/36 (d)(e)		2,486,720
		Total FNMA		44,751,104
	GNMA — 6.2%
		Government National Mortgage Association (GNMA):
	51,253	6.500% due 6/15/31 (a)		52,802
	62,372	7.000% due 9/15/31 (a)		64,783
	5,747,494	6.000% due 3/15/33 (a)		5,774,081
	2,000,000	5.000% due 5/18/36 (d)(e)		1,916,876
		Total GNMA		7,808,542
		TOTAL MORTGAGE-BACKED SECURITIES (Cost — $57,146,160)		55,712,460
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $126,578,240)		122,422,593
	SHORT-TERM INVESTMENT — 40.1%
	Repurchase Agreement — 40.1%
	50,737,000	Merrill Lynch, Pierce, Fenner & Smith Inc. repurchase agreement dated 4/28/06, 4.750% due 5/1/06; Proceeds at maturity - $50,757,083; (Fully collateralized by U.S. Treasury Note, 0.875% due 4/15/10; Market value — $51,755,957) (a) (Cost — $50,737,000)		50,737,000
		TOTAL INVESTMENTS — 137.0% (Cost — $177,315,240#)		173,159,593
		Liabilities in Excess of Other Assets — (37.0)%		(46,776,421	)
		TOTAL NET ASSETS — 100.0%	$	126,383,172

^(a) All or a portion of this security is segregated for open futures contracts, TBA’s and mortgage dollar rolls.

^(b) Variable rate security. Interest rate disclosed is that which is in effect at April 30, 2006.

^(c) All or a portion of this security is held at the broker as collateral for open futures contracts.

^(d) This security is traded on a to-be-announced (“TBA”) basis (See Note 1).

^(e) All or a portion of this security was acquired under mortgage dollar roll agreement (See Notes 1 and 3).

# Aggregate cost for federal income tax purposes is substantially the same.

Abbreviations used in this schedule:
IO	— Interest Only
PAC	— Planned Amortization Cost

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         23

Statements of Assets and Liabilities (April 30, 2006) (unaudited)

	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio			Legg Mason Partners Variable Dividend Strategy Portfolio			Legg Mason Partners Variable Growth and Income Portfolio			Legg Mason Partners Variable Government Portfolio
ASSETS:
Investments, at cost	$	42,189,822		$	66,042,822		$	63,478,026		$	126,578,240
Repurchase agreement, at cost		337,000			1,913,000			1,525,000			50,737,000
Investments, at value	$	52,606,276		$	74,075,351		$	77,799,191		$	122,422,593
Repurchase agreement, at value		337,000			1,913,000			1,525,000			50,737,000
Cash		563			852			435			369
Receivable for securities sold		132,381			354,372			—			9,900,020
Dividends and interest receivable		19,507			97,821			54,871			689,374
Receivable for Fund shares sold		10,821			17,773			12,477			2,578
Receivable from broker — variation margin on open futures contracts		—			—			—			10,828
Prepaid expenses		339			—			522			212
Total Assets		53,106,887			76,459,169			79,392,496			183,762,974
LIABILITIES:
Payable for securities purchased		531,565			—			240,172			57,151,242
Payable for Fund shares repurchased		47,729			105,497			125,428			104,609
Investment management fee payable		32,965			40,503			42,011			57,733
Trustee fees payable		5,591			9,832			5,303			6,983
Deferred dollar roll income		—			—			—			13,497
Accrued expenses		17,859			51,520			25,214			45,738
Total Liabilities		635,709			207,352			438,128			57,379,802
Total Net Assets	$	52,471,178		$	76,251,817		$	78,954,368		$	126,383,172
NET ASSETS:
Par value (Note 4)	$	39		$	82		$	76		$	116
Paid-in capital in excess of par value		50,039,064			92,623,133			69,624,964			134,008,781
Undistributed net investment income		2,252			345,033			47,241			960,440
Accumulated net realized loss on investments, futures contracts and foreign currency transactions		(7,986,631	)		(24,749,605	)		(5,039,078	)		(4,283,117	)
Net unrealized appreciation (depreciation) on investments, futures contracts and foreign currencies		10,416,454			8,033,174			14,321,165			(4,303,048	)
Total Net Assets	$	52,471,178		$	76,251,817		$	78,954,368		$	126,383,172
Shares Outstanding		3,882,987			8,205,028			7,610,372			11,638,577
Net Asset Value		$13.51			$9.29			$10.37			$10.86

See Notes to Financial Statements.

24         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Statements of Operations (For the six months ended April 30, 2006) (unaudited)

	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio			Legg Mason Partners Variable Dividend Strategy Portfolio			Legg Mason Partners Variable Growth and Income Portfolio			Legg Mason Partners Variable Government Portfolio
INVESTMENT INCOME:
Interest	$	10,085		$	85,097		$	20,985		$	3,129,940
Dividends		243,490			985,403			564,732			—
Income from securities lending		—			—			454			—
Less: Foreign taxes withheld		—			(4,647	)		(5,768	)		—
Total Investment Income		253,575			1,065,853			580,403			3,129,940
EXPENSES:
Investment management fee (Note 2)		202,991			246,711			249,938			356,408
Legal fees		24,252			30,336			26,549			27,380
Shareholder reports		8,783			13,488			3,762			8,692
Audit and tax		8,132			10,392			8,557			9,906
Custody fees		4,881			14,606			4,066			4,924
Trustees’ fees		1,645			7,479			6,568			5,344
Transfer agent fees (Note 2)		852			1,261			1,164			1,010
Insurance		635			394			759			1,448
Registration fees		35			4			168			35
Miscellaneous expenses		1,856			3,894			3,034			2,748
Total Expenses		254,062			328,565			304,565			417,895
Less: Fee waivers and/or expense reimbursements (Notes 2 and 6)		(2,739	)		(3,222	)		(3,231	)		(4,458	)
Net Expenses		251,323			325,343			301,334			413,437
Net Investment Income		2,252			740,510			279,069			2,716,503
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS (NOTES 1 AND 3):
Net Realized Gain (Loss) From:
Investment transactions		2,347,583			1,345,741			2,243,818			(682,580	)
Futures contracts		—			—			—			248,627
Foreign currency transactions		—			(1,089	)		—			—
Net Realized Gain (Loss)		2,347,583			1,344,652			2,243,818			(433,953	)
Change in Net Unrealized Appreciation/Depreciation From:
Investments		2,628,600			4,559,742			5,080,146			(1,764,987	)
Futures contracts		—			—			—			(227,618	)
Foreign currencies		—			645			—			—
Change in Net Unrealized Appreciation/Depreciation		2,628,600			4,560,387			5,080,146			(1,992,605	)
Increase From Payment by Affiliate (Note 2)		—			—			45,193			—
Net Gain (Loss) on Investments, Futures Contracts and Foreign Currency Transactions		4,976,183			5,905,039			7,369,157			(2,426,558	)
Increase in Net Assets From Operations	$	4,978,435		$	6,645,549		$	7,648,226		$	289,945

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         25

Statements of Changes in Net Assets

For the six months ended April 30, 2006 (unaudited) and the year ended October 31, 2005
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	2006			2005
OPERATIONS:
Net investment income	$	2,252		$	65,509
Net realized gain		2,347,583			854,169
Change in net unrealized appreciation/depreciation		2,628,600			4,675,349
Increase in Net Assets From Operations		4,978,435			5,595,027
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(65,509	)		—
Decrease in Net Assets From Distributions to Shareholders		(65,509	)		—
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		755,375			2,175,320
Reinvestment of distributions		65,509			—
Cost of shares repurchased		(6,570,215	)		(13,543,097	)
Decrease in Net Assets From Fund Share Transactions		(5,749,331	)		(11,367,777	)
Decrease in Net Assets		(836,405	)		(5,772,750	)
NET ASSETS:
Beginning of period		53,307,583			59,080,333
End of period*	$	52,471,178		$	53,307,583
* Includes undistributed net investment income of:		$2,252			$65,509

See Notes to Financial Statements.

26         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Statements of Changes in Net Assets (continued)

For the six months ended April 30, 2006 (unaudited) and the year ended October 31, 2005
Legg Mason Partners Variable Dividend Strategy Portfolio	2006			2005
OPERATIONS:
Net investment income	$	740,510		$	1,630,551
Net realized gain		1,344,652			3,685,032
Change in net unrealized appreciation/depreciation		4,560,387			(3,626,246	)
Increase in Net Assets From Operations		6,645,549			1,689,337
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(1,500,001	)		(750,395	)
Decrease in Net Assets From Distributions to Shareholders		(1,500,001	)		(750,395	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		1,090,256			7,025,850
Reinvestment of distributions		1,500,001			750,395
Cost of shares repurchased		(7,350,339	)		(10,684,795	)
Decrease in Net Assets From Fund Share Transactions		(4,760,082	)		(2,908,550	)
Increase (Decrease) in Net Assets		385,466			(1,969,608	)
NET ASSETS:
Beginning of period		75,866,351			77,835,959
End of period*	$	76,251,817		$	75,866,351
* Includes undistributed net investment income of:		$345,033			$1,104,524

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         27

Statements of Changes in Net Assets (continued)

For the six months ended April 30, 2006 (unaudited) and the year ended October 31, 2005
Legg Mason Partners Variable Growth and Income Portfolio	2006			2005
OPERATIONS:
Net investment income	$	279,069		$	859,322
Net realized gain		2,243,818			1,946,100
Change in net unrealized appreciation/depreciation		5,080,146			1,704,609
Increase from payment by affiliate		45,193			—
Increase in Net Assets From Operations		7,648,226			4,510,031
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(600,002	)		(825,257	)
Decrease in Net Assets From Distributions to Shareholders		(600,002	)		(825,257	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		2,057,897			7,667,798
Reinvestment of distributions		600,002			825,257
Cost of shares repurchased		(4,894,295	)		(8,199,481	)
Increase (Decrease) in Net Assets From Fund Share Transactions		(2,236,396	)		293,574
Increase in Net Assets		4,811,828			3,978,348
NET ASSETS:
Beginning of period		74,142,540			70,164,192
End of period*	$	78,954,368		$	74,142,540
* Includes undistributed net investment income of:		$47,241			$368,174

See Notes to Financial Statements.

28         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Statements of Changes in Net Assets (continued)

For the six months ended April 30, 2006 (unaudited) and the year ended October 31, 2005
Legg Mason Partners Variable Government Portfolio	2006			2005
OPERATIONS:
Net investment income	$	2,716,503		$	4,811,829
Net realized gain (loss)		(433,953	)		151,833
Change in net unrealized appreciation/depreciation		(1,992,605	)		(4,358,724	)
Increase in Net Assets From Operations		289,945			604,938
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income		(6,000,004	)		(4,853,346	)
Decrease in Net Assets From Distributions to Shareholders		(6,000,004	)		(4,853,346	)
FUND SHARE TRANSACTIONS (NOTE 4):
Net proceeds from sale of shares		3,931,227			16,268,536
Reinvestment of distributions		6,000,004			4,853,346
Cost of shares repurchased		(8,851,395	)		(12,823,407	)
Increase in Net Assets From Fund Share Transactions		1,079,836			8,298,475
Increase (Decrease) in Net Assets		(4,630,223	)		4,050,067
NET ASSETS:
Beginning of period		131,013,395			126,963,328
End of period*	$	126,383,172		$	131,013,395
* Includes undistributed net investment income of:		$960,440			$4,243,941

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         29

Financial Highlights

For a share of beneficial interest outstanding throughout each year ended October 31, unless otherwise noted:

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	2006(1)			2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$	12.35		$	11.23		$	11.45		$	8.96		$	10.73		$	14.48
Income (Loss) From Operations:
Net investment income (loss)		0.00	(2)		0.02			(0.02	)		(0.01	)		(0.03	)		0.02
Net realized and unrealized gain (loss)		1.18			1.10			(0.20	)		2.50			(1.73	)		(3.69	)
Total Income (Loss) From Operations		1.18			1.12			(0.22	)		2.49			(1.76	)		(3.67	)
Less Distributions From:
Net investment income		(0.02	)		—			—			—			(0.01	)		(0.04	)
Net realized gains		—			—			—			—			—			(0.04	)
Total Distributions		(0.02	)		—			—			—			(0.01	)		(0.08	)
Net Asset Value, End of Period		$13.51		$	12.35		$	11.23		$	11.45		$	8.96		$	10.73
Total Return(3)		9.52	%		9.97	%		(1.92	)%		27.79	%		(16.44	)%		(25.45	)%
Net Assets, End of Period (000s)		$52,471			$53,308			$59,080			$34,884			$28,628			$34,384
Ratios to Average Net Assets:
Gross expenses		0.94	%(5)		0.94	%		0.95	%		0.90	%		1.11	%		1.08	%
Net expenses(4)		0.93	(5)(6)		0.94			0.94	(6)		0.90			0.95	(6)		0.95	(6)
Net investment income (loss)		0.01	(5)		0.11			(0.25	)		(0.08	)		(0.25	)		0.16
Portfolio Turnover Rate		25	%		43	%		46	%		66	%		58	%		116	%

⁽¹⁾ For the six months ended April 30, 2006 (unaudited).

⁽²⁾ Amount represents less than $0.01 per share.

⁽³⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽⁴⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 0.95%.

⁽⁵⁾ Annualized.

⁽⁶⁾ The investment manager voluntarily waived a portion of its fees.

See Notes to Financial Statements.

30         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Financial Highlights (continued)

For a share of beneficial interest outstanding throughout each year ended October 31, unless otherwise noted:

Legg Mason Partners Variable Dividend Strategy Portfolio	2006(1)			2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$	8.69		$	8.58		$	8.33		$	7.24		$	8.96		$	12.14
Income (Loss) From Operations:
Net investment income		0.09			0.18			0.03			0.03			0.02			0.04
Net realized and unrealized gain (loss)		0.68			0.01			0.25			1.09			(1.72	)		(3.19	)
Total Income (Loss) From Operations		0.77			0.19			0.28			1.12			(1.70	)		(3.15	)
Less Distributions From:
Net investment income		(0.17	)		(0.08	)		(0.03	)		(0.03	)		(0.02	)		(0.03	)
Total Distributions		(0.17	)		(0.08	)		(0.03	)		(0.03	)		(0.02	)		(0.03	)
Net Asset Value, End of Period	$	9.29		$	8.69		$	8.58		$	8.33		$	7.24		$	8.96
Total Return(2)		9.03	%		2.23	%		3.41	%		15.47	%		(18.94	)%		(26.03	)%
Net Assets, End of Period (000s)		$76,252			$75,866			$77,836			$73,717			$61,139			$67,093
Ratios to Average Net Assets:
Gross expenses		0.87	%(4)		0.86	%		0.88	%		0.91	%		0.93	%		0.93	%
Net expenses(3)		0.86	(4)(5)		0.86			0.88	(5)		0.91			0.93			0.93
Net investment income		1.95	(4)		2.07			0.37			0.47			0.24			0.42
Portfolio Turnover Rate		13	%		99	%		42	%		77	%		45	%		26	%

⁽¹⁾ For the six months ended April 30, 2006 (unaudited).

⁽²⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽³⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 0.95%.

⁽⁴⁾ Annualized.

⁽⁵⁾ The investment manager voluntarily waived a portion of its fees.

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         31

Financial Highlights (continued)

For a share of beneficial interest outstanding throughout each year ended October 31, unless otherwise noted:

Legg Mason Partners Variable Growth and Income Portfolio	2006(1)			2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$	9.47		$	9.00		$	8.44		$	6.95		$	8.15		$	10.77
Income (Loss) From Operations:
Net investment income		0.04			0.11			0.05			0.05			0.02			0.05
Net realized and unrealized gain (loss)		0.94			0.46			0.55			1.48			(1.20	)		(2.58	)
Total Income (Loss) From Operations		0.98			0.57			0.60			1.53			(1.18	)		(2.53	)
Less Distributions From:
Net investment income		(0.08	)		(0.10	)		(0.04	)		(0.04	)		(0.02	)		(0.05	)
Net realized gains		—			—			—			—			—			(0.04	)
Total Distributions		(0.08	)		(0.10	)		(0.04	)		(0.04	)		(0.02	)		(0.09	)
Net Asset Value, End of Period	$	10.37		$	9.47		$	9.00		$	8.44		$	6.95		$	8.15
Total Return(2)		10.36	%†		6.37	%		7.18	%		22.09	%		(14.47	)%		(23.63	)%
Net Assets, End of Period (000s)		$78,954			$74,143			$70,164			$54,334			$36,730			$31,576
Ratios to Average Net Assets:
Gross expenses		0.79	%(4)		0.78	%		0.91	%		0.87	%		1.09	%		1.18	%
Net expenses(3)		0.78	(4)(5)		0.78			0.91	(5)		0.87			0.95	(5)		0.95	(5)
Net investment income		0.73	(4)		1.14			0.61			0.68			0.40			0.53
Portfolio Turnover Rate		18	%		57	%		43	%		65	%		48	%		68	%

⁽¹⁾ For the six months ended April 30, 2006 (unaudited).

⁽²⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽³⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 0.95%.

⁽⁴⁾ Annualized.

⁽⁵⁾ The investment manager voluntarily waived a portion of its fees.

† The investment manager fully reimbursed the Fund for losses incurred resulting from an investment transaction error. Without this reimbursement, total return would not have changed.

See Notes to Financial Statements.

32         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Financial Highlights (continued)

For a share of beneficial interest outstanding throughout each year ended October 31, unless otherwise noted:

Legg Mason Partners Variable Government Portfolio	2006(1)			2005			2004			2003			2002(2)			2001
Net Asset Value, Beginning of Period	$	11.35		$	11.75		$	11.68		$	11.74		$	11.44		$	10.62
Income (Loss) From Operations:
Net investment income		0.24			0.45			0.41			0.33			0.35	(3)		0.52
Net realized and unrealized gain (loss)		(0.21	)		(0.40	)		0.03			(0.23	)		0.13	(3)		0.87
Total Income From Operations		0.03			0.05			0.44			0.10			0.48			1.39
Less Distributions From:
Net investment income		(0.52	)		(0.45	)		(0.37	)		(0.16	)		(0.11	)		(0.57	)
Net realized gains		—			—			—			—			(0.07	)		—
Total Distributions		(0.52	)		(0.45	)		(0.37	)		(0.16	)		(0.18	)		(0.57	)
Net Asset Value, End of Period	$	10.86		$	11.35		$	11.75		$	11.68		$	11.74		$	11.44
Total Return(4)		0.23	%		0.41	%		3.90	%		0.87	%		4.20	%		13.56	%
Net Assets, End of Period (000s)		$126,383			$131,013			$126,963			$127,378			$84,104			$13,410
Ratios to Average Net Assets:
Gross expenses		0.64	%(6)		0.65	%		0.70	%		0.68	%		1.00	%		1.30	%
Net expenses(5)		0.64	(6)(7)		0.65			0.70	(7)		0.68			0.80	(7)		0.80	(7)
Net investment income		4.19	(6)		3.68			3.44			2.91			3.17	(3)		4.47
Portfolio Turnover Rate		71	%(8)		96	%(8)		53	%(8)		83	%(8)		145	%		90	%

⁽¹⁾ For the six months ended April 30, 2006 (unaudited).

⁽²⁾ Per share amounts have been calculated using the average shares method.

⁽³⁾ Effective November 1, 2001, the Fund adopted a change in the accounting method that requires the Fund to amortize premiums and accrete all discounts. Without the adoption of the change, for the year ended October 31, 2002, the ratio of net investment income to average net assets would have been 3.32%. The impact of this change to net investment income and net realized and unrealized gain was $0.01 per share. Per share information, ratios and supplemental data for the periods prior to November 1, 2001 have not been restated to reflect this change in presentation.

⁽⁴⁾ Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized.

⁽⁵⁾ As a result of a voluntary expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 0.80%.

⁽⁶⁾ Annualized.

⁽⁷⁾ The investment manager voluntarily waived a portion of its fees.

⁽⁸⁾ Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 316%, 614%, 667% and 429% for the six months ended April 30, 2006 and the years ended October 31, 2005, 2004 and 2003, respectively.

See Notes to Financial Statements.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         33

Notes to Financial Statements (unaudited)

1. Organization and Significant Accounting Policies

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, Legg Mason Partners Variable Dividend Strategy Portfolio, Legg Mason Partners Variable Growth and Income Portfolio and Legg Mason Partners Variable Government Portfolio (the “Funds”) (formerly known as Smith Barney Premier Selections All Cap Growth Portfolio, Smith Barney Dividend Strategy Portfolio, Smith Barney Growth and Income Portfolio and SB Government Portfolio, respectively) are separate diversified investment funds of Legg Mason Partners Investment Series (formerly known as Smith Barney Investment Series) (the “Trust”). The Trust, a Massachusetts business trust, is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company.

The following are significant accounting policies consistently followed by the Funds and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.

(a) Investment Valuation. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various other relationships between securities. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Funds calculate their net asset value, the Funds may value these investments at fair value as determined in accordance with the procedures approved by the Funds’ Board of Trustees. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.

(b) Repurchase Agreements. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian take possession of the underlying collateral securities, the market value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.

(c) Financial Futures Contracts. The Funds may enter into financial futures contracts typically to hedge a portion of the portfolios. Upon entering into a financial futures contract, the Funds are required to deposit cash or securities as initial margin. Additional securities are also segregated up to the current market value of the financial futures contracts. Subsequent payments, known as variation margin, are made or received by the Funds each day, depending on the daily fluctuation in the value of the underlying financial instruments. The Funds recognize an unrealized gain or loss equal to the daily variation

34         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

margin. When the financial futures contracts are closed, a realized gain or loss is recognized equal to the difference between the proceeds from (or cost of) the closing transactions and the Funds’ basis in the contracts.

The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. In addition, investing in financial futures contracts involves the risk that the Funds could lose more than the original margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

(d) Lending of Portfolio Securities. The Funds have an agreement with their custodian whereby the custodian may lend securities owned by the Funds to brokers, dealers and other financial organizations. In exchange for lending securities under the terms of the agreement with their custodian, the Funds receive a lender’s fee. Fees earned by the Funds on securities lending are recorded as securities lending income. Loans of securities by the Funds are collateralized by cash, U.S. government securities or high quality money market instruments that are maintained at all times in an amount at least equal to the current market value of the loaned securities, plus a margin which varies depending on the type of securities loaned. The custodian establishes and maintains the collateral in a segregated account. The Funds have the right under the lending agreement to recover the securities from the borrower on demand.

The Funds maintain the risk of any loss on the securities on loan as well as the potential loss on investments purchased with cash collateral received from securities lending.

(e) Securities Traded on a To-Be-Announced Basis. The Legg Mason Partners Variable Government Portfolio may trade securities on a to-be-announced (“TBA”) basis. In a TBA transaction, the Fund commits to purchasing or selling securities which have not yet been issued by the issuer and for which specific information is not known, such as the face amount and maturity date and the underlying pool of investments in U.S. government agency mortgage pass-through transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Fund, normally 15 to 45 days later. Beginning on the date the Fund enters into a TBA transaction, cash, U.S. government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.

(f) Mortgage Dollar Rolls. The Legg Mason Partners Variable Government Portfolio enters into dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities to settle on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. The Fund is compensated by a fee paid by the counterparty, often in the form of a drop in the repurchase price of the securities. Dollar rolls are accounted for as financing arrangements; the fee is accrued into interest income ratably over the term of the dollar roll and any gain or loss on the roll is deferred and realized upon disposition of the rolled security.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         35

Notes to Financial Statements (unaudited) (continued)

The risk of entering into a mortgage dollar roll is that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of proceeds of the dollar roll may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.

(g) Stripped Securities. Certain Funds invest in “Stripped Securities,” a term used collectively for stripped fixed income securities. Stripped securities can be principal only securities (“PO”), which are debt obligations that have been stripped of unmatured interest coupons or interest only securities (“IO”), which are unmatured interest coupons that have been stripped from debt obligations. As is the case with all securities, the market value of Stripped Securities will fluctuate in response to changes in economic conditions, interest rates and the market’s perception of the securities. However, fluctuations in response to interest rates may be greater in Stripped Securities than for debt obligations of comparable maturities that pay interest currently. The amount of fluctuation increases with a longer period of maturity.

The yield to maturity on IO’s is sensitive to the rate of principal repayments (including prepayments) on the related underlying debt obligation and principal payments may have a material effect on yield to maturity. If the underlying debt obligation experiences greater than anticipated prepayments of principal, the Funds may not fully recoup its initial investment in IO’s.

(h) Security Transactions and Investment Income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Funds determine the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults on an expected interest payment, the Funds’ policy is to generally halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default.

(i) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference

36         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities, at the date of valuation, resulting from changes in exchange rates.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

(j) Distributions to Shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Funds are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

(k) Federal and Other Taxes. It is the Funds’ policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Funds intend to distribute substantially all of its income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Funds’ financial statements. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

(l) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share.

2. Investment Management Agreement and Other Transactions with Affiliates

On December 1, 2005, Citigroup Inc. (“Citigroup”) completed the sale of substantially all of its asset management business to Legg Mason, Inc. (“Legg Mason”). As a result, the Funds’ investment manager, Smith Barney Fund Management LLC (the “Manager” or “SBFM”), previously an indirect wholly-owned subsidiary of Citigroup, became a wholly-owned subsidiary of Legg Mason. Completion of the sale caused the Funds’ then existing investment management contracts to terminate. The Funds’ shareholders approved new investment management contracts between the Funds and the Manager, each of which became effective on December 1, 2005.

Legg Mason, whose principal executive offices are in Baltimore, Maryland, is a financial services holding company.

Prior to the Legg Mason transaction and continuing under the new investment management agreement effective December 1, 2005, the Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, Legg Mason Partners Variable Dividend Strategy Portfolio, Legg Mason Partners Variable Growth and Income Portfolio and Legg Mason Partners Variable Government Portfolio pay the Manager a fee, which was calculated daily and payable monthly, are calculated in accordance with the following breakpoint schedules:

Legg Mason Partners Investment Series 2006 Semi-Annual Report         37

Notes to Financial Statements (unaudited) (continued)

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	Annual Rate
Average Daily Net Assets
First $1 billion	0.750	%
Next $1 billion	0.725
Next $3 billion	0.700
Next $5 billion	0.675
Over $10 billion	0.650

Legg Mason Partners Variable Dividend Strategy Portfolio and Legg Mason Partners Variable Growth and Income Portfolio	Annual Rate
Average Daily Net Assets
First $1 billion	0.650	%
Next $1 billion	0.600
Next $1 billion	0.550
Next $1 billion	0.500
Over $4 billion	0.450

Legg Mason Partners Variable Government Portfolio	Annual Rate
Average Daily Net Assets
First $2 billion	0.550	%
Next $2 billion	0.500
Next $2 billion	0.450
Next $2 billion	0.400
Over $8 billion	0.350

During the six months ended April 30, 2006, Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, Legg Mason Partners Variable Dividend Strategy Portfolio and Legg Mason Partners Variable Growth and Income Portfolio, had voluntary expense limitations in place of 0.95%. Legg Mason Partners Variable Government Portfolio had a voluntary expense limitation in place of 0.80%. These expense limitations can be terminated at any time.

During the six months ended April 30, 2006, the Manager waived a portion of its investment management fee amounting to $2,739, $3,222, $3,231 and $4,458 for the Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio, Legg Mason Partners Variable Dividend Strategy Portfolio, Legg Mason Partners Variable Growth and Income Portfolio and Legg Mason Partners Variable Government Portfolio, respectively.

During the six months ended April 30, 2006, the Manager reimbursed Legg Mason Partners Variable Growth and Income Portfolio in the amount of $45,193 for losses incurred resulting from an investment transaction error.

The Funds’ Board has approved PFPC Inc. (“PFPC”) to serve as transfer agent for the Funds, effective January 1, 2006. The principal business office of PFPC is located at 4400 Computer Drive, Westborough, MA 01581. Prior to January 1, 2006, Citicorp Trust Bank, fsb. (“CTB”), a subsidiary of Citigroup, acted as the Funds’ transfer agent. Also, prior to January 1, 2006, PFPC acted as the Funds’ sub-transfer agent. CTB received account fees and asset-based fees that varied according to the size and type of account.

38         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

PFPC was responsible for shareholder recordkeeping and financial processing for all shareholder accounts and was paid by CTB. For the six months ended April 30, 2006, the Funds paid transfer agent fees of $8,368 to CTB.

The totals for each Fund were as follows:

	Transfer Agent Fees
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	$	2,091
Legg Mason Partners Variable Dividend Strategy Portfolio		2,093
Legg Mason Partners Variable Growth and Income Portfolio		2,091
Legg Mason Partners Variable Government Portfolio		2,093

The Funds’ Board has appointed the Funds’ current distributor, Citigroup Global Markets Inc. (“CGM”), and Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, as co-distributors of the Funds. CGM and other broker-dealers, financial intermediaries and financial institutions (each called a “Service Agent”) that currently offer Fund shares will continue to make the Funds’ shares available to their clients. Additional Service Agents may offer Fund shares in the future.

For the six months ended April 30, 2006, CGM, its affiliates and LMIS received broker commissions of $11 for the Legg Mason Partners Variable Dividend Strategy Portfolio.

Certain officers and a Trustee of the Trust are employees of Legg Mason or its affiliates and do not receive compensation from the Trust.

The Trustees of the Funds have adopted a Retirement Plan (the “Plan”), for all Trustees who are not “interested persons” of the Funds, within the meaning of the 1940 Act. Under the Plan, each Trustee is required to retire from the Board as of the last day of the calendar year in which such applicable Trustee attains age 75. Trustees may retire under the Plan before attaining the mandatory retirement age. Trustees who have served as Trustee of the Trust or any of the investment companies associated with the Manager for at least ten years when they retire are eligible to receive the maximum retirement benefit under the Plan. The maximum retirement benefit is an amount equal to five times the amount of retainer and regular meeting fees payable to a Trustee during the entirety of the calendar year of the Trustee’s retirement (assuming no change in relevant facts for the balance of the year following the Trustee’s retirement). Amounts under the Plan may be paid in installments or in a lump sum (discounted to present value). Benefits under the Plan are unfunded. Two former Trustees are currently receiving payments under the Plan. In addition, three other Trustees received full payments under the Plan.

Certain of the Trustees are also covered by a prior retirement plan. Under the prior plan, retirement benefits are payable for a ten-year period following retirement, with the annual payment to be based upon the Trustee’s compensation from the Trust during calendar year 2000. Trustees with more than five but less than ten years of service at retirement will receive a prorated benefit. In order to receive benefits under the current Plan, a Trustee must waive all rights under the prior plan prior to receiving payment under either plan.

At April 30, 2006, $5,591, $9,832, $5,303 and $6,983 were accrued in connection with the Plans for Legg Mason Partners Variable Premier Selections All Cap Growth

Legg Mason Partners Investment Series 2006 Semi-Annual Report         39

Notes to Financial Statements (unaudited) (continued)

Portfolio, Legg Mason Partners Variable Dividend Strategy Portfolio, Legg Mason Partners Variable Growth and Income Portfolio and Legg Mason Partners Variable Government Portfolio, respectively, in connection with these plans.

3. Investments

During the six months ended April 30, 2006, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S. Government & Agency Obligations were as follows:

	Purchases		Sales
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	$	13,194,764	$	17,719,345
Legg Mason Partners Variable Dividend Strategy Portfolio		9,419,612		11,041,498
Legg Mason Partners Variable Growth and Income Portfolio		13,495,519		15,671,376
Legg Mason Partners Variable Government Portfolio		90,071,666		92,634,962

At April 30, 2006, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

	Gross unrealized appreciation		Gross unrealized depreciation			Net unrealized appreciation/ depreciation
Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	$	11,724,112	$	(1,307,658	)	$	10,416,454
Legg Mason Partners Variable Dividend Strategy Portfolio		9,678,694		(1,646,165	)		8,032,529
Legg Mason Partners Variable Growth and Income Portfolio		15,437,403		(1,116,238	)		14,321,165
Legg Mason Partners Variable Government Portfolio		115,082		(4,270,729	)		(4,155,647	)

At April 30, 2006, Legg Mason Partners Variable Government Portfolio had the following open futures contracts:

Contracts to Buy:	Number of Contracts	Expiration Date	Basis Value		Market Value		Unrealized Loss
U.S. Treasury 10 Year Notes	63	6/06	$	6,798,823	$	6,651,422	$	(147,401	)

At April 30, 2006, Legg Mason Partners Variable Government Portfolio had outstanding mortgage dollar rolls with a total cost of $40,677,961. During the six months ended April 30, 2006, Legg Mason Partners Variable Government Portfolio entered into mortgage dollar roll transactions in the aggregate amount of $312,939,547. For the six months ended April 30, 2006, Legg Mason Partners Variable Government Portfolio recorded interest income of $306,840 related to such mortgage rolls.

4. Shares of Beneficial Interest

At April 30, 2006, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 per share.

40         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

Transactions in shares of each Fund were as follows:

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio	Six Months Ended April 30, 2006		Year Ended October 31, 2005
Shares sold	57,490		182,244
Shares issued on reinvestment	5,043		—
Shares repurchased	(496,579	)	(1,127,132	)
Net Decrease	(434,046	)	(944,888	)
Legg Mason Partners Variable Dividend Strategy Portfolio
Shares sold	121,353		801,488
Shares issued on reinvestment	171,429		84,314
Shares repurchased	(819,752	)	(1,221,275	)
Net Decrease	(526,970	)	(335,473	)
Legg Mason Partners Variable Growth and Income Portfolio
Shares sold	203,925		817,377
Shares issued on reinvestment	60,668		86,414
Shares repurchased	(486,616	)	(869,834	)
Net Increase (Decrease)	(222,023	)	33,957
Legg Mason Partners Variable Government Portfolio
Shares sold	353,785		1,421,226
Shares issued on reinvestment	545,951		429,880
Shares repurchased	(801,553	)	(1,119,908	)
Net Increase	98,183		731,198

5. Capital Loss Carryforward

As of October 31, 2005, the Funds had the following net capital loss carryforwards remaining:

Year of Expiration	Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio			Legg Mason Partners Variable Dividend Strategy Portfolio			Legg Mason Partners Variable Growth and Income Portfolio			Legg Mason Partners Variable Government Portfolio
10/31/2009	$	(997,566	)	$	(3,340,004	)		—			—
10/31/2010		(6,363,962	)		(15,846,502	)	$	(3,058,834	)	$	(49,007	)
10/31/2011		(2,644,926	)		(6,459,408	)		(3,755,495	)		(2,378,580	)
10/31/2012		—			—			—			(877,195	)
10/31/2013		—			—			—			(266,355	)
	$	(10,006,454	)	$	(25,645,914	)	$	(6,814,329	)	$	(3,571,137	)

These amounts will be available to offset any future taxable capital gains.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         41

Notes to Financial Statements (unaudited) (continued)

6. Regulatory Matters

On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and CGM relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).

The SEC order finds that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the fund’s investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also finds that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan submitted for the approval of the SEC. At this time, there is no certainty as to how the above-described proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. The order also required that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provided that a portion of such fees might be subsequently distributed in accordance with the terms of the order. On April 3, 2006, an aggregate amount of approximately $9 million held in escrow was distributed to the affected Funds.

The order required SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGM would have been required, at their expense, to engage an independent monitor to oversee a competitive

42         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Notes to Financial Statements (unaudited) (continued)

bidding process. On November 21, 2005, and within the specified timeframe, the Fund’s Board selected a new transfer agent for the Fund. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Funds.

On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason Inc.

7. Legal Matters

Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGM and SBFM, (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC based in Note .. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the advisor for the Smith Barney family of funds, rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses.

On October 5, 2005, a motion to consolidate the five actions and any subsequently-filed, related action was filed. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future.

As of the date of this report, the Funds’ investment manager believes that 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 Funds’ investment manager and it affiliates to continue to render services to the Funds under their respective contracts.

*   *   *

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 SBFM and Salomon Brothers Asset Management Inc (the “Advisers”), substantially all of the mutual funds managed by the Advisers, including the Funds (the “Funds”), and directors or trustees of the Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGM 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 CGM for steering clients towards proprietary funds. The complaints also alleged that the defendants breached their fiduciary duty to the Funds by improperly charging Rule l2b-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.

Legg Mason Partners Investment Series 2006 Semi-Annual Report         43

Notes to Financial Statements (unaudited) (continued)

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, the Funds’ investment manager 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, the Funds’ investment manager 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.

The Defendants have moved to dismiss the Complaint. Those motions are pending before the court.

8. Other Matters

On September 16, 2005, the staff of the SEC informed SBFM and SBAM that the staff is considering recommending that the Commission institute administrative proceedings against SBFM and SBAM for alleged violations of Section 19(a) and 34(b) of the Investment Company Act (and related Rule 19a-1). The notification is a result of an industry wide inspection by the Commission and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. Section 19(a) and related Rule 19a-1 of the Investment Company Act generally require funds that are making dividend and distribution payments to provide shareholders with a written statement disclosing the source of the dividends and distributions, and, in particular, the portion of the payments made from each of net investment income, undistributed net profits and/ or paid-in capital. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM or SBAM.

Although there can be no assurance, SBFM believes that this matter is not likely to have a material adverse effect on the Fund or SBFM’s ability to perform investment management services relating to the Fund.

44         Legg Mason Partners Investment Series 2006 Semi-Annual Report

Additional Shareholder Information (unaudited)

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

Results of a Special Meeting of Shareholders

On November 15, 2005, a Special Meeting of Shareholders was held to approve a new management agreement. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to the matter voted on at the Special Meeting of Shareholders.

Item Voted On	Votes For	Votes Against	Abstentions	Broker Non-Votes
New Management Agreement	50,289,312.213	4,520,979.500	1,028,595.125	0.000

Legg Mason Partners Variable Dividend Strategy Portfolio

Results of a Special Meeting of Shareholders

On November 29, 2005, a Special Meeting of Shareholders was held to approve a new management agreement. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to the matter voted on at the Special Meeting of Shareholders.

Item Voted On	Votes For	Votes Against	Abstentions	Broker Non-Votes
New Management Agreement	74,891,656.506	1,738,977.095	1,631,416.282	0.000

Legg Mason Partners Variable Growth and Income Portfolio

Results of a Special Meeting of Shareholders

On November 15, 2005, a Special Meeting of Shareholders was held to approve a new management agreement. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to the matter voted on at the Special Meeting of Shareholders.

Item Voted On	Votes For	Votes Against	Abstentions	Broker Non-Votes
New Management Agreement	73,827,592.577	2,138,361.029	748,278.743	0.000

Legg Mason Partners Variable Government Portfolio

Results of a Special Meeting of Shareholders

On November 15, 2005, a Special Meeting of Shareholders was held to approve a new management agreement. The following table provides the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to the matter voted on at the Special Meeting of Shareholders.

Item Voted On	Votes For	Votes Against	Abstentions	Broker Non-Votes
New Management Agreement	129,864,430.558	1,287,583.185	1,492,842.669	0.000

Legg Mason Partners Investment Series 2006 Semi-Annual Report         45

Legg Mason Partners Investment Series

TRUSTEES Elliott J. Berv Donald M. Carlton A. Benton Cocanougher Mark T. Finn R. Jay Gerken, CFA
Chairman Stephen Randolph Gross Diana R. Harrington Susan B. Kerley Alan G. Merten R. Richardson Pettit OFFICERS R. Jay Gerken, CFA President and Chief
Executive Officer Andrew B. Shoup Senior Vice President and Chief Administrative Officer Frances M. Guggino Chief Financial Officer
and Treasurer Alan J. Blake Vice President and Investment Officer Kevin Caliendo Vice President and Investment Officer Scott K. Glasser Vice President and
Investment Officer Peter J. Hable Vice President and
Investment Officer Michael A. Kagan Vice President and Investment Officer OFFICERS (continued) Timothy Woods, CFA Vice President and Investment Officer Ted P. Becker Chief Compliance Officer John Chiota Chief Anti-Money Laundering Compliance Officer Wendy S. Setnicka Controller Robert I. Frenkel Secretary and
Chief Legal Officer INVESTMENT MANAGER Smith Barney Fund
    Management LLC DISTRIBUTORS Citigroup Global Markets Inc. Legg Mason Investors
    Services, LLC CUSTODIAN State Street Bank and Trust Company TRANSFER AGENT PFPC Inc. 4400 Computer Drive Westborough, Massachusetts 01581 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 345 Park Avenue New York, New York 10154

This report is submitted for general information of the shareholders of the Legg Mason Partners Investment Series — Legg Mason Partners Variable Premier Selections All Cap Growth, Legg Mason Partners Variable Dividend Strategy, Legg Mason Partners Variable Growth and Income and Legg Mason Partners Variable Government Portfolios.

This report must be preceded or accompanied by a free prospectus. Investors should consider the Funds’ investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the Funds. Please read the prospectus carefully before investing.

www.leggmason.com/InvestorServices

©2006 Legg Mason Investor Services, LLC

Member NASD, SIPC

FD02334 6/06 SR 06-69

Legg Mason Partners Investment Series

Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio

Legg Mason Partners Variable Dividend Strategy Portfolio

Legg Mason Partners Variable Growth and Income Portfolio

Legg Mason Partners Variable Government Portfolio

The Funds are separate investment funds of the Legg Mason Partners Investment Series, a Massachusetts business trust.

LEGG MASON PARTNERS INVESTMENT SERIES

Legg Mason Partners Funds

125 Broad Street

10th Floor, MF-2

New York, New York 10004

The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington D.C., and how information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. To obtain information on Form N-Q from the Funds, shareholders can call 1-800-451-2010.

Information on how the Funds voted proxies relating to portfolio securities during the prior 12 month period ended June 30th of each year, and a description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the Funds’ website at www.leggmason.com/InvestorServices.com and (3) on the SEC’s website at www.sec.gov. Proxy voting reports for the period ending June 30, 2005 will continue to be listed under the Trust’s former Smith Barney Investment Series name.

COVER

SEC Transmittal Letter