UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-8372
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)
Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
300 First Stamford Place, 4th Floor
Stamford, CT 06902
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 451-2010
Date of fiscal year end: October 31
Date of reporting period: April 30, 2006
| ITEM 1. | REPORT TO STOCKHOLDERS. |
The Semi-Annual Report to Stockholders is filed herewith.
SEMI-ANNUAL
REPORT
APRIL 30, 2006
Legg Mason Partners Variable Money Market Portfolio
INVESTMENT PRODUCTS: NOT FDIC INSURED Ÿ NO BANK GUARANTEE Ÿ MAY LOSE VALUE
Legg Mason Partners Variable Money Market Portfolio
Semi-Annual Report • April 30, 2006
What’s
Inside
Fund Objective
Maximize current income consistent with preservation of capital. The Fund seeks to maintain a stable $1 share price.
“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 Fund’s 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 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 10th, 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.
Both short- and long-term yields rose over the reporting period. During the six months ended April 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
Legg Mason Partners Variable Money Market Portfolio I
Bernanke, believe the inverted yield curve was largely a function of strong foreign demand for longer-term bonds.
Given the increase in short-term rates, the yields available from money market instruments steadily rose over the six-month reporting period.
Within this environment, the Fund performed as follows:
| | |
| Performance Snapshot as of April 30, 2006 (unaudited) | | |
| |
| | | 6 months |
| | | |
Variable Money Market Portfolio1 | | 1.98% |
|
90-Day U.S. Treasury Bill Index | | 2.02% |
|
Lipper Variable Money Market Funds Category Average2 | | 1.92% |
|
| 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 108 funds in the variable money market funds category. |
Performance Update1
For the six months ended April 30, 2006, the Legg Mason Partners Variable Money Market Portfolio returned 1.98%. The Fund outperformed the Lipper Variable Money Market Funds Category Average2, which increased 1.92% over the same time frame. The Fund’s unmanaged benchmark, the 90-Day U.S. Treasury Bill Index,iv returned 2.02% 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 6-month period ended April 30, 2006, including the reinvestment of distributions, including returns of capital, if any, calculated among the 108 funds in the fund’s Lipper category, and excluding sales charges. |
II Legg Mason Partners Variable Money Market Portfolio
As of April 30, 2006, the seven-day current yield for the Legg Mason Partners Variable Money Market Portfolio was 4.37%, and its seven-day effective yield, which reflects compounding, was 4.46%3.
Your investment in the fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
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 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 then existing investment management 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.
Prior to May 1, 2006, the fund operated under the name Travelers Series Fund Inc. Smith Barney Money Market Portfolio. The fund’s investment strategy and objective have not changed.
Information About Your fund
As you may be aware, several issues in the mutual fund industry have come under the scrutiny of federal and state regulators. The 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
| 3 | | The seven-day current yield reflects the amount of income generated by the investment during that seven-day period and assumes that the income is generated each week over a 365-day period. The yield is shown as a percentage of the investment. The seven-day effective yield is calculated similarly to the seven-day current yield but, when annualized, the income earned by an investment in the Fund is assumed to be reinvested. The effective yield typically will be slightly higher than the current yield because of the compounding effect of the assumed reinvestment. |
Legg Mason Partners Variable Money Market Portfolio III
other things, the fund’s response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The fund has 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 fund and its 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
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: An investment in a money market fund is neither insured nor guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at one dollar per share, it is possible to lose money by investing in the fund. 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 90-day U.S. Treasury Bill Index is an unmanaged index that consists of one 90-day United States Treasury Bill whose return is tracked until its maturity. |
IV Legg Mason Partners Variable Money Market Portfolio
Fund at a Glance (unaudited)
Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report 1
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 Money Market Portfolio | | 1.98 | % | | $ | 1,000.00 | | $ | 1,019.80 | | 0.47 | % | | $ | 2.35 |
|
| (1) | | For the six months ended April 30, 2006. |
| (2) | | Assumes reinvestment of 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 waiver) are equal to the Fund’s 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. |
2 Legg Mason Partners Variable Money Market Portfolio 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 Money Market Portfolio | | 5.00 | % | | $ | 1,000.00 | | $ | 1,022.46 | | 0.47 | % | | $ | 2.36 |
|
| (1) | | For the six months ended April 30, 2006. |
| (2) | | Expenses (net of voluntary fee waiver) are equal to the Fund’s 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 Money Market Portfolio 2006 Semi-Annual Report 3
Schedule of Investments (April 30, 2006) (unaudited)
LEGG MASON PARTNERS VARIABLE MONEY MARKET PORTFOLIO
| | | | | | | |
| | |
Face
Amount | | Security | | Value | |
| | | | | | | | |
| | SHORT-TERM INVESTMENTS — 99.7% | | | | |
| | Commercial Paper (a) — 42.2% | | | | |
| $ | 9,036,000 | | Atomium Funding LLC, 4.665% due 6/12/06 | | $ | 8,987,718 | |
| | 15,000,000 | | Bavaria TRR Corp., 4.848% due 5/10/06 | | | 14,981,887 | |
| | 8,159,000 | | Chesham Finance LLC, 4.892% due 5/1/06 | | | 8,159,000 | |
| | 6,579,000 | | Cullinan Finance Corp., 4.765% due 7/21/06 | | | 6,510,019 | |
| | 5,000,000 | | Danske Corp., 5.016% due 9/29/06 | | | 4,897,446 | |
| | 13,700,000 | | Dexia Delaware LLC, 4.790% due 5/9/06 | | | 13,685,448 | |
| | 5,000,000 | | East-Fleet Finance LLC, 4.869% due 5/12/06 | | | 4,992,590 | |
| | 15,000,000 | | Erasmus Capital Corp., 4.945% due 5/18/06 | | | 14,965,079 | |
| | 5,000,000 | | General Electric Capital Corp., 4.868% due 7/7/06 | | | 4,955,426 | |
| | 5,000,000 | | Grampian Funding LLC, 4.745% due 5/22/06 | | | 4,986,321 | |
| | | | HBOS Treasury Services PLC: | | | | |
| | 8,700,000 | | 4.790% due 5/9/06 | | | 8,690,759 | |
| | 7,900,000 | | 4.741% due 5/18/06 | | | 7,882,504 | |
| | 7,000,000 | | ING U.S. Funding LLC, 5.196% due 10/30/06 | | | 6,820,932 | |
| | 10,000,000 | | Market Street Funding Corp., 4.802% due 5/8/06 | | | 9,990,706 | |
| | 12,000,000 | | New Center Asset Trust, 4.872% due 5/16/06 | | | 11,975,750 | |
| | 15,000,000 | | Ormond Quay Funding LLC, 4.839% due 5/11/06 | | | 14,979,917 | |
| | 7,000,000 | | Rabobank USA Finance Corp., 4.518% due 5/15/06 | | | 6,987,941 | |
| | 5,000,000 | | Societe Generale North America, 4.899% due 5/22/06 | | | 4,985,767 | |
| | 5,000,000 | | Svenska Handlesbanken NY Inc., 4.595% due 6/15/06 | | | 4,971,937 | |
| | 5,000,000 | | Tasman Funding Inc., 5.000% due 6/30/06 | | | 4,958,850 | |
| | | | UBS Finance Delaware LLC: | | | | |
| | 2,738,000 | | 4.667% due 5/24/06 | | | 2,729,953 | |
| | 5,475,000 | | 4.900% due 6/6/06 | | | 5,448,391 | |
| | 5,000,000 | | Victory Receivable Corp., 4.818% due 5/2/06 | | | 4,999,333 | |
| | | | Westpac Banking Corp.: | | | | |
| | 9,900,000 | | 4.862% due 5/30/06 | | | 9,861,560 | |
| | 3,000,000 | | 4.605% due 6/15/06 | | | 2,983,125 | |
|
|
|
| | | | TOTAL COMMERCIAL PAPER
(Cost — $195,388,359) | | | 195,388,359 | |
|
|
|
| | Certificates of Deposit — 8.4% | | | | |
| | | | Bank of America NA: | | | | |
| | 3,000,000 | | 5.020% due 7/21/06 | | | 3,000,000 | |
| | 8,000,000 | | 4.910% due 8/23/06 | | | 8,000,000 | |
| | 5,000,000 | | 5.160% due 10/27/06 | | | 5,000,000 | |
| | 2,000,000 | | HSBC Bank USA, 3.990% due 7/17/06 | | | 2,000,000 | |
| | 5,000,000 | �� | SunTrust Bank, 4.700% due 7/25/06 | | | 5,000,000 | |
| | | | Wells Fargo Bank NA: | | | | |
| | 10,000,000 | | 4.770% due 5/8/06 | | | 9,999,980 | |
| | 3,000,000 | | 4.800% due 1/29/07 | | | 2,999,133 | |
| | 3,000,000 | | 4.865% due 1/31/07 | | | 2,999,891 | |
|
|
|
| | | | TOTAL CERTIFICATES OF DEPOSIT
(Cost — $38,999,004) | | | 38,999,004 | |
|
|
|
See Notes to Financial Statements.
4 Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report
Schedule of Investments (April 30, 2006) (unaudited) (continued)
| | | | | | |
| | |
Face
Amount | | Security | | Value |
| | | | | | | |
| | Certificates of Deposit (Yankee) — 42.1% | | | |
| $ | 5,000,000 | | Abbey National Treasury Services PLC, 4.090% due 5/22/06 | | $ | 5,000,000 |
| | | | Bank of Nova Scotia NY: | | | |
| | 5,000,000 | | 4.700% due 9/29/06 | | | 5,000,000 |
| | 3,000,000 | | 4.860% due 1/30/07 | | | 2,999,550 |
| | | | Barclays Bank PLC NY: | | | |
| | 5,000,000 | | 4.950% due 6/19/06 | | | 5,000,000 |
| | 10,000,000 | | 4.900% due 7/17/06 | | | 10,000,000 |
| | | | BNP Paribas NY Branch: | | | |
| | 5,000,000 | | 4.130% due 5/25/06 | | | 4,997,052 |
| | 3,500,000 | | 4.235% due 8/25/06 | | | 3,498,918 |
| | 5,000,000 | | 4.975% due 9/20/06 | | | 5,000,000 |
| | 5,000,000 | | 5.000% due 9/27/06 | | | 5,000,000 |
| | | | Calyon NY: | | | |
| | 5,000,000 | | 4.845% due 8/9/06 | | | 5,000,000 |
| | 5,000,000 | | 4.750% due 10/26/06 | | | 5,000,000 |
| | 15,000,000 | | Credit Suisse New York, 4.790% due 5/3/06 | | | 15,000,000 |
| | 7,000,000 | | Depfa Bank PLC, 4.690% due 5/9/06 | | | 6,999,800 |
| | | | Deutsche Bank NY: | | | |
| | 5,000,000 | | 4.100% due 5/22/06 | | | 5,000,000 |
| | 10,000,000 | | 4.970% due 9/18/06 | | | 10,000,000 |
| | 15,000,000 | | Dresdner Bank NY, 4.930% due 5/26/06 | | | 15,000,000 |
| | | | Fortis Bank: | | | |
| | 15,000,000 | | 4.780% due 5/10/06 | | | 15,000,000 |
| | 2,000,000 | | 5.225% due 4/4/07 | | | 2,000,000 |
| | 2,000,000 | | HBOS Treasury Services, 5.255% due 4/5/07 | | | 2,000,089 |
| | | | Lloyds TSB Bank PLC NY: | | | |
| | 10,000,000 | | 4.610% due 5/1/06 | | | 10,000,000 |
| | 5,000,000 | | 4.770% due 6/1/06 | | | 5,000,021 |
| | | | Nordea Bank Finland NY: | | | |
| | 3,000,000 | | 4.590% due 6/5/06 | | | 3,000,013 |
| | 3,000,000 | | 4.930% due 8/28/06 | | | 3,000,000 |
| | 5,000,000 | | Rabobank Nederland NV NY, 4.625% due 7/5/06 | | | 4,999,698 |
| | | | Royal Bank of Canada NY: | | | |
| | 5,000,000 | | 4.705% due 5/15/06 | | | 5,000,010 |
| | 2,000,000 | | 4.030% due 7/24/06 | | | 1,999,531 |
| | | | Royal Bank of Scotland NY: | | | |
| | 1,500,000 | | 4.225% due 8/15/06 | | | 1,500,000 |
| | 3,000,000 | | 4.640% due 11/1/06 | | | 3,000,000 |
| | | | Societe Generale NY: | | | |
| | 10,000,000 | | 4.780% due 5/10/06 | | | 10,000,000 |
| | 2,000,000 | | 3.730% due 6/23/06 | | | 2,000,000 |
| | | | Toronto Dominion Bank NY: | | | |
| | 5,000,000 | | 5.170% due 10/18/06 | | | 5,000,128 |
| | 3,000,000 | | 5.230% due 3/30/07 | | | 3,000,000 |
See Notes to Financial Statements.
Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report 5
Schedule of Investments (April 30, 2006) (unaudited) (continued)
| | | | | | | |
| | |
Face
Amount | | Security | | Value | |
| | Certificates of Deposit (Yankee) — 42.1% (continued) | |
| | | | | | | | |
| | | | UBS AG Stamford CT: | | | | |
| $ | 5,000,000 | | 4.795% due 5/22/06 | | $ | 4,999,695 | |
| | 5,225,000 | | 4.210% due 8/25/06 | | | 5,208,830 | |
|
|
|
| | | | TOTAL CERTIFICATES OF DEPOSIT (YANKEE)
(Cost — $195,203,335) | | | 195,203,335 | |
|
|
|
| | Foreign Certificate of Deposit — 1.1% | | | | |
| | 5,000,000 | | Credit Agricole SA, 4.495% due 5/15/06 (Cost — $4,999,774) | | | 4,999,774 | |
|
|
|
| | Time Deposit — 3.2% | | | | |
| | 15,000,000 | | State Street Cayman Islands, 4.820% due 5/1/06 (Cost — $15,000,000) | | | 15,000,000 | |
|
|
|
| | U.S. Government Agencies (a) — 2.7% | | | | |
| | | | Federal Home Loan Mortgage Corp., Discount Notes: | | | | |
| | 5,000,000 | | 4.545% due 6/20/06 | | | 4,969,167 | |
| | 2,000,000 | | 4.610% due 9/27/06 | | | 1,963,371 | |
| | | | Federal National Mortgage Association, Discount Notes: | | | | |
| | 2,000,000 | | 4.345% due 9/29/06 | | | 1,965,060 | |
| | 2,000,000 | | 5.111% due 3/6/07 | | | 1,916,227 | |
| | 2,000,000 | | 5.123% due 3/30/07 | | | 1,909,812 | |
|
|
|
| | | | TOTAL U.S. GOVERNMENT AGENCIES
(Cost — $12,723,637) | | | 12,723,637 | |
|
|
|
| | | | TOTAL INVESTMENTS — 99.7% (Cost — $462,314,109#) | | | 462,314,109 | |
| | | | Other Assets in Excess of Liabilities — 0.3% | | | 1,189,180 | |
|
|
|
| | | | TOTAL NET ASSETS — 100.0% | | $ | 463,503,289 | |
|
|
|
| (a) | | Rate shown represents yield to maturity. |
| # | | Aggregate cost for federal income tax purposes is substantially the same. |
See Notes to Financial Statements.
6 Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report
Statement of Assets and Liabilities (April 30, 2006) (unaudited)
| | | | |
| ASSETS: | | | | |
Investments, at amortized cost | | $ | 462,314,109 | |
Interest receivable | | | 2,490,291 | |
Receivable for Fund shares sold | | | 453,681 | |
Prepaid expenses | | | 1,792 | |
|
|
Total Assets | | | 465,259,873 | |
|
|
| LIABILITIES: | | | | |
Payable for Fund shares repurchased | | | 1,179,680 | |
Due to custodian | | | 371,735 | |
Investment management fee payable | | | 171,461 | |
Accrued expenses | | | 33,708 | |
|
|
Total Liabilities | | | 1,756,584 | |
|
|
Total Net Assets | | $ | 463,503,289 | |
|
|
| NET ASSETS: | | | | |
Par value (Note 3) | | $ | 4,635 | |
Paid-in capital in excess of par value | | | 463,500,081 | |
Overdistributed net investment income | | | (902 | ) |
Accumulated net realized loss on investments | | | (525 | ) |
|
|
Total Net Assets | | $ | 463,503,289 | |
|
|
Shares Outstanding | | | 463,497,765 | |
|
|
Net Asset Value | | | $1.00 | |
|
|
See Notes to Financial Statements.
Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report 7
Statement of Operations (For the six months ended April 30, 2006) (unaudited)
| | | | |
| INVESTMENT INCOME: | | | | |
Interest | | $ | 10,311,987 | |
|
|
| EXPENSES: | | | | |
Investment management fee (Note 2) | | | 1,048,060 | |
Audit and tax | | | 14,356 | |
Directors’ fees | | | 14,215 | |
Custody fees | | | 12,936 | |
Legal fees | | | 10,466 | |
Shareholder reports | | | 7,392 | |
Insurance | | | 6,553 | |
Transfer agent fees (Note 2) | | | 1,367 | |
Miscellaneous expenses | | | 2,223 | |
|
|
Total Expenses | | | 1,117,568 | |
Less: Fee waivers and/or expense reimbursements (Notes 2 and 5) | | | (11,967 | ) |
|
|
Net Expenses | | | 1,105,601 | |
|
|
Net Investment Income | | | 9,206,386 | |
|
|
Increase in Net Assets From Operations | | $ | 9,206,386 | |
|
|
See Notes to Financial Statements.
8 Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report
Statements of Changes in Net Assets
| | | | | | | | |
For the six months ended April 30, 2006 (unaudited) and the year ended October 31, 2005 | | | | | | | | |
| | |
| | | 2006 | | | 2005 | |
| OPERATIONS: | | | | | | | | |
Net investment income | | $ | 9,206,386 | | | $ | 11,832,187 | |
Net realized loss | | | — | | | | (525 | ) |
|
|
Increase in Net Assets From Operations | | | 9,206,386 | | | | 11,831,662 | |
|
|
| DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1): | | | | | | | | |
Net investment income | | | (9,206,386 | ) | | | (11,832,187 | ) |
|
|
Decrease in Net Assets From
Distributions to Shareholders | | | (9,206,386 | ) | | | (11,832,187 | ) |
|
|
| FUND SHARE TRANSACTIONS (NOTE 3): | | | | | | | | |
Net proceeds from sale of shares | | | 43,261,753 | | | | 130,216,637 | |
Reinvestment of distributions | | | 9,691,081 | | | | 11,533,870 | |
Cost of shares repurchased | | | (70,121,165 | ) | | | (172,163,455 | ) |
Net assets of shares issued in connection with merger (Note 4) | | | — | | | | 545,829 | |
|
|
Decrease in Net Assets From Fund Share Transactions | | | (17,168,331 | ) | | | (29,867,119 | ) |
|
|
Decrease in Net Assets | | | (17,168,331 | ) | | | (29,867,644 | ) |
| NET ASSETS: | | | | | | | | |
Beginning of period | | | 480,671,620 | | | | 510,539,264 | |
|
|
End of period* | | $ | 463,503,289 | | | $ | 480,671,620 | |
|
|
* Includes overdistributed net investment income of: | | | $(902 | ) | | | $(902 | ) |
|
|
See Notes to Financial Statements.
Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report 9
Financial Highlights
For a share of capital stock outstanding throughout each year ended October 31, unless otherwise noted:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | 2006(1) | | | 2005 | | | 2004(2) | | | 2003(2) | | | 2002 | | | 2001 | |
Net Asset Value, Beginning of Period | | $ | 1.000 | | | $ | 1.000 | | | $ | 1.000 | | | $ | 1.000 | | | $ | 1.000 | | | $ | 1.000 | |
|
|
Income From Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.020 | | | | 0.024 | | | | 0.007 | | | | 0.007 | | | | 0.014 | | | | 0.044 | |
|
|
Less Distributions From: | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions from net investment income | | | (0.020 | ) | | | (0.024 | ) | | | (0.007 | ) | | | (0.007 | ) | | | (0.014 | ) | | | (0.044 | ) |
|
|
Net Asset Value, End of Period | | $ | 1.000 | | | $ | 1.000 | | | $ | 1.000 | | | $ | 1.000 | | | $ | 1.000 | | | $ | 1.000 | |
|
|
Total Return(3) | | | 1.98 | % | | | 2.44 | % | | | 0.71 | % | | | 0.74 | % | | | 1.40 | % | | | 4.46 | % |
|
|
Net Assets, End of Period (millions) | | | $464 | | | | $481 | | | | $511 | | | | $599 | | | | $733 | | | | $605 | |
|
|
Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Gross expenses | | | 0.48 | %(4) | | | 0.52 | % | | | 0.53 | % | | | 0.53 | % | | | 0.53 | % | | | 0.53 | % |
Net expenses(5) | | | 0.47 | (4)(6) | | | 0.52 | (6) | | | 0.53 | (6) | | | 0.53 | | | | 0.53 | | | | 0.53 | |
Net investment income | | | 3.95 | (4) | | | 2.41 | | | | 0.71 | | | | 0.75 | | | | 1.38 | | | | 4.17 | |
|
|
| (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 have been lower. 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 1.25%. |
| (6) | | The investment manager voluntarily waived a portion of its fees and/or reimbursed expenses. |
See Notes to Financial Statements.
10 Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report
Notes to Financial Statements (unaudited)
| 1. | Organization and Significant Accounting Policies |
Legg Mason Partners Variable Money Market Portfolio (formerly known as Smith Barney Money Market Portfolio) (the “Fund”) is a separate diversified investment fund 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 Fund 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 Fund 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. Money market instruments are valued at amortized cost, in accordance with Rule 2a-7 under the 1940 Act, which approximates market value. This method involves valuing portfolio securities at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. The Fund’s use of amortized cost is subject to their compliance with certain conditions as specified under Rule 2a-7 of the 1940 Act.
(b) 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. 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 Fund’s policy is to generally halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default.
(c) Distributions to Shareholders. Distributions from net investment income on the shares of the Fund are declared each business day to shareholders of record, and are paid monthly. Distributions of net realized gains, if any, are declared at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(d) Federal and Other Taxes. It is the Fund’s 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 Fund intends 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 Fund’s financial statements.
(e) 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.
Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report 11
Notes to Financial Statements (unaudited) (continued)
| 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 Fund’s 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 Fund’s then existing investment management contract to terminate. The Fund’s shareholders 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 in Baltimore, Maryland, is a financial services holding company.
Prior to the Legg Mason deal and continuing under the new Investment Management Agreement effective December 1, 2005, the Fund pays the Manager an investment management fee calculated daily and paid monthly in accordance with the following breakpoint schedule:
| | | |
| |
| Average Daily Net Assets | | Annual Rate | |
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 | |
|
|
During the six months ended April 30, 2006, the Fund had a voluntary expense limitation in place of 1.25%. For the six months ended April 30, 2006, the Manager voluntarily waived a portion of its fees amounting to $11,967. Such waivers and/or expense reimbursements are voluntary and may be reduced or terminated at any time.
The Fund’s Board has approved PFPC Inc. (“PFPC”) to serve as transfer agent for the Fund, 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 Fund’s transfer agent. Also, prior to January 1, 2006, PFPC acted as the Fund’s 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 Fund paid transfer agent fees of $2,099 to CTB.
The Fund’s 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.
12 Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
Certain officers and one Director of the Company are employees of Legg Mason or its affiliates and do not receive compensation from the Company.
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.
Capital stock transactions were as follows:
| | | | | | |
| | |
| | | Six Months Ended
April 30, 2006 | | | Year Ended
October 31, 2005 | |
Shares sold | | 43,261,753 | | | 130,209,587 | |
Shares issued on reinvestment | | 9,691,081 | | | 11,533,870 | |
Shares repurchased | | (70,121,165 | ) | | (172,163,455 | ) |
Shares issued in connection with merger (Note 4) | | — | | | 547,329 | |
|
|
Net Decrease | | (17,168,331 | ) | | (29,872,669 | ) |
|
|
On July 8, 2005, the Fund acquired the assets and certain liabilities of the GSS Salomon Brothers Variable Money Market Fund pursuant to a plan of reorganization approved by GSS Salomon Brothers Variable Money Market Fund shareholders on July 1, 2005. Total shares issued by the Fund, the total net assets of the GSS Salomon Brothers Variable Money Market Fund and the total net assets of the Fund on the date of the transfer were as follows:
| | | | | | | | |
| | | |
| Acquired Fund | | Shares Issued
by the Fund | | Total Net Assets of the
GSS Salomon Brothers
Variable Money Market Fund | | Total Net Assets
of the Fund |
GSS Salomon Brothers Variable Money Market Fund | | 547,329 | | $ | 545,829 | | $ | 490,581,343 |
|
Total net assets of the Fund immediately after the transfer were $491,127,172. The transaction was structured to qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as amended.
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
Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report 13
Notes to Financial Statements (unaudited) (continued)
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 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 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.
14 Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
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 5. 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, 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 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, 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 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 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 posi - -
Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report 15
Notes to Financial Statements (unaudited) (continued)
tion 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.
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.
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.
16 Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report
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.1 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
| | | | | | | | |
| Item Voted On | | Votes For | | Votes Against | | Abstentions | | Broker Non-Votes |
New Management Agreement | | 463,703,917.470 | | 6,281,666.020 | | 10,455,325.840 | | 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. Heilbron | | 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 Fund is a series. |
Legg Mason Partners Variable Money Market Portfolio 2006 Semi-Annual Report 17
Legg Mason Partners Variable
Money Market Portfolio
| | |
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 Martin R. Hanley 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, Connecticut 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 Legg Mason Partners Variable Money Market 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.
www.leggmason.com/InvestorsServices
©2006 Legg Mason Investor Services, LLC
Member NASD, SIPC
Legg Mason Partners Variable Money Market Portfolio
The Fund is a separate investment fund 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 Fund files its 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 Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s 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 Fund, shareholders can call 1-800-451-2010.
Information on how the Fund 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 Fund uses to determine how to vote proxies relating to portfolio transactions is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the Fund’s website at www.leggmason.com/InvestorsServices 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 Fund’s former Travelers Series Fund Inc.—Smith Barney Money Market Portfolio name.
Not Applicable.
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Not Applicable.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Not applicable.
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
| ITEM 6. | SCHEDULE OF INVESTMENTS. |
Included herein under Item 1.
| ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
| ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
Not applicable.
| ITEM 11. | CONTROLS AND PROCEDURES. |
(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.
(a) Not applicable.
(b) Attached hereto.
| | |
| Exhibit 99.CERT | | Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
| |
| Exhibit 99.906CERT | | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized.
| | |
| Legg Mason Partners Variable Portfolios III, Inc. |
| |
| By: | | /s/ R. Jay Gerken |
| | (R. Jay Gerken) |
| | Chief Executive Officer of |
| | Legg Mason Partners Variable Portfolios III, Inc. |
| |
| Date: | | July 7, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | |
| By: | | /s/ R. Jay Gerken |
| | (R. Jay Gerken) |
| | Chief Executive Officer of |
| | Legg Mason Partners Variable Portfolios III, Inc. |
| |
| Date: | | July 7, 2006 |
| |
| By: | | /s/ James M. Giallanza |
| | (James M. Giallanza) |
| | Chief Financial Officer of |
| | Legg Mason Partners Variable Portfolios III, Inc. |
| |
| Date: | | July 7, 2006 |
