SMITH BARNEY SHEARSON EUROPEAN FUND
Two World Trade Center
New York, New York 10048
______________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on April 29, 1994
______________
To the Shareholders of
Smith Barney Shearson European Fund:
Notice is hereby given that a Special Meeting of Shareholders of Smith
Barney Shearson European Fund (the "Fund"), a series of Smith Barney Shearson
Investment Funds Inc. (the "Company"), a Maryland corporation, will be held at
the offices of the Fund, Two World Trade Center, 100th floor, New York, New
York 10048, at 3:30 p.m., on April 29, 1994, for the following purposes:
1. To approve or disapprove a new investment advisory agreement between the
Fund and Smith, Barney Advisers, Inc. ("SBA"), containing substantially the
same terms and conditions as the Fund's current investment advisory agreement
(Proposal 1).
2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
The Directors of the Company have fixed the close of business on
March 22,
1994 as the record date for the determination of shareholders of
the Fund entitled to notice of and to vote at the Special Meeting.
By Order of the Board of Directors
Francis J. McNamara, III
Secretary
March 23, 1994
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE REQUESTED TO
COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. INSTRUCTIONS
FOR THE PROPER EXECUTION OF THE PROXY CARD ARE SET FORTH ON THE INSIDE COVER
OF THIS NOTICE. IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you in order that the Fund may avoid the time and expense involved in
validating your vote if you fail to sign your proxy card(s) properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card(s).
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
proxy card(s).
3. All Other Accounts: The capacity of the individual signing the proxy
card(s) 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
SMITH BARNEY SHEARSON EUROPEAN FUND
Two World Trade Center
New York, New York 10048
______________________
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on April 29, 1994
______________________
PROXY STATEMENT
This Proxy Statement is being furnished in
connection with the solicitation of proxies by the
Board of Directors (the "Board") of Smith Barney
Shearson European Fund (the "Fund"), a series of Smith
Barney Shearson Investment Funds Inc. (the "Company"),
for use at a Special Meeting of Shareholders of the
Fund to be held at
3:30
p.m. on April 29,
1994, at the offices of the Fund, Two World Trade
Center, 100th floor, New York, New York 10048, and at
any adjournments thereof (collectively, the "Special
Meeting"). A Notice of Special Meeting of
Shareholders and a proxy card accompany this Proxy
Statement. Proxy solicitations will be made primarily
by mail, but proxy solicitations may also be made by
telephone, telegraph or personal interviews conducted
by: officers and employees of the Fund; Smith Barney
Shearson Inc. ("Smith Barney Shearson"), the
distributor of the shares of the Fund; The Shareholder
Services Group, Inc. ("TSSG"), a subsidiary of First
Data Corporation, the transfer agent of the Fund;
and/or The Boston Company Advisors, Inc. ("Boston
Advisors"), the administrator of the Fund. The costs
of proxy solicitation and expenses incurred in
connection with the preparation of this Proxy
Statement and its enclosures will be paid by Smith
Barney Shearson. Smith Barney Shearson will also
reimburse brokerage firms and others for their
expenses in forwarding solicitation material to the
beneficial owners of Fund shares.
The Fund currently issues three classes of
shares, but for purposes of the matters to be
considered at the Special Meeting, all shares will be
voted as a single class. Each share is entitled to
one vote and any fractional share is entitled to a
fractional vote. If the enclosed proxy is properly
executed and returned in time to be voted at the
Special Meeting, the shares of common stock ("Shares")
represented by the proxy will be voted in accordance
with the instructions marked thereon. Unless
instructions to the contrary are marked on the proxy,
it will be voted FOR the matters listed in the
accompanying Notice of Special Meeting of
Shareholders. Any shareholder who has given a proxy
has the right to revoke it at any time prior to its
exercise either by attending the Special Meeting and
voting his or her shares in person, or by submitting a
letter of revocation or later-dated proxy to the Fund
at the above address prior to the date of the Special
Meeting. For purposes of determining the presence of
a quorum for transacting business at the Special
Meeting, abstentions and broker "non-votes" (i.e.,
proxies from brokers or nominees indicating that such
persons have not received instructions from the
beneficial owner or other persons entitled to vote
shares on a particular matter with respect to which
the brokers or nominees do not have discretionary
power) will be treated as shares that are present but
which have not been voted. For this reason,
abstentions and broker "non-votes" will have the
effect of a "no" vote for purposes of obtaining the
requisite approval of the proposal.
In the event that a quorum is not present at the
Special Meeting, or in the event that a quorum is
present but sufficient votes to approve any of the
proposals are not received, the persons named as
proxies on the enclosed proxy card may propose one or
more adjournments of the Special Meeting to permit
further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of
those shares represented at the Special Meeting in
person or by proxy. If a quorum is present, the
persons named as proxies will vote those proxies which
they are entitled to vote FOR any such proposal in
favor of such an adjournment and will vote those
proxies required to be voted AGAINST any such proposal
against any such adjournment. A shareholder vote may
be taken on one or more of the proposals in this Proxy
Statement prior to any such adjournment if sufficient
votes have been received for approval. A quorum of
shareholders is constituted by the presence in person
or by proxy of the holders of a majority of the
outstanding shares of the Fund entitled to vote at the
Special Meeting.
The Board has fixed the close of business on
March 22, 1994 as the record date (the "Record Date")
for the determination of shareholders of the Fund
entitled to notice of and to vote at the Special
Meeting. At the close of business on the Record Date,
there were 2,864,831.342 shares of common stock of the
Fund outstanding. As of the Record Date, to the
knowledge of the Fund and its Board, no single
shareholder or "group" (as that term is used in
Section 13(d) of the Securities Exchange Act of 1934),
beneficially owned more than 5% of the outstanding
shares of the Fund. As of the Record Date, the
officers and Board Members of the Fund beneficially
owned less than 1% of the shares of the Fund. As of
March 22, 1994, no shares of SBA or its ultimate
parent corporation, The Travelers Inc. ("Travelers"),
were held by Board Members.
In order that your Shares may be represented at the
Special Meeting, you are requested to:
- - indicate your instructions on the enclosed proxy
card;
- - date and sign the proxy card;
- - mail the proxy card promptly in the enclosed
envelope, which requires no postage if mailed in the
United States; and
- - allow sufficient time for the proxy card to be
received on or before
3:30 p.m.
, April 29,
1994.
As a corporation formed under the laws of the
State of Maryland, the Fund is not required to hold
annual shareholder meetings but may hold special
meetings as required or deemed desirable. As
indicated above, the Special Meeting is being called
to consider a new investment advisory contract for the
Fund.
The Board recommends an affirmative vote on
Proposal One.
PROPOSAL 1 TO APPROVE OR DISAPPROVE A NEW INVESTMENT
ADVISORY AGREEMENT BETWEEN SMITH, BARNEY ADVISERS,
INC. AND THE FUND, CONTAINING SUBSTANTIALLY THE SAME
TERMS AND CONDITIONS AS THE FUND'S CURRENT INVESTMENT
ADVISORY AGREEMENT.
SUMMARY OF PROPOSAL
For the reasons discussed below and based on an
analysis of the factors described below, the Directors
of the Fund have determined to enter into a new
investment advisory agreement (the "New Agreement")
between the Fund and SBA, a subsidiary of Smith Barney
Inc., which is in turn a wholly owned subsidiary of
Travelers.
Travelers is located at 65 East 55th
Street, New York, NY. The Fund currently is advised
by Lehman Brothers Global Asset Management Limited
("LBGAM") under an agreement (the "Current Agreement")
that will terminate on April 8, 1994, pursuant to
notice duly given by the Board. The New Agreement
contains substantially the same terms and conditions,
including the same advisory fee, as provided in the
Current Agreement. The New Agreement will commence on
April 8, 1994, and if approved by shareholders, will
continue initially for a two-year period and will
continue automatically for successive annual periods
thereafter, provided such continuance is approved at
least annually by (i) a majority of the Board who are
not interested persons of the Fund (as that term is
used in the Investment Company Act of 1940, as amended
(the "1940 Act")) and a majority of the full Board of
Directors or (ii) a majority of the outstanding voting
securities of the Fund, as defined in the 1940 Act.
THE CURRENT ADVISER
The Fund is presently advised by LBGAM, an
adviser registered under the Investment Advisers Act
of 1940, as amended (the "Advisers Act"). LBGAM is
located at Two Broadgate, London, EC2M7HA, United
Kingdom. LBGAM renders investment advice to
institutional clients (including other investment
companies) with total assets under management, as of
January 31, 1994, in excess of $8.1 billion. The
Current Agreement dated November 29, 1988 was last
approved by shareholders on November 22, 1988. During
the fiscal year ended December 31, 1993, the Fund paid
LBGAM $195,586 in investment advisory fees.
THE PROPOSED ADVISER
SBA was established in 1968 and is a part of
Smith Barney Shearson Capital Management, which has
been in the investment advisory business for 48 years.
SBA and its wholly-owned subsidiaries render
investment management advice to investment companies
and institutional clients with aggregate assets under
management as of February 28, 1994 in excess of $9.1
billion. The names of the investment companies for
which SBA provides services, the amounts of their net
assets as of March 1, 1993 and the annual rate of
SBA's fees for its services to those companies are set
forth on Exhibit A to the Proxy Statement. An audited
balance sheet of SBA as of December 31, 1992 (the
"Balance Sheet Date") is set forth as Exhibit B to
this Proxy Statement. In addition, an unaudited
balance sheet of SBA as of December 31, 1993 is set
forth as Exhibit C to this Proxy Statement. SBA has
represented that since December 31, 1992, there has
been no material adverse change in its financial
condition.
The name, position with SBA and principal
occupation of each executive officer and director of
SBA are set forth in the following table. The
business address of SBA and each officer and director
is 1345 Avenue of the Americas, New York, New York
10105.
Name
Position with SBA
Principal
Occupation
Stephen J.
Treadway
Director;
President, Chief
Executive Officer
Executive Vice
President and
Director of Smith
Barney
Lewis E.
Daidone
Director; Senior
Vice President
Managing Director
of Smith Barney
Michael J. Day
Treasurer
Director and
Executive Vice
President of
Smith Barney
George A. Saks
Director
Executive Vice
President,
Secretary and
General Counsel
of Smith Barney
Bruce D.
Sargent
Director
Director and
Executive Vice
President of
Smith Barney
Christina T.
Sydor
Secretary
Managing Director
of Smith Barney
EVALUATION BY THE BOARD AND REASONS FOR THE PROPOSAL
On February 8, 1994, the Directors of the Fund
met in person at a meeting called for the purpose of
considering, among other things, the New Agreement
with SBA. The Board reviewed various materials
furnished by Smith Barney Shearson and SBA and
information regarding LBGAM. The materials described,
among other matters, SBA and its affiliates, senior
personnel, portfolio managers, analysts, economists
and others, its method of operation, investment
philosophy, performance record and financial
condition. The Board also considered the past
investment performance of LBGAM in managing the Fund
and of SBA in managing portfolios of international
equity securities. A representative of SBA met with
the Board, discussed the materials and responded to
questions.
The Board of Directors of the Fund determined to
terminate the Current Agreement with LBGAM and to
enter into the New Agreement. In so doing, a variety
of factors were evaluated. The Directors determined
that management of the Fund could be enhanced by a
closer relationship between the Fund's officers,
distributor and the Fund's investment adviser. The
Board considered the fact that if the Fund entered
into the New Agreement with SBA, the Fund would, like
other funds in the Company, be advised and distributed
by Smith Barney Shearson and its affiliates.
Accordingly, the Fund's investment advisory function
could be integrated with its marketing and
distribution functions and handled centrally and more
efficiently. It was noted that LBGAM and its
affiliates are currently advising and sponsoring
series of mutual funds that are being offered, and
will continue to be offered, to retail and other
investors through its own distribution network. The
availability of these LBGAM-advised funds could be
confusing to investors in the Fund and other mutual
funds sponsored by Smith Barney Shearson.
After evaluating the foregoing materials and
factors, the Directors of the Fund, including the
Directors who are not interested persons of the Fund,
as such term is defined in the 1940 Act, approve the
New Agreement with SBA containing terms and conditions
substantially identical to those in the Current
Agreement. THE DIRECTORS UNANIMOUSLY RECOMMENDED THAT
SHAREHOLDERS VOTE FOR THE NEW AGREEMENT.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the
Fund are made by the Fund's investment adviser subject
to the overall review of the Board. Although
investment decisions for the Fund are made
independently from those of the other accounts managed
by the adviser, investments of the type the Fund may
make also may be made by those other accounts. When
the Fund and one or more other accounts managed by the
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 the Fund or the
size of the position obtained or disposed of by the
Fund.
Transactions on U.S. stock exchanges and many
foreign stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges where
commissions are negotiated, the cost of transactions
may vary among different brokers. No stated
commission is generally applicable to securities
traded in U.S. 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 repurchased from and sold to dealers
include a dealer's mark-up or mark-down.
In selecting brokers or dealers to execute
portfolio transactions on behalf of the Fund, the
adviser seeks the best overall terms available. In
assessing the best overall terms available for any
transaction, the adviser will consider the factors it
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, the adviser is authorized, 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 and Exchange Act of 1934) provided
to the Fund and/or other accounts over which the
adviser or its affiliates exercises investment
discretion. The fees under the Fund's investment
advisory agreement are not reduced by reason of the
Fund's or the adviser's receiving brokerage and
research services. Research and investment services
are those which brokerage houses customarily provide
to institutional investors and include statistical and
economic data and research reports on particular
issues and industries. These services are used by the
adviser in connection with all of its investment
activities, and some of the services obtained in
connecting with the execution of transactions for the
Fund may be used in managing other investment
accounts. Conversely, brokers furnishing these
services may be selected for the execution of
transactions for these other accounts, whose aggregate
assets may exceed those of the Fund, and the services
furnished by the brokers may be used by the adviser in
providing investment management for the Fund. The
Board of Directors periodically will review the
commissions paid by the Fund to determine if the
commissions paid over representative periods of time
were reasonable in relation to the benefits inuring to
the Fund. Over-the-counter purchases and sales by the
Fund are transacted directly with principal market
makers except in those cases in which better prices
and executions may be obtained elsewhere.
To the extent consistent with applicable
provisions of the 1940 Act and the rules and
exemptions adopted by the Securities and Exchange
Commission (the "SEC") under the 1940 Act, subject to
the approval of the Board, transactions for the Fund
may be executed through Smith Barney Shearson and
other affiliated broker-dealers if, in the judgment of
SBA, the use of an affiliated broker-dealer is likely
to result in price and execution at least as favorable
as those of other qualified broker-dealers. Under
rules adopted by the SEC, Smith Barney Shearson may
not directly execute transactions for the Fund on the
floor of any national securities exchange unless (i)
the Board of Directors has expressly authorized Smith
Barney Shearson to effect such transactions; and (ii)
Smith Barney Shearson annually advises the Fund of the
aggregate compensation it earned on such transactions.
The Fund will not purchase any security,
including U.S. government securities, during the
existence of any underwriting or selling group
relating to the security of which Smith Barney
Shearson is a member, except to the extent permitted
by the SEC.
During the fiscal year ended December 31, 1993,
the Fund paid $100,366 in brokerage commissions, of
which $9,401 (representing 9.37% of the total of all
brokerage commissions paid) was paid to Smith Barney
Shearson (or its predecessor, Shearson Lehman Brothers
Inc.). Such commissions were paid with respect to
10.56% of the total dollar value of all transactions
involving the payment of brokerage commissions
effected during the year.
THE PROPOSED AGREEMENT
A copy of the form of New Agreement is set forth
as Exhibit D to this Proxy Statement. Under its
terms, SBA, subject to the supervision and approval of
the Fund's Board of Directors would manage the Fund's
investments in accordance with the investment
objectives and policies stated in the Fund's
Prospectus and Statement of Additional Information.
As adviser, SBA would be responsible for making
investment decisions, supplying investment research
and portfolio management services and placing orders
to purchase and sell securities on behalf of the Fund.
SBA would receive a fee that is computed daily and
paid monthly at the annual rate of 0.70% of the value
of the Fund's average daily net assets which is
identical to the fee provided in the Current
Agreement. With the exception of the identity of the
investment adviser and the commencement and
termination dates, the provisions of the New Agreement
and the Current Agreement are virtually identical.
Under the terms of the New Agreement, SBA would
bear all expenses in connection with its performance.
Other expenses incurred in the operation of the Fund
will continue to be borne by the Fund, including:
taxes, interest, brokerage fees and commissions, if
any; distribution and shareholder service fees; fees
of the Directors who are not officers, directors,
shareholders or employees of Smith Barney Shearson, or
any of its affiliates; fees of the SEC and state blue
sky qualification fees; charges of custodian and
transfer and dividend disbursing agents; certain
insurance premiums; outside auditing and legal
expenses; cost of investor services (including
allocable telephone and personnel expenses); costs of
preparation and printing of prospectuses and
statements of additional information for regulatory
purposes and for distribution to shareholders; costs
of preparation and printing of shareholders' reports;
costs incurred in connection with meetings of the
shareholders of the Fund and of the officers of the
Fund or Board and any extraordinary expenses.
If in any fiscal year the aggregate expenses of
the Fund (including fees pursuant to the New Agreement
and the Fund's administration agreement, but excluding
distribution and shareholder service fees, interest,
taxes, brokerage and, if permitted by state securities
commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction
over the Fund, SBA will reduce its advisory fee to the
Fund for the excess expense to the extent required by
state law in the same proportion as its advisory fee
bears to the Fund's aggregate fees for investment
advice and administration. This expense
reimbursement, if any, will be estimated, reconciled
and paid on a monthly basis.
The New Agreement provides that in the absence
of willful misfeasance, bad faith, gross negligence or
reckless disregard for its obligations thereunder, SBA
shall not be liable for any act or omission in the
course of or in connection with the rendering of its
services thereunder.
REQUIRED VOTE
Approval of the New Agreement requires the
affirmative vote of a "majority of the outstanding
voting securities" of the Fund. The term "majority of
the outstanding voting securities" of the Fund, as
defined in the 1940 Act, means the affirmative vote of
the lesser of: (1) 67% of the voting securities of the
Fund present at the Special Meeting if more than 50%
of the outstanding Shares are present in person or by
proxy at the Special Meeting; or (2) more than 50% of
the outstanding voting securities of the Fund.
If the New Agreement is not approved by the
shareholders of the Fund, SBA will serve as investment
adviser to the Fund for a period of time pending
approval of such agreement or a different investment
advisory agreement or other definitive action by the
shareholders, provided that the compensation received
by SBA during that period is equal to no more than the
amount that would have been received under the Fund's
agreement with LBGAM.
Proxies solicited by the Board at the Special
Meeting will not be voted for approval of the New
Agreement, or any other matter to be voted on by the
shareholders unless: (a) (i) in the judgment of the
Board there has been no material adverse change in the
financial condition of SBA between the Balance Date
Sheet and the most recently completed fiscal quarter,
and (ii) the Fund shall have received a certificate of
the Chairman, President or a Senior Vice President of
SBA, dated the day on which such vote is to be taken,
that, to the knowledge of that officer, since the date
of the most recently completed quarter there has been
no material adverse change in the financial condition
of SBA unless such material adverse change has been
disclosed to shareholders in additional proxy
solicitation materials; or (b) the Fund shall have
mailed to all shareholders of record a certified
balance sheet of SBA and given the shareholders an
opportunity to revoke any proxies previously
furnished.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Fund is not generally required to hold
annual or special meetings of the shareholders.
Shareholders wishing to submit proposals for inclusion
in a proxy statement for a subsequent shareholders'
meeting should send their written proposals to the
Secretary of the Fund, c/o The Boston Company
Advisors, Inc., Exchange Place, Boston, MA 02109.
SHAREHOLDERS' REQUEST FOR SPECIAL MEETING
Shareholders holding at least 10% of the Fund's
outstanding voting securities (as defined in the 1940
Act) may require the calling of a meeting of the
Fund's shareholders for the purpose of voting on the
removal of any Board Member. Meetings of the Fund's
shareholders for any other purpose will also be called
by the Board when requested in writing by shareholders
holding at least 10% of the shares then outstanding
or, if the Board Members shall fail to call or give
notice of any meeting of shareholders for a period of
30 days after such application, shareholders holding
at least 10% of the shares then outstanding may call
and give notice of such meeting.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board does not intend to present any other
business at the Special Meeting other than as
described in this Proxy Statement, nor is the Board
aware that any shareholder intends to do so. If,
however, any other matters are properly brought
before the Special Meeting, the persons named in the
accompanying proxy card will vote thereon in
accordance with their judgment.
March 23, 1994.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING
ARE THEREFORE URGED TO COMPLETE, SIGN, DATE AND RETURN
THE PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
Exhibit A
Names of Investment Companies Serviced by SBA
Fund
Net Assets as
of
12/31/93
Annual Rate of Fee
Expressed as a
Percentage of Average
Daily Net Assets
Smith Barney Equity
Funds, Inc.
$
91,460,000
.60% up to $500 million;
.55% of the next $500
million and .50%
thereafter
Smith Barney Funds,
Inc:
Income and Growth
Portfolio
644,887,
000
.60% up to $500 million;
.55% of the next $500
million and .50%
thereafter
Capital Appreciation
Portfolio
175,817,
000
.90%
Utility Portfolio
120,980,
000
.60% up to $500 million;
.55% of the next $500
million and .50%
thereafter
Short-Term U.S.
Treasury Securities
Portfolio
205,758,
000
.45%
U.S. Government
Securities
Portfolio
502,334,
000
.50% up to $200 million
on the aggregate net
assets of these
portfolios and .40%
thereafter
Monthly Payment
Government Portfolio
58,108,0
00
.50% up to $200 million
on the aggregate net
assets of these
portfolios and .40%
thereafter
Income Return Account
Portfolio
60,279,0
00
.50% up to $200 million
on the aggregate net
assets of these
portfolios and .40%
thereafter
Smith Barney Variable
Account Funds:
Income and Growth
Portfolio
30,637,8
48
.60%
U.S. Government/High
Quality Securities
Portfolio
5,449,53
8
.45%
Reserve Account
Portfolio
2,615,33
2
.45%
Smith Barney World
Funds, Inc.
Global Government Bond
Portfolio
112,758,
000
.75%
International Equity
Portfolio
513,914,
000
.85%
EXHIBIT B
SMITH, BARNEY ADVISERS, INC.
(a wholly-owned subsidiary of Smith Barney Inc.)
BALANCE SHEET
December 31, 1992
Assets
Liabilities and
Stockholder's
Equity
Cash
$ 100,337
Note Payable
$
560,000
Management
fees
receivable
879,694
Due to
affiliate, net
1,732,445
Furniture,
fixtures
and
equipment,
Deferred tax
liability
9,733,607
net of
accumulated
depreciation
and
amortization
38,232
Stockholder's
equity:
Common
shares
$1 par
value
authorized
and
issued,
100 shares
100
Investment
advisory
contracts,
net of
accumulated
amortization
26,176,635
Additional
paid-in
capital
15,169,035
Other assets
289
Retained
earnings
*
15,169,135
$27,195,187
$27,195,187
Notes:
(1) Organization-Smith, Barney Advisers, Inc.
("SBA"), a registered investment adviser, acts
pursuant to management agreements as investment
manager to the following investment companies: Smith
Barney Equity Funds, Inc. ("SBEF"), Smith Barney
Funds, Inc. ("SBF"), Smith Barney Variable Account
Funds ("SBVAF"), Smith Barney World Funds, Inc.
("SBWF"), Worldwide Securities Limited ("WSL") and
Worldwide Special Fund N.V. ("WSF"). SBA provides
each company with personnel, investment advice, office
space and administrative services at fees based on the
net assets of each fund. Fees from SBVAF, which
commenced operations July 1989, were partially waived
through December 31, 1992.
(2) Related Party Transactions-Smith Barney, Harris
Upham & Co. Incorporated ("SBHU"), another subsidiary
of Smith Barney Inc. ("SBI"), provides SBA with
investment information and recommendations, executive
and administrative services (e.g. accounting, legal,
personnel, facilities, mail and other support
services) and order processing support on a basis
mutually agreed upon. Receivables from or payables to
SBHU are non-interest bearing. Substantially all cash
collected by SBA relating to management fees is
remitted to SBI in the form of intercompany dividends.
(3) Income Taxes- In February 1992, the Financial
Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, Accounting for
Income Taxes. Statement 109 requires a change from
the deferred method of accounting for income taxes of
APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and
liability method of Statement 109, deferred tax assets
and liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing
assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are
expected to be recovered or settled.
The Company adopted Statement 109 on January 1, 1992.
The adoption of this Statement resulted in an increase
to the balance of Investment Advisory Contracts and
the establishment of a corresponding Deferred Tax
Liability of $9,733,607.
SBA is included in the consolidated federal, state,
and local tax returns filed by SBI. Income taxes
payable to SBI of approximately $2,303,000 are
included in the net balance of Due to Affiliate at
December 31, 1992.
(4) Investment Advisory Contracts- The balance of
Investment Advisory Contracts represents the
unamortized cost assigned to those contracts in
connection with the acquisition of SBI's parent by
Commercial Credit Group, Inc. in December 1988. The
combined successor firm subsequently changed its name
to Primerica Corporation. In addition, this balance
also includes the cost of the Investment Advisory
Contracts of WSL and WSF which were purchased by SBA
during 1992. The final installment payment of
approximately $500,000 due as a result of this
purchase is payable on December 31, 1996 and is
subject to adjustment contingent upon certain
conditions as set forth in the purchase agreement.
The cost of the Investment Advisory Contracts is being
amortized over thirty years on a straight-line basis.
See Note 3.
(5) Stockholder's Equity- In connection with the
acquisition of SBI by Primerica Corporation on June
19, 1987 and the subsequent acquisition of Primerica
Corporation by Commercial Credit Group, Inc. in
December 1988, SBA was recapitalized and its retained
earnings on both dates were transferred to additional
paid-in capital.
During 1992, the Company paid dividends to SBI which
were in excess of current and accumulated earnings.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Smith, Barney Advisers, Inc.:
We have audited the accompanying balance sheet
of Smith, Barney Advisers, Inc. (a wholly-owned
subsidiary of Smith Banrey Inc.) as of December 31,
1992. This financial statement is the responsibility
of the Company's management. Our responsibility is to
express an opinion on this financial statement based
on our audit.
We conducted our audit in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the audit
to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. An
audit of a balance sheet includes examining, on a test
basis, evidence supporting the amounts and disclosures
in the balance sheet. 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 audit of the
balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to
above presents fairly, in all material respects, the
financial position of Smith, Barney Advisers, Inc . as
of December 31, 1992 in conformity with generally
accepted accounting principles.
As discussed in Note 3 to the balance sheet, the
Company changed its method of accounting for income
taxes in 1992 to adopt the provisions of the Financial
Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, Accounting for Income
Taxes.
KPMG Peat Marwick
New York, New York
March 31, 1993
EXHIBIT C
SMITH, BARNEY ADVISERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
December 31, 1993
(Unaudited)
Assets Liabilities and
Stockholder's Equity
EXHIBIT C
SMITH, BARNEY ADVISERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
December 31, 1993
(Unaudited)
Assets Liabilities and
Stockholder's Equity
Cash
$
537,335
Note payable
$69,749,90
0
Furniture and
fixtures, net
Payable to
Parent
9,511,098
of accumulated
depreciation
Other
liabilities
662,527
and
amortization
24,547
Investment
advisory
contracts,
Stockholder's
equity:
net of
accumulated
amortization
93,578,582
Common
stock
($1 par
Investment in
non-marketables
1,130,748
value)
10
0
Receivable from
affiliates
2,061,284
Additional
paid-in
capital
16,791,3
89
Other assets
3,470,162
Retained
earnings
4,087,64
4
20,879,133
$100,802,6
58
$100,802,6
58
Notes:
(1) Organization - Smith, Barney Advisers, Inc.
("SBA"), a wholly-owned subsidiary of Smith Barney
Shearson Holdings Inc. ("Parent") (formerly Smith
Barney Holdings, Inc.), is a registered investment
adviser and acts pursuant to management agreements as
investment manager to forty investment company
portfolios. SBA provides each company with personnel,
investment advice, office space and administrative
services at fees based on the net assets of each fund.
The consolidated statement of financial
condition includes the accounts of Smith Barney
Shearson Strategy Advisers Inc. ("SBSSA") (a wholly-
owned subsidiary of SBA) and its wholly-owned
subsidiary. Significant intercompany balances have
been eliminated in consolidation.
(2) Shearson Acquisition - On July 31, 1993, Smith
Barney, Harris Upham & Co. Incorporated ("SBHU"),
together with certain of its affiliates (including
SBA) and The Travelers Inc. (formerly Primerica
Corporation), acquired the domestic retail brokerage
and asset management businesses ("Shearson") of
Shearson Lehman Brothers Holdings Inc. and its
subsidiaries, a subsidiary of American Express
Company. Shearson was combined with the operations of
SBHU and its affiliates, and SBHU was renamed Smith
Barney Shearson Inc. ("SBS"). The asset management
businesses acquired by SBA included SBSSA (and its
wholly-owned subsidiary), as well as the contracts to
manage sixteen of Shearson's investment company
management contracts.
(3) Related Party Transactions - SBS provides SBA
with executive and administrative services (e.g.
accounting, legal, personnel, facilities, mail and
other support services) and order processing support
on a basis mutually agreed upon. Receivable from
affiliates are non-interest bearing. In 1993, SBA
transferred a deferred tax liability, resulting from
the adoption of Statement of Financial Accounting
Standard No. 109 on January 1, 1992, to the Parent
pursuant to a tax sharing agreement. The resulting
Payable to Parent is non-interest bearing.
Substantially all cash collected by SBA relating to
management fees is remitted to the Parent in the form
of intercompany dividends.
(4) Income Taxes - Under an income tax allocation
arrangement with the Parent and The Travelers Inc.,
SBA's Federal, state and local income taxes are
provided on a separate return basis without regard to
timing items, and are subject to the utilization of
tax attributes in The Travelers Inc. consolidated
income tax provision. Under a tax sharing agreement,
SBA remits taxes to the Parent.
(5) Investment Advisory Contracts - Investment
advisory contracts include $68,296,775 of value
ascribed to the acquired Shearson investment company
portfolios purchased by SBA (see note 2). The cost of
these contracts is being amortized over twenty years
on a straight-line basis.
In addition, the balance also incudes the amortized
cost assigned to certain investment advisory contracts
in connection with the acquisition of the Parent by
Commercial Credit Group, Inc. in December 1988. The
combined successor firm subsequently changed its name
to Primerica Corporation (now The Travelers Inc.).
The cost of these contracts is being amortized over
thirty years on a straight-line basis.
(6) Note Payable - At December 31, 1993 note payable
represents a demand note payable to Parent at a rate
of LIBOR plus .75%. The note was issued for the
financing of investment advisory contracts purchased
by SBA on July 31, 1993 (see note 2).
EXHIBIT D
INVESTMENT ADVISORY AGREEMENT
SMITH BARNEY SHEARSON INVESTMENT FUNDS INC.
April 8, 1994
Smith, Barney Advisers, Inc.
388 Greenwich Street
New York, NY 10013
Dear Sirs:
Smith Barney Shearson Investment Funds Inc. (the
"Company"), a corporation organized under the laws of
Maryland, confirms its agreement with Smith, Barney
Advisers Inc. (the "Adviser"), on behalf of the Smith
Barney Shearson European Fund (the "Fund"), as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of
the Portfolio by investing and reinvesting in investments
of the kind and in accordance with the investment
objective, policies and limitations of such Fund as
specified in the Company's Articles of Incorporation, as
amended from time to time (the "Charter Document"), in the
prospectus (the "Prospectus") and the statement of
additional information (the "Statement") filed with the
Securities and Exchange Commission as part of the
Company's Registration Statement on Form N-1A, as amended
from time to time, and in the manner and to the extent as
may from time to time be approved by the Board of
Directors of the Company ("Board"). Copies of the
Prospectus, the Statement and the Charter Document have
been or will be submitted to the Adviser. The Company
agrees to provide copies of all amendments to the
Prospectus, the Statement and the Charter Document to the
Adviser on an on-going basis. The Company desires to
employ and hereby appoints the Adviser to act as the
investment adviser to the Fund. The Adviser accepts the
appointment and agrees to furnish the services for the
compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision, direction and
approval of the Board of the Company, the Adviser will (a)
manage the Company's holdings in accordance with the
Fund's investment objective and policies as stated in the
Charter Document, the Prospectus and the Statement; (b)
make investment decisions for the Fund; (c) place purchase
and sale orders for the Fund; (d) employ professional Fund
managers and securities analysts who provide research
services to the Fund. In providing those services, the
Adviser will conduct a continual program of investment,
evaluation and, if
appropriate, sale and reinvestment of the Fund's assets.
In addition, the Adviser will furnish the Fund with
whatever statistical information the Fund may reasonably
request with respect to the securities that the Fund may
hold or contemplate purchasing.
3. Brokerage
In selecting brokers or dealers to execute
transactions on behalf of the Fund, the Adviser will seek
the best overall terms available. In assessing the best
overall terms available for any transaction, the Adviser
will consider factors it deems relevant, including, but
not limited to, the breadth of the market in the security,
the price of the security, the financial condition and
execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting
brokers or dealers to execute a particular transaction,
the Adviser is authorized to consider the brokerage and
research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934), provided to
the Fund and/or other accounts over which the Adviser or
its affiliates exercise investment discretion.
4. Information Provided to the Company
The Adviser will keep the Company informed of
developments materially affecting the Fund's holdings, and
will, on its own initiative, furnish the Company from time
to time with whatever information the Adviser believes is
appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment
in rendering the services listed in paragraphs 2 above.
The Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement
relates, provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Adviser
against any liability to the Company or to its
shareholders to which the Adviser would otherwise be
subject by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its
duties or by reason of the Adviser's reckless disregard of
its obligations and duties under this Agreement.
6. Compensation
In consideration of the services rendered
pursuant to this Agreement, the Company will pay the
Adviser on the first business day of each month a fee for
the previous month at the annual rate of 0.70% of the
Fund's average daily net assets. The fee for the period
from the Effective Date (defined below) of the Agreement
to the end of the month during which the Effective Date
occurs shall be prorated according to the proportion that
such period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month,
the fee for such part of that month shall be prorated
according to the proportion that such period bears to the
full
monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of
determining fees payable to the Adviser, the value of the
Fund's net assets shall be computed at the times and in
the manner specified in the Prospectus and/or the
Statement.
7. Expenses
The Adviser will bear all expenses in
connection with the performance of its services under this
Agreement. The Fund will bear certain other expenses to
be incurred in its operation, including, but not limited
to, investment advisory and administration fees; fees for
necessary professional and brokerage services; fees for
any pricing service; the costs of regulatory compliance;
and costs associated with maintaining the Company's legal
existence and shareholder relations.
8. Reduction of Fees or Reimbursement to the Fund
If in any fiscal year the aggregate expenses
of the Fund (including fees pursuant to this Agreement and
the Company's administration agreement, but excluding
interest, taxes, brokerage and extraordinary expenses)
exceed the expense limitation of any state having
jurisdiction over the Fund, the Adviser will reduce its
fees or reimburse the Fund for such excess expense in the
same proportion as its advisory fee bears to the Fund's
combined fees for investment advice and administration. A
fee reduction pursuant to this paragraph 8, if any, will
be estimated, reconciled and, in case of reimbursement,
paid on a monthly basis.
9. Services to Other Companies or Accounts
The Fund understands that the Adviser now
acts, will continue to act and may act in the future as
investment adviser to fiduciary and other managed
accounts, and as investment adviser to other investment
companies. The Fund has no objection to the Adviser's so
acting, provided that whenever the Fund and one or more
other investment companies or Funds advised by the Adviser
have available funds for investment, investments suitable
and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company or
Fund. The Fund recognizes that in some cases this
procedure may adversely affect the size of the position
obtainable for the Fund. In addition, the Fund
understands that the persons employed by the Adviser to
assist in the performance of the Adviser's duties under
this Agreement will not devote their full time to such
service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Adviser or
any affiliate of the Adviser to engage in and devote time
and attention to other businesses or to render services of
whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of
April 8, 1994 and shall continue for an initial two-year
term and shall continue thereafter so long as such
continuance is specifically approved at least annually by
(i) the Board of the Company
or (ii) a vote of a "majority" (as that term is defined in
the Investment Company Act of 1940, as amended (the "1940
Act")) of the Fund's outstanding voting securities,
provided that in either event the continuance is also
approved by a majority of the Board who are not
"interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval.
This Agreement is terminable, without penalty, on 60 days'
written notice by the Board of Directors of the Company or
by vote of holders of a majority of the Fund's shares, or
upon 90 days' written notice, by the Adviser. This
Agreement will also terminate automatically in the event
of its assignment (as defined in the 1940 Act and the
rules thereunder).
If the foregoing is in accordance with your
understanding, kindly indicate your acceptance of this
Agreement by signing and returning the enclosed copy of
this Agreement.
Very truly yours,
SMITH BARNEY SHEARSON INVESTMENT FUNDS INC.
By: ___________________________
Name: Heath B. McLendon
Title: Chairman
Agreed and Accepted:
SMITH, BARNEY ADVISERS, INC.
By: __________________________
Name:
Title:
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
SMITH BARNEY SHEARSON EUROPEAN FUND PROXY SOLICITED
BY THE BOARD OF TRUSTEES
The undersigned holder of shares of Smith Barney
Shearson European Fund ("the Fund"), a series of
Smith Barney Shearson Investment Inc. a Maryland
corporation, hereby appoints Heath B. McLendon,
Richard P. Roelofs, and Francis J. McNamara, III
attorney and proxies for the undersigned with full
powers of substitution and revocation, to represent
the undersigned and to vote on behalf of the
undersigned all shares of the Fund that the
undersigned is entitled to vote at the Special
Meeting of Shareholders of the Fund to be held at
the offices of the Fund, Two World Trade Center, New
York, New York, on April 29, 1994 at 3:30 p.m. and
any adjournment or adjournments thereof. The
undersigned hereby acknowledges receipt of the
Notice of Special Meeting and Proxy Statement dated
[March 23, 1994] and hereby instructs said attorney
and proxies to vote said shares as indicated hereon.
In their discretion, the proxies are authorized to
vote upon such other business as may properly come
before the Special Meeting. A majority of the
proxies present and acting at the Special Meeting in
person or by substitute (or, if only one shall be so
present, then that one,) shall have an may exercise
all the power and authority of said proxies
hereunder. The undersigned hereby revokes and proxy
previously given.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
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.
DATE: _________________________________________
_________________________________________
_________________________________________
Signature(s) (Title(s), if applicable
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Please indicate your vote by an FOR AGAINST
ABSTAIN
"X" in the appropriate box below.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 THE PROPOSAL. Please refer to the
Prospectus/Proxy Statement for a discussion of the
Proposal.
1. To approve or disapprove a new investment advisory
agreement between the Fund and Smith, Barney Advisers,
Inc. ("SBA"), containing substantially the same terms and
conditions as the Fund's current investment advisory
agreement.
- -2-
- -9-
A-1
B-3
C-3
shared/global/sliv/proxy/prxycrd2
