As filed with the Securities and Exchange Commission
on June 27, 1995
- ------------------------------
Registration No. 2-74288
811-3275
- --------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [X] Post-Effective
Amendment No. 40
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940, as amended
Amendment No. 42 [X]
SMITH BARNEY INVESTMENT FUNDS INC.
(Exact name of Registrant as Specified in Charter)
Area Code and Telephone Number: (212) 723-9218
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
Christina T. Sydor
Secretary
388 Greenwich Street New York, New York 10013
(Name and Address of Agent for Service)
copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing become effective:
Immediately upon filing pursuant to Rule 485(b)
on July 3, 1995 pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
on -------------- pursuant to Rule 485(a)
The Registrant has previously filed a declaration of indefinite
registration of its shares pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant's Rule 24f-2 Notice for
the
fiscal year ended December 31, 1994 was filed on February 28, 1995.
<PAGE>
SMITH BARNEY INVESTMENT FUNDS INC.
CONTENTS OF
REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits<PAGE>
SMITH BARNEY INVESTMENT FUNDS INC.
FORM N-1A CROSS REFERENCE SHEET
Pursuant to Rule 495(a) Under the Securities Act of 1933, as amended
Part A Item No. and Caption
Prospectus Caption
1. Cover Page
Cover Page
2. Synopsis
Prospectus Summary
3. Condensed Financial
Financial Highlights
Information
4. General Description of
Cover Page; Prospectus Summary;
Registrant
Investment Objective and Man-
agement Policies; Additional
Information
5. Management of the Fund
Management of the Fund;
Distributor; Additional
Information; Annual Report
6. Capital Stock and Other
Investment Objective and
Securities
Management Policies; Dividends,
Distributions and Taxes;
Additional Information
7. Purchase of Securities Being
Valuation of Shares; Purchase of
Offered
Shares; Exchange Privilege;
Redemption of Shares; Minimum
Account Size; Distributor;
Additional Information
8. Redemption or Repurchase
Redemption of Shares;
Exchange Privilege
9. Pending Legal Proceedings
Not Applicable
<PAGE>
Statement of
Part B Item No.
Additional Information Caption
10. Cover Page
Cover page
11. Table of Contents
Contents
12. General Information and
Distributor; Additional
History
Information
13. Investment Objectives and
Investment Objective and
Policies
Management Policies
14. Management of the Fund
Management of the Company;
Distributor
15. Control Persons and Principal
Management of the Company
Holders of Securities
16. Investment Advisory and Other
Management of the Company;
Services
Distributor
17. Brokerage Allocation and
Investment Objective and
Other Services
Management Policies; Distributor
18. Capital Stock and Other
Investment Objective and
Securities
Management Policies; Purchase
of
Shares; Redemption of Shares;
Taxes
19. Purchase, Redemption and
Purchase of Shares; Redemption
Pricing of Securities Being of
Shares; Valuation of Shares;
Offered
Distributor; Exchange Privilege
20. Tax Status
Taxes
21. Underwriters
Distributor
22. Calculation of Performance
Performance Data
Data
23. Financial Statements
Financial Statements
<PAGE>
<PAGE>
SMITH BARNEY INVESTMENT FUNDS INC.
Investment Grade Bond Fund
PROSPECTUS JULY 3, 1995
3100 Breckenridge Blvd., Bldg. 200
Duluth, Georgia 30199-0062
(800) 544-5445
Smith Barney Investment Grade Bond Fund (the "Fund") has an
investment objec-
tive of high current income consistent with prudent investment
management and
preservation of capital by investing in bonds and other income-producing
secu-
rities.
The Fund is one of a number of funds, each having distinct investment
objectives and policies, making up Smith Barney Investment Funds Inc.
(the
"Company"). The Company is an open-end management investment
company commonly
referred to as a mutual fund.
This Prospectus sets forth concisely certain information about the
Company
and the Fund, including sales charges, distribution and service fees and
expenses, that prospective investors will find helpful in making an
investment
decision. Investors are encouraged to read this Prospectus carefully and
to
retain it for future reference.
Additional information about the Fund and the Company is contained
in a
Statement of Additional Information dated [May 1], 1995, as amended
or supple-
mented from time to time, that is available upon request and without
charge by
calling or writing the Company at the telephone number or address set
forth
above or by contacting an Investments Representative of PFS Investments
Inc.
("PFS Investments"). The Statement of Additional Information has been
filed
with the Securities and Exchange Commission (the "SEC") and is
incorporated by
reference into this Prospectus in its entirety.
PFS DISTRIBUTORS
Distributor
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
- -------------------------------------------------
FINANCIAL HIGHLIGHTS 9
- -------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 14
- -------------------------------------------------
VALUATION OF SHARES 18
- -------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 19
- -------------------------------------------------
PURCHASE OF SHARES 21
- -------------------------------------------------
EXCHANGE PRIVILEGE 27
- -------------------------------------------------
REDEMPTION OF SHARES 29
- -------------------------------------------------
MINIMUM ACCOUNT SIZE 31
- -------------------------------------------------
PERFORMANCE 31
- -------------------------------------------------
MANAGEMENT OF THE FUND 33
- -------------------------------------------------
DISTRIBUTOR 34
- -------------------------------------------------
ADDITIONAL INFORMATION 36
- -------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained
in
this Prospectus and, if given or made, such other information or
representations must not be relied upon as having been authorized by the
Fund
or the distributor. This Prospectus does not constitute an offer by the
Fund or
the distributor to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in any such jurisdiction.
- --------------------------------------------------------------------------------
2
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed
information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the
Prospec-
tus. See the "Table of Contents".
INVESTMENT OBJECTIVE. The Fund is an open-end, diversified
management
investment company that seeks to provide as high a level of current
income as
is consistent with prudent investment management and preservation of
capital.
Under normal circumstances, the Fund will invest at least 65% of its
assets in
bonds. See "Investment Objective and Management Policies".
ALTERNATIVE PURCHASE ARRANGEMENTS. The Fund offers two
classes of shares
("Classes") to investors purchasing through PFS Investments
Representatives
designed to provide them with the flexibility of selecting an investment
best
suited to their needs--the two Classes of shares available are: Class A
shares
and Class B shares. See "Purchase of Shares" and "Redemption of
Shares". In
addition to Class A and Class B shares, the Fund offers Class C and
Class Y
shares to investors purchasing through Smith Barney Inc. ("Smith
Barney"), a
distributor of the Fund. Those shares have different sales charges and
other
expenses than Class A and Class B shares which may affect performance.
Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.50% and are subject to an annual service fee of
0.25%
of the average daily net assets of the Class. The initial sales charge may
be
reduced or waived for certain purchases. Purchases of Class A shares,
which
when combined with current holdings of Class A shares offered with a
sales
charge equal or exceed $500,000 in the aggregate, will be made at net
asset
value with no initial sales charge, but will be subject to a contingent
deferred sales charge ("CDSC") of 1.00% on redemptions made within
12 months of
purchase. See "Prospectus Summary--Reduced or No Initial Sales
Charge".
Class B Shares. Class B shares are offered at net asset value subject to
a
maximum CDSC of 4.50% of redemption proceeds, declining by 0.50%
the first year
after purchase and by 1.00% each year thereafter to zero. This CDSC
may be
waived for certain redemptions. Class B shares are subject to an annual
service
fee of 0.25% and an annual distribution fee of 0.50% of the average
daily net
assets of this Class. The Class B shares' distribution fee may cause that
Class
to have higher expenses and pay lower dividends than Class A shares.
3
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PROSPECTUS SUMMARY (CONTINUED)
Class B Shares Conversion Feature. Class B shares will convert
automatically
to Class A shares, based on relative net asset value, eight years after the
date of the original purchase. Upon conversion, these shares will no
longer be
subject to an annual distribution fee. In addition, a certain portion of
Class
B shares that have been acquired through the reinvestment of dividends
and
distributions ("Class B Dividend Shares") will be converted at that time.
See
"Purchase of Shares--Deferred Sales Charge Alternatives".
In deciding which Class of Fund shares to purchase, investors should
con-
sider the following factors, as well as any other relevant facts and
circum-
stances:
Intended Holding Period. The decision as to which Class of shares is
more
beneficial to an investor depends on the amount and intended length of
his or
her investment. Shareholders who are planning to establish a program of
regu-
lar investment may wish to consider Class A shares; as the investment
accumu-
lates shareholders may qualify for reduced sales charges and the shares
are
subject to lower ongoing expenses over the term of the investment. As
an
investment alternative, Class B shares are sold without any initial sales
charge so the entire purchase price is immediately invested in the Fund.
Any
investment return on these additional invested amounts may partially or
wholly
offset the higher annual expenses of this Class. Because the Fund's future
return cannot be predicted, however, there can be no assurance that this
would
be the case.
Reduced or No Initial Sales Charge. The initial sales charge on Class
A
shares may be waived for certain eligible purchasers, and the entire
purchase
price will be immediately invested in the Fund. In addition, Class A
share
purchases, which when combined with current holdings of Class A shares
offered
with a sales charge equal or exceed $500,000 in the aggregate, will be
made at
net asset value with no initial sales charge, but will be subject to a CDSC
of
1.00% on redemptions made within 12 months of purchase. The
$500,000 aggregate
investment may be met by adding the purchase to the net asset value of
all
Class A shares held in funds sponsored by Smith Barney listed under
"Exchange
Privilege". Class A share purchases may also be eligible for a reduced
initial
sales charge. See "Purchase of Shares". Because the ongoing expenses
of Class
A shares may be lower than those for Class B shares, purchasers eligible
to
purchase Class A shares at net asset value or at a reduced sales charge
should
consider doing so.
PFS Investments Representatives may receive different compensation
for sell-
ing each Class of shares. Investors should understand that the purpose of
the
4
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PROSPECTUS SUMMARY (CONTINUED)
CDSC on the Class B shares is the same as that of the initial sales charge
on
the Class A shares.
See "Purchase of Shares" and "Management of the Company and the
Fund" for a
complete description of the sales charges and service and distribution fees
for
each Class of shares and "Valuation of Shares", "Dividends,
Distributions and
Taxes" and "Exchange Privilege" for other differences between the
Classes of
shares.
PURCHASE OF SHARES. Shares may be purchased through the Fund's
distributor, PFS
Distributors ("PFS"). See "Purchase of Shares".
INVESTMENT MINIMUMS. Investors in Class A and Class B shares
may open an
account by making an initial investment of at least $1,000 for each
account, or
$250 for an individual retirement account ("IRA") or a Self-Employed
Retirement
Plan. The initial investment amount will be waived for accounts
establishing a
Systematic Investment Plan. Subsequent investments of at least $50 may
be made
for both Classes. For participants in retirement plans qualified under
Section
403(b)(7) of the Internal Revenue Code of 1986, as amended (the
"Code"), the
minimum initial and subsequent investment requirement for both Classes
is $25.
The minimum initial and subsequent investment requirement for both
Classes
through the Systematic Investment Plan described below is $50. See
"Purchase of
Shares".
SYSTEMATIC INVESTMENT PLAN. The Fund offers shareholders a
Systematic
Investment Plan under which they may authorize the automatic placement
of a
purchase order each month or quarter for Fund shares in an amount of
at least
$50. See "Purchase of Shares".
REDEMPTION OF SHARES. Shares may be redeemed on each day the
New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase of Shares"
and
"Redemption of Shares".
MANAGEMENT OF THE FUND. Smith Barney Mutual Funds
Management Inc. (the
"Manager") serves as the Fund's investment adviser. The Manager
provides
investment advisory and management services to investment companies
affiliated
with Smith Barney. The Manager is a wholly owned subsidiary of Smith
Barney
Holdings Inc. ("Holdings"). Holdings is a wholly owned subsidiary of
Travelers
Group Inc. ("Travelers"), a diversified financial services holding
company
engaged, through its subsidiaries, principally in four business segments:
Investment Services, Consumer Finance Services, Life Insurance
5
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PROSPECTUS SUMMARY (CONTINUED)
Services and Property & Casualty Insurance Services. The Manager also
serves as
the Fund's administrator. See "Management of the Fund".
EXCHANGE PRIVILEGE. Shares of a Class may be exchanged for
shares of the same
class of certain other funds of the Smith Barney Mutual Funds at the
respective
net asset values next determined, plus any applicable sales charge
differential. See "Exchange Privilege".
VALUATION OF SHARES. Net asset value of the Fund for the prior
day generally is
quoted daily in the financial section of most newspapers and is also
available
from PFS Shareholder Services (the "Sub-Transfer Agent"). See
"Valuation of
Shares".
DIVIDENDS AND DISTRIBUTIONS. Dividends from net investment
income are declared
monthly and paid on the last Friday of each month. Distributions of net
realized long- and short-term capital gains, if any, are declared and paid
annually. See "Dividends, Distributions and Taxes".
REINVESTMENT OF DIVIDENDS. Dividends and distributions paid
on shares of a
Class will be reinvested automatically in additional shares of the same
Class
at current net asset value unless otherwise specified by an investor.
Shares
acquired by dividend and distribution reinvestments will not be subject
to any
sales charge or CDSC. Class B shares acquired through dividend and
distribution
reinvestments will become eligible for conversion to Class A shares on
a pro
rata basis. See "Dividends, Distributions and Taxes".
RISK FACTORS AND SPECIAL CONSIDERATIONS. The Company
is designed for long-term
investors and not for investors who intend to liquidate their investment
after
a short period. Neither the Company as a whole nor any particular fund
in the
Company, including the Fund, constitutes a balanced investment plan.
There can
be no assurance that the Fund will achieve its investment objective. The
Fund
may employ investment techniques which involve certain risks, including
entering into repurchase agreements and reverse repurchase agreements,
lending
portfolio securities, selling securities short and investing in foreign
securities through the use of American Depositary Receipts. See
"Investment
Objective and Management Policies--Additional Investments".
6
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PROSPECTUS SUMMARY (CONTINUED)
THE FUND'S EXPENSES. The following expense table lists the costs
and estimated
expenses that an investor will incur either directly or indirectly as a
shareholder of the Fund, based on the maximum sales charge or
maximum CDSC
that may be incurred at the time of purchase or redemption and the
Fund's
operating expenses for its most recent fiscal year:
<TABLE>
<CAPTION>
CLASS A CLASS B
- -------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
<CAPTION>
Maximum sales charge imposed on purchases
(as a percentage of offering price)......................... 4.50%
NONE
Maximum CDSC (as a percentage of original cost or redemption
proceeds, whichever is lower)............................... NONE*
4.50%
- -------------------------------------------------------------------------------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees.............................................. 0.65% 0.65%
12b-1 fees**................................................. 0.25 0.75
Other expenses............................................... 0.21 0.17
- -------------------------------------------------------------------------------
Total Fund Operating Expenses............................... 1.11%
1.57%
</TABLE>
- -------------------------------------------------------------------------------
* Purchase of Class A shares, which when combined with current
holdings of
Class A shares offered with a sales charge, equal or exceed $500,000
in
the aggregate, will be made at net asset value with no sales charge,
but
will be subject to a CDSC of 1.00% on redemptions made within 12
months.
** Upon conversion of Class B shares to Class A shares, such shares
will no
longer be subject to a distribution fee.
The sales charge and CDSC set forth in the above table are the
maximum
charges imposed upon purchases or redemptions of Fund shares and
investors may
actually pay lower or no charges, depending on the amount purchased
and, in
the case of Class B and certain Class A shares, the length of time the
shares
are held. See "Purchase of Shares" and "Redemption of Shares". PFS
receives an
annual 12b-1 service fee of 0.25% of the value of average daily net
assets of
Class A shares. With respect to Class B shares, PFS receives an annual
12b-1
fee of 0.75% of the value of average daily net assets of that Class,
consist-
ing of a 0.25% service fee and a 0.50% distribution fee. "Other
expenses" in
the above table include fees for shareholder services, custodial fees, legal
and accounting fees, printing costs and registration fees.
7
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PROSPECTUS SUMMARY (CONTINUED)
EXAMPLE.
The following example is intended to assist an investor in understanding
the
various costs that an investor in the Fund will bear directly or indirectly.
The example assumes payment by the Fund of operating expenses at the
levels
set forth in the table above. See "Purchase of Shares", "Redemption of
Shares"
and "Management of the Fund".
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10
YEARS*
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
<C>
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5.00%
annual return and (2) redemption at the end
of each time period:
Class A..................................... $56 $79 $103 $174
Class B..................................... 61 80 96 174
An investor would pay the following expenses
on the same investment, assuming the same
annual return and no redemption:
Class A..................................... $56 $79 $103 $174
Class B..................................... 16 50 86 174
- ------------------------------------------------------------------------------
</TABLE>
* Ten-year figures assume conversion of Class B shares to Class A
shares at
the end of the eighth year following the date of purchase.
The example also provides a means for the investor to compare expense
levels
of funds with different fee structures over varying investment periods. To
facilitate such comparison, all funds are required to utilize a 5.00%
annual
return assumption. However, the Fund's actual return will vary and may
be
greater or less than 5.00%. THIS EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESEN-
TATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
8
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand
L.L.P., inde-
pendent accountants, whose report thereon appears in the Fund's Annual
Report
dated December 31, 1994. The information set out below should be read
in con-
junction with the financial statements and related notes that also appear
in
the Fund's Annual Report, which is incorporated by reference into the
State-
ment of Additional Information.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH
YEAR:
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/94# 12/31/93# 12/31/92*
<S> <C> <C> <C>
Net Asset Value, beginning of year $13.01 $11.89 $11.67
- ------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.74 0.88 0.14
Net realized and unrealized gain/(loss) on
investments (1.88) 1.27 0.23
- ------------------------------------------------------------------------------
Total from investment operations (1.14) 2.15 0.37
Distributions to shareholders:
Distributions from net investment income (0.86) (0.88) (0.14)
Distributions in excess of net investment
income -- (0.01) --
Distributions from net realized capital
gains (0.31) (0.14) --
Distributions from capital (0.03) -- (0.01)
- ------------------------------------------------------------------------------
Total distributions (1.20) (1.03) (0.15)
- ------------------------------------------------------------------------------
Net Asset Value, end of year $10.67 $13.01 $11.89
- ------------------------------------------------------------------------------
Total return+ (8.95)% 18.45% 3.25%
- ------------------------------------------------------------------------------
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's) $181,334 $10,137 $933
Ratio of operating expenses to average net
assets 1.11% 1.11%
1.03%**++
Ratio of net investment income to average
net assets 7.35% 6.67% 7.53%**
Portfolio turnover rate 18% 65% 47%
- ------------------------------------------------------------------------------
</TABLE>
* The Fund commenced selling Class A shares on November 6, 1992.
** Annualized.
+ Total return represents aggregate total return for the period indicated
and
does not reflect any applicable sales charge.
++ The annualized operating expense ratio excludes interest expense.
The ratio
including interest expense for the period ended December 31, 1992
was
1.04%.
# Per share amounts have been calculated using the monthly average
shares
method, which more appropriately presents the per share data for the
period
since use of the undistributed method does not accord with results of
oper-
ations.
9
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH
YEAR:
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
12/31/94# 12/31/93#
<S> <C> <C>
Net Asset Value, beginning of year $13.01 $11.89
- -----------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.82 0.80
Net realized and unrealized gain/(loss) on investments (2.02)
1.29
- -----------------------------------------------------------------------------
Total from investment operations (1.20) 2.09
Distributions to shareholders:
Distributions from net investment income (0.80) (0.82)
Distributions in excess of net investment income -- (0.01)
Distributions from net realized capital gains (0.31) (0.14)
Distributions from capital 0.03 --
- -----------------------------------------------------------------------------
Total distributions (1.14) (0.97)
- -----------------------------------------------------------------------------
Net Asset Value, end of year $10.67 $13.01
- -----------------------------------------------------------------------------
Total return+ (9.41)% 18.06%
- -----------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $221,120 $476,008
Ratio of operating expenses to average net assets 1.57%
1.58%
Ratio of net investment income to average net assets 6.89%
6.20%
Portfolio turnover rate 18% 65%
- -----------------------------------------------------------------------------
</TABLE>
+ Total return represents aggregate total return for the period indicated
and
does not reflect any applicable sales charge.
# Per share amounts have been calculated using the monthly average
shares
method, which more appropriately presents the per share data for the
period
since use of the undistributed method does not accord with results of
oper-
ations.
10
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
[THIS PAGE INTENTIONALLY LEFT BLANK]
11
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH
YEAR:
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
12/31/92* 12/31/91
<S> <C> <C>
Net Asset Value, beginning of year $11.80
$10.43
- ------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.83 0.86
Net realized and unrealized gain/(loss) on investments 0.12
1.38
- ------------------------------------------------------------------------------
Total from investment operations 0.95 2.24
Distributions to shareholders:
Distributions from net investment income (0.83)
(0.87)
Distributions in excess of net investment income -- --
Distributions from net realized capital gains -- --
Distributions from capital (0.03) --
- ------------------------------------------------------------------------------
Total distributions (0.86) (0.87)
- ------------------------------------------------------------------------------
Net Asset Value, end of year $11.89 $11.80
- ------------------------------------------------------------------------------
Total return+ 8.36% 22.50%
- ------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $431,783 $413,878
Ratio of operating expenses to average net assets 1.57%**
1.53%
Ratio of net investment income to average net assets 6.99%
7.90%
Portfolio turnover rate 47% 82%
- ------------------------------------------------------------------------------
</TABLE>
* On November 6, 1992 the Fund commenced selling Class A shares.
Those shares
in existence prior to November 6, 1992 were designated Class B
shares.
** The operating expense ratio excludes interest expense. The ratio
including
interest expense for the year ended December 31, 1992 was 1.58%.
*** Annualized expense ratio before waiver of fees by the distributor for
the
years ended December 31, 1989 and 1988 were 1.66% and 1.57%,
respectively.
+ Total return represents aggregate total return for the period indicated
and
does not reflect any applicable sales charge.
++ Net investment income before waiver of fees by the distributor
would have
been $0.86 and $0.87 for the years ended December 31, 1989 and
1988,
respectively.
# Per share amounts have been calculated using the monthly average
shares
method, which more appropriately presents the per share data for the
period
since use of the undistributed method does not accord with results of
opera-
tions.
(/1/Not)covered by Coopers & Lybrand's report.
12
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
YEAR
ENDED ENDED ENDED ENDED ENDED
ENDED
12/31/90 12/31/89 12/31/88(/1/) 12/31/87(/1/) 12/31/86(/1/)
12/31/85(/1/)
<S> <C> <C> <C> <C>
<C>
$11.01 $10.33 $10.55 $12.91 $12.00
$10.88
- --------------------------------------------------------------------------------
0.86 0.87++ 0.90++ 0.89 1.10
1.08
(0.57) 0.68 (0.24) (1.24) 1.16 1.54
- --------------------------------------------------------------------------------
0.29 1.55 0.66 (0.35) 2.26 2.62
(0.87) (0.87) (0.88) (1.12) (1.10) (1.39)
-- -- -- -- -- --
-- -- -- (0.89) (0.25) (0.11)
-- -- -- -- -- --
- --------------------------------------------------------------------------------
(0.87) (0.87) (0.88) (2.01) (1.35) (1.50)
- --------------------------------------------------------------------------------
$10.43 $11.01 $10.33 $10.55 $12.91
$12.00
- --------------------------------------------------------------------------------
2.98% 15.57% 6.43% (2.83)% 19.54%
26.43%
- --------------------------------------------------------------------------------
$405,779 $483,382 $532,794 $705,561 $421,011
$233,880
1.58% 1.63%*** 1.22%*** 1.62% 1.62%
1.79%
8.20% 8.07% 8.74% 7.96% 7.74%
9.78%
59% 118% 72% 79% 211%
717%
- --------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
Set forth below is a description of the investment objective and policies
of
the Fund. There can be no assurance that the Fund will achieve its
investment
objective. Certain instruments and techniques discussed in this summary
are
described in greater detail in this Prospectus under "Additional
Investments"
and in the Statement of Additional Information. A description of the
rating
systems of Moody's Investors Services Inc. ("Moody's") and Standard
& Poor's
Corporation ("S&P") is contained in the Appendix to the Statement of
Addi-
tional Information.
The Statement of Additional Information contains specific investment
restrictions which govern the Fund's investments. These restrictions and
the
Fund's investment objective are fundamental policies, which means that
they
may not be changed without a majority vote of shareholders of the Fund.
Except
for the objective and those restrictions specifically identified as
fundamen-
tal, all investment policies and practices described in this Prospectus and
in
the Statement of Additional Information are non-fundamental, so that the
Board
of Directors may change them without shareholder approval. The
fundamental
restrictions applicable to the Fund include a prohibition on (a) purchasing
a
security if, as a result, more than 5% of the assets of the Fund would be
invested in the securities of the issuer (with certain exceptions) or the Fund
would own more than 10% of the outstanding voting securities of the
issuer,
(b) investing more than 10% of the Fund's total assets in "illiquid"
securi-
ties (which includes repurchase agreements with more than seven days
to matu-
rity), and (c) investing more than 25% of the Fund's total assets in the
secu-
rities of issuers in a particular industry (with exceptions for securities
guaranteed by the United States government, its agencies or
instrumentalities
("U.S. government securities") and certain money market instruments).
The Fund's investment objective is to provide as high a level of current
income as is consistent with prudent investment management and
preservation of
capital. The Fund seeks to achieve its objective by investing in any of the
following securities; corporate bonds rated Baa or better by Moody's or
BBB or
better by S&P; U.S. government securities; commercial paper issued by
domestic
corporations and rated Prime-1 or Prime-2 by Moody's or A-1 or A-2
by S&P, or,
if not rated, issued by a corporation having an outstanding debt issue
rated
Aa or better by Moody's or AA or better by S&P; negotiable bank
certificates
of deposit and bankers' acceptances issued by domestic banks (but not
their
foreign branches) having total assets in excess of $1 billion; and high-
yielding common stocks and warrants. Obligations rated in the lowest of
the
top four rating categories (Baa by Moody's or BBB by S&P) may have
specula-
14
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
(CONTINUED)
tive characteristics and changes in economic conditions or other
circumstances
are more likely to lead to a weakened capacity to make principal and
interest
payments, including a greater possibility of default or bankruptcy of the
issu-
er, than is the case with higher grade bonds. Subsequent to its purchase
by the
Fund, an issue of securities may cease to be rated or its rating may be
reduced
below the minimum required for the purchase by the Fund. In addition,
it is
possible that Moody's and S&P might not timely change their ratings of
a par-
ticular issue to reflect subsequent events. None of these events will
require
the sale of the securities by the Fund, although the Manager will consider
these events in determining whether the Fund should continue to hold the
secu-
rities. To the extent that the ratings given by Moody's or S&P for
securities
may change as a result of changes in the rating systems or due to a
corporate
reorganization of Moody's and/or S&P, the Fund will attempt to use
comparable
ratings as standards for its investments in accordance with the investment
objectives and policies of the Fund.
The Fund may enter into repurchase agreements, reverse repurchase
agreements,
firm commitment agreements, "short sales against the box" and may lend
its
portfolio securities. Except when in a temporary defensive investment
position,
the Fund intends to maintain at least 65% of its assets invested in bonds.
The value of securities in which the Fund invests (and therefore, the
Fund's
net asset value per share) generally will vary inversely with changes in
inter-
est rates and also will fluctuate according to changes in market conditions
and
other factors.
In making purchases of securities consistent with the above policies, the
Fund will be subject to the applicable restrictions referred to under
"Invest-
ment Restrictions" in the Statement of Additional Information.
ADDITIONAL INVESTMENTS
U.S. Government Securities. U.S. government securities are obligations
of, or
are guaranteed by, the United States government, its agencies or
instrumentali-
ties. These include bills, certificates of indebtedness, and notes and bonds
issued by the United States Treasury or by agencies or instrumentalities
of the
United States government. Some U.S. government securities, such as
U.S. Trea-
sury bills and bonds, are supported by the full faith and credit of the
United
States Treasury; others are supported by the right of the issuer to borrow
from
the United States Treasury; others, such as those of the Federal National
Mort-
15
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
(CONTINUED)
gage Association, are supported by the discretionary authority of the
United
States government to purchase the agency's obligations; still others, such
as
those of the Student Loan Marketing Association and the Federal Home
Loan
Mortgage Corporation ("FHLMC") are supported only by the credit of
the instru-
mentality. Mortgage participation certificates issued by the FHLMC
generally
represent ownership interests in a pool of fixed-rate conventional
mortgages.
Timely payment of principal and interest on these certificates is
guaranteed
solely by the issuer of the certificates. Other investments will include
Government National Mortgage Association Certificates ("GNMA
Certificates"),
which are mortgage-backed securities representing part ownership of a
pool of
mortgage loans on which timely payment of interest and principal is
guaranteed
by the full faith and credit of the United States government. While the
United
States government guarantees the payment of principal and interest on
GNMA
Certificates, the market value of the securities is not guaranteed and will
fluctuate.
Repurchase Agreements. The Fund may enter into repurchase
agreement transac-
tions on U.S. government securities with banks which are the issuers of
instruments acceptable for purchase by the Fund and with certain dealers
on
the Federal Reserve Bank of New York's list of reporting dealers. Under
the
terms of a typical repurchase agreement, the Fund would acquire an
underlying
debt obligation for a relatively short period (usually not more than one
week)
subject to an obligation of the seller to repurchase, and the Fund to
resell,
the obligation at an agreed-upon price and time, thereby determining the
yield
during the Fund's holding period. This arrangement results in a fixed
rate of
return that is not subject to market fluctuations during the Fund's holding
period. The value of the underlying securities will be at least equal at all
times to the total amount of the repurchase obligation, including interest.
The Fund bears a risk of loss in the event that the other party to a repur-
chase agreement defaults on its obligations and the Fund is delayed or
pre-
vented from exercising its rights to dispose of the collateral securities,
including the risk of a possible decline in the value of the underlying
secu-
rities during the period while the Fund seeks to assert its rights to them,
the risk of incurring expenses associated with asserting those rights and
the
risk of losing all or part of the income from the agreement. The
Manager, act-
ing under the supervision of the Board of Directors, review on an
ongoing
basis the creditworthiness and the value of the collateral of those banks
and
dealers with which the Fund enters into repurchase agreements to
evaluate
potential risks.
16
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
(CONTINUED)
Reverse Repurchase Agreements. A reverse repurchase agreement
involves the
sale of a money market instrument by the Fund and its agreement to
repurchase
the instrument at a specified time and price. The Fund will maintain a
segre-
gated account consisting of U.S. government securities or cash or cash
equiva-
lents to cover its obligations under reverse repurchase agreements with
broker-
dealers (but not banks). The Fund will invest the proceeds in other
money mar-
ket instruments or repurchase agreements maturing not later than the
expiration
of the reverse repurchase agreement. Under the Investment Company Act
of 1940,
as amended (the "1940 Act"), reverse repurchase agreements may be
considered
borrowings by the seller; accordingly, the Fund will limit its investments
in
reverse repurchase agreements and other borrowings to no more than 33
1/3% of
its total assets. Firm Commitment Agreements and When-Issued
Purchases. Firm
commitment agreements and when-issued purchases call for the purchase
of secu-
rities at an agreed-upon price on a specified future date, and would be
used,
for example, when a decline in the yield of securities of a given issuer
is
anticipated. The Fund as purchaser assumes the risk of any decline in
value of
the security beginning on the date of the agreement or purchase. The
Fund will
not use such transactions for leveraging purposes, and accordingly will
segre-
gate U.S. government securities, cash or cash equivalents in an amount
suffi-
cient to meet its purchase obligations under the agreement.
Loans of Portfolio Securities. The Fund may lend its portfolio
securities
provided: (a) the loan is secured continuously by collateral consisting of
U.S.
government securities, cash or cash equivalents maintained on a daily
marked-
to-market basis in an amount at least equal to the current market value
of the
securities loaned; (b) the Fund may at any time call the loan and obtain
the
return of the securities loaned; (c) the Fund will receive any interest or
div-
idends paid on the loaned securities; and (d) the aggregate market value
of
securities loaned will not at any time exceed 33 1/3% of the total assets
of
the Fund. The risks in lending portfolio securities, as with other
extensions
of secured credit, consists of possible delays in receiving additional
collat-
eral or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Loans will be made to
firms
deemed by the Manager to be in good standing and will not be made
unless, in
the judgement of the Manager, the consideration to be earned from such
loans
would justify the risk.
Short Sales. The Fund may sell securities short "against the box".
While a
short sale is the sale of a security the Fund does not own, it is "against
the
box" if at all times when the short position is open, the Fund owns an
equal
amount of the securities or securities convertible into, or exchangeable
with-
out
17
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
(CONTINUED)
further consideration for, securities of the same issue as the securities
sold
short. Short sales "against the box" are used to defer recognition of
capital
gains or losses.
American Depositary Receipts. The Fund may purchase American
Depositary
Receipts ("ADRs"), which are dollar-denominated receipts issued
generally by
domestic banks and representing the deposit with the bank of a security
of a
foreign issuer. ADRs are publicly traded on exchanges or
over-the-counter in
the United States.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Manager arranges for the purchase and sale of the Fund's
securities and
selects broker-dealers (including Smith Barney) which, in its best
judgment,
provide prompt and reliable execution at favorable prices and reasonable
com-
mission rates. The Manager may select broker-dealers which provide it
with
research services and may cause the Fund to pay such broker-dealers
commissions
which exceed those other broker-dealers may have charged, if it views
the com-
missions as reasonable in relation to the value of the brokerage and/or
research services.
For reporting purposes, the Fund's portfolio turnover rate is calculated
by
dividing the lesser of purchases or sales of portfolio securities for the fis-
cal year by the monthly average of the value of the Fund's securities,
with
money market instruments with less than one year to maturity excluded.
A 100%
portfolio turnover rate would occur, for example, if all included
securities
were replaced once during the year. The Fund's portfolio turnover rates
for
each of the past fiscal years are set forth under "Financial Highlights".
VALUATION OF SHARES
The Fund's net asset value per share is determined as of the close of
regular
trading on the NYSE on each day that the NYSE is open, by dividing the
value of
the Fund's net assets attributable to each Class by total number of shares
of
the Class outstanding.
A security that is primarily traded on a United States or foreign stock
exchange is valued at the last sale price on that exchange or, if there
were no
sales during the day, at the current quoted bid price. In cases where
securi-
ties are traded on more than one exchange, the securities are valued on
the
18
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
VALUATION OF SHARES (CONTINUED)
exchange designated by or under the authority of the Board of Directors
as the
primary market. Fund securities which are primarily traded on foreign
exchanges may be valued with the assistance of a pricing service and are
gen-
erally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the
time a
foreign security is valued is likely to have changed such value, then the
fair
value of those securities will be determined by consideration of other
factors
by or under the direction of the Board of Directors. Unlisted foreign
securi-
ties are valued at the mean between the last available bid and offer price
prior to the time of valuation. U.S. over-the-counter securities will be
val-
ued on the basis of the bid price at the close of business on each day.
Secu-
rities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction
of
the Board of Directors. Notwithstanding the above, bonds and other fixed
income securities are valued by using market quotations and may be
valued on
the basis of prices provided by a pricing service approved by the Board
of
Directors. Any assets or liabilities initially expressed in terms of foreign
currencies will be converted into U.S. dollar values at the mean between
the
bid and offered quotations of such currencies against U.S. dollars as last
quoted by any recognized dealer.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund will be treated separately from the Company's other funds
in deter-
mining the amount of dividends from net investment income and
distributions of
capital gains payable to shareholders. The Fund declares dividends
monthly
consisting of estimated daily net investment income, and pays dividends
month-
ly. Any net realized long-term capital gains, after utilization of capital
loss carryforwards, will be distributed at least annually. Net realized
short-
term capital gains may be paid with the distribution of dividends from
net
investment income.
If a shareholder does not otherwise instruct, dividends and capital gains
distributions will be reinvested automatically in additional shares of the
same Class at net asset value subject to no sales charge or CDSC. In
order to
avoid the application of a 4.00% nondeductible excise tax on certain
undis-
tributed amounts of ordinary income and capital gains, the Fund may
make an
additional distribution shortly before December 31 in each year of any
undistrib-
19
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
uted ordinary income or capital gains and expects to pay any other
dividends
and distributions necessary to avoid the application of this tax.
If, for any full fiscal year, the Fund's total distributions exceed current
and accumulated earnings and profits, the excess distributions may be
treated
as a taxable dividend or as a tax-free return of capital (up to the amount
of
the shareholder's tax basis in his or her shares). The amount treated as
a
tax-free return of capital will reduce a shareholder's adjusted basis in his
or her shares. Pursuant to the requirements of the 1940 Act and other
applica-
ble laws, a notice will accompany any distribution paid from sources
other
then net investment income. In the event the Fund distributes amounts in
excess of its net investment income and net realized capital gains, such
dis-
tributions may have the effect of decreasing the Fund's total assets,
which
may increase the Fund's expense ratio.
The per share dividends on Class B shares may be lower than the per
share
dividends on Class A shares principally as a result of the distribution fee
applicable with respect to Class B shares. Distributions of capital gains,
if
any, will be in the same amount for Class A and Class B shares.
TAXES
The Fund will be treated as a separate taxpayer with the result that, for
Federal tax purposes, the amount of investment income and capital gains
earned
will be determined on a fund-by-fund basis, rather than on a
Company-wide
basis. The Fund has qualified and intends to continue to qualify as a
"regu-
lated investment company" under the Code. In any taxable year in which
the
Fund so qualifies and distributes at least 90% of its investment company
tax-
able income (which includes, among other items, dividends, interest and
the
excess of any net short-term capital gains over net long-term capital
losses),
the Fund (but not its shareholders) generally will be relieved of Federal
income tax on the investment company taxable income and net realized
capital
gains (the excess of net long-term capital gains over net short-term
capital
losses), if any, distributed to shareholders. In order to qualify as a regu-
lated investment company, the Fund will be required to meet various
Code
requirements.
Distributions of any investment company taxable income are taxable to
share-
holders as ordinary income. Distributions of any net capital gains
designated
by the Fund as capital gains dividends are taxable to shareholders as
long-
term capital gains regardless of the length of time a shareholder may
have
held shares of the Fund.
20
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
Dividends (including capital gains dividends) declared by the Fund in
Octo-
ber, November or December of any calendar year to shareholders of
record on a
date in such a month will be deemed to have been received by
shareholders on
December 31 of that calendar year, provided that the dividend is actually
paid
by the Fund during January of the following calendar year.
Upon the disposition of shares of the Fund (whether by redemption,
sale or
exchange), a shareholder generally will realize a taxable gain or loss.
Such
gain or loss generally will be a capital gain or loss if the shares are
capital
assets in the shareholder's hands, and generally will be long-term or
short-
term depending upon the shareholder's holding period for the shares.
Any loss
realized by a shareholder on disposition of Fund shares held by the
shareholder
for six months or less will be treated as long-term capital loss to the
extent
of any distributions of capital gains dividends received by the shareholder
with respect to such shares.
Shareholders will be notified annually about the amounts of dividends
and
distributions, including the amounts (if any) for that year which have
been
designated as capital gains dividends. Dividends and distributions, and
gains
realized upon a disposition of Fund shares, may also be subject to state,
local
or foreign taxes depending on each shareholder's particular situation.
Divi-
dends, consisting of interest from U.S. government securities may be
exempt
from all state and local income taxes. Shareholders should consult their
tax
advisors for specific information on the tax consequences of particular
types
of distributions.
PURCHASE OF SHARES
GENERAL
The Fund offers two Classes of shares to investors purchasing through
PFS
Investments Representatives. Class A shares are sold to investors with an
ini-
tial sales charge and Class B shares are sold without an initial sales
charge
but are subject to a CDSC payable upon certain redemptions. See
"Prospectus
Summary--Alternative Purchase Arrangements" for a discussion of
factors to con-
sider in selecting which Class of shares to purchase.
Initial purchases of Fund shares must be made through a PFS
Investments Rep-
resentative by completing the appropriate application found in the
prospectus.
The completed application should be forwarded to the Sub-Transfer
Agent, 3100
Breckenridge Blvd., Bldg 200, Duluth, Georgia 30199-0062. Checks
21
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PURCHASE OF SHARES (CONTINUED)
drawn on foreign banks must be payable in U.S. dollars and have the
routing
number of the U.S. bank encoded on the check. Subsequent investments
may be
sent directly to the Sub-Transfer Agent.
Investors in Class A and Class B shares may open an account by
making an
initial investment of at least $1,000 for each account, or $250 for an IRA
or
a Self-Employed Retirement Plan in the Fund. The initial investment
amount
will be waived for accounts establishing a Systematic Investment Plan.
Subse-
quent investments of at least $50 may be made for both Classes. For
partici-
pants in retirement plans qualified under Section 403(b)(7) of the Code,
the
minimum initial and subsequent investment requirement for both Classes
in the
Fund is $25. For the Fund's Systematic Investment Plan, the minimum
initial
and subsequent investment requirement for both Classes is $50. There
are no
minimum investment requirements for Class A shares for employees of
Travelers
and its subsidiaries, including Smith Barney, Directors of the Company
and
their spouses and children. The Fund reserves the right to waive or
change
minimums, to decline any order to purchase its shares and to suspend the
offering of shares from time to time. Shares purchased will be held in the
shareholder's account by the Sub-Transfer Agent. Share certificates are
issued
only upon a shareholder's written request to the Sub-Transfer Agent.
Purchase orders received by the Sub-Transfer Agent prior to the close
of
regular trading on the NYSE, on any day the Fund calculates its net asset
val-
ue, are priced according to the net asset value determined on that day.
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their accounts at any time by
purchasing
shares through a service known as the Systematic Investment Plan. Under
the
Systematic Investment Plan, the Sub-Transfer Agent is authorized
through pre-
authorized transfers of $50 or more to charge the regular bank account
or
other financial institution indicated by the shareholder on a monthly or
quar-
terly basis to provide systematic additions to the shareholder's Fund
account.
A shareholder who has insufficient funds to complete the transfer will be
charged a fee of up to $25 by PFS or the Sub-Transfer Agent.
22
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PURCHASE OF SHARES (CONTINUED)
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the Fund
are
as follows:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------------ DEALERS'
% OF % OF REALLOWANCE AS
% OF
AMOUNT OF INVESTMENT OFFERING PRICE AMOUNT
INVESTED OFFERING PRICE
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
LESS THAN $ 25,000 4.50% 4.71% 4.05%
$ 25,000 - $ 49,999 4.00% 4.17% 3.60%
$ 50,000 - $ 99,999 3.50% 3.63% 3.15%
$100,000 - $249,999 2.50% 2.56% 2.25%
$250,000 - $499,999 1.50% 1.52% 1.35%
$500,000 - AND OVER * * *
- ---------------------------------------------------------------------------
</TABLE>
* PURCHASES OF CLASS A SHARES, WHICH WHEN COMBINED
WITH CURRENT HOLDINGS OF
CLASS A SHARES OFFERED WITH A SALES CHARGE, EQUAL
OR EXCEED $500,000 IN THE
AGGREGATE, WILL BE MADE AT NET ASSET VALUE
WITHOUT ANY INITIAL SALES CHARGE,
BUT WILL BE SUBJECT TO A CDSC OF 1.00% ON
REDEMPTIONS MADE WITHIN 12 MONTHS
OF PURCHASE. THE CDSC ON CLASS A SHARES IS PAYABLE
TO PFS, WHICH IN TURN
PAYS PFS INVESTMENTS TO COMPENSATE ITS INVESTMENTS
REPRESENTATIVES WHOSE
CLIENTS MAKE PURCHASES OF $500,000 OR MORE. THE
CDSC IS WAIVED IN THE SAME
CIRCUMSTANCES IN WHICH THE CDSC APPLICABLE TO
CLASS B SHARES IS WAIVED. SEE
"DEFERRED SALES CHARGE ALTERNATIVES" AND "WAIVERS
OF CDSC".
INITIAL SALES CHARGE WAIVERS
Purchases of Class A shares may be made at net asset value without a
sales
charge in the following circumstances: (a) sales of Class A shares to
Direc-
tors of the Company and employees of Travelers and its subsidiaries, or
the
spouses and children of such persons (including the surviving spouse of
a
deceased Director or employee, and retired Directors or employees), or
sales
to any trust, pension, profit-sharing or other benefit plan for such
persons
provided such sales are made upon the assurance of the purchaser that
the pur-
chase is made for investment purposes and that the securities will not be
re-
sold except through redemption or repurchase; (b) offers of Class A
shares to
any other investment company in connection with the combination of
such com-
pany with the Fund by merger, acquisition of assets or otherwise; (c)
share-
holders who have redeemed Class A shares in the Fund (or Class A
shares of
another fund in the Smith Barney Mutual Funds that are offered with a
sales
charge equal to or greater than the maximum sales charge of the Fund)
and who
wish to reinvest their redemption proceeds in the Fund, provided the
reinvest-
ment is made within 60 calendar days of the redemption; (d) accounts
managed
by registered investment advisory subsidiaries of Travelers; and (e) sales
through PFS Investments Representatives where the amounts invested
represent
the redemption pro-
23
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PURCHASE OF SHARES (CONTINUED)
ceeds from investment companies distributed by an entity other than PFS,
on the
condition that (i) the redemption has occurred no more than 60 days
prior to
the purchase of the shares, (ii) the shareholder paid an initial sales charge
on such redeemed shares and (iii) the shares redeemed were not subject
to a
deferred sales charge. PFS Investments may pay its Investments
Representatives
an amount equal to 0.40% of the amount invested if the purchase
represents
redemption proceeds from an investment company distributed by an
entity other
than PFS. In order to obtain such discounts, the purchaser must provide
suffi-
cient information at the time of purchase to permit verification that the
pur-
chase would qualify for the elimination of the sales charge.
VOLUME DISCOUNTS
The "Amount of Investment" referred to in the sales charge table set
forth
above under "Initial Sales Charge Alternative--Class A Shares" includes
the
purchase of Class A shares in the Fund and of other funds sponsored by
Smith
Barney that are offered with a sales charge listed under "Exchange
Privilege".
A person eligible for a volume discount includes an individual; members
of a
family unit comprising a husband, wife and minor children; a trustee or
other
fiduciary purchasing for a single fiduciary account including pension,
profit-
sharing and other employee benefit trusts qualified under Section 401(a)
of the
Code, or multiple custodial accounts where more than one beneficiary is
involved if purchases are made by salary reduction and/or payroll
deduction for
qualified and nonqualified accounts and transmitted by a common
employer enti-
ty. Employer entity for payroll deduction accounts may include trade and
craft
associations and any other similar organizations.
LETTER OF INTENT
A Letter of Intent for amounts of $50,000 or more provides an
opportunity for
an investor to obtain a reduced sales charge by aggregating investments
over a
13 month period, provided that the investor refers to such Letter when
placing
orders. For purposes of a Letter of Intent, the "Amount of Investment"
as
referred to in the preceding sales charge table includes purchases of all
Class
A shares of the Fund and other funds of the Smith Barney Mutual Funds
that are
offered with a sales charge listed under "Exchange Privilege" over a 13
month
period based on the total amount of intended purchases plus the value of
all
Class A shares previously purchased and still owned. An alternative is
to com-
pute the 13 month period starting up to 90 days before the date of
execution of
a Letter of Intent. Each investment made during the period receives the
reduced
24
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PURCHASE OF SHARES (CONTINUED)
sales charge applicable to the total amount of the investment goal. If the
goal is not achieved within the period, the investor must pay the
difference
between the sale charges applicable to the purchases made and the
charges pre-
viously paid, or an appropriate number of escrowed shares will be
redeemed.
DEFERRED SALES CHARGE ALTERNATIVES
"CDSC Shares" are sold at net asset value next determined without an
initial
sales charge so that the full amount of an investor's purchase payment
may be
immediately invested in the Fund. A CDSC, however, may be imposed
on certain
redemptions of these shares. "CDSC Shares" are: (a) Class B shares; and
(b)
Class A shares, which when combined with Class A shares offered with
a sales
charge currently held by an investor, equal or exceed $500,000 in the
aggregate.
Any applicable CDSC will be assessed on an amount equal to the lesser
of the
cost of the original cost of the shares being redeemed or their net asset
value at the time of redemption. CDSC Shares that are redeemed will not
be
subject to a CDSC to the extent that the value of such shares represents:
(a)
capital appreciation of Fund assets; (b) reinvestment of dividends or
capital
gains distributions; (c) with respect to Class B shares, shares redeemed
more
than five years after their purchase; or (d) with respect to Class A shares
that are CDSC Shares, shares redeemed more than 12 months after their
pur-
chase.
Class A shares that are CDSC Shares are subject to a 1.00% CDSC if
redeemed
within 12 months of purchase. In circumstances in which the CDSC is
imposed on
Class B shares, the amount of the charge will depend on the number of
years
since the shareholder made the purchase payment from which the amount
is being
redeemed. Solely for purposes of determining the number of years since
a pur-
chase payment, all purchase payments made during a month will be
aggregated
and deemed to have been made on the last day of the preceding Smith
Barney
statement month. The following table sets forth the rates of the charge
for
redemptions of Class B shares by shareholders.
25
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PURCHASE OF SHARES (CONTINUED)
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE CDSC
- --------------------------------
<S> <C>
First 4.50%
Second 4.00%
Third 3.00%
Fourth 2.00%
Fifth 1.00%
Sixth 0.00%
Seventh 0.00%
Eighth 0.00%
- --------------------------------
</TABLE>
Class B shares will convert automatically to Class A shares eight years
after
the date on which they were purchased and thereafter will no longer be
subject
to any distribution fee. There will also be converted at that time such
propor-
tion of Class B Dividend Shares owned by the shareholder as the total
number of
his or her Class B shares converting at the time bears to the total number
of
outstanding Class B shares (other than Class B Dividend Shares) owned
by the
shareholder.
In determining the applicability of any CDSC, it will be assumed that
a
redemption is made first of shares representing capital appreciation, next
of
shares representing the reinvestment of dividends and capital gains
distribu-
tions and finally of other shares held by the shareholder for the longest
period of time. The length of time that CDSC Shares acquired through
an
exchange have been held will be calculated from the date that the shares
exchanged were initially acquired in one of the other Smith Barney
Mutual
Funds, and Fund shares being redeemed will be considered to represent,
as
applicable, capital appreciation or dividend and capital gains distribution
reinvestments in such other funds. For Federal income tax purposes, the
amount
of the CDSC will reduce the gain or increase the loss, as the case may
be, on
the amount realized on redemption. The amount of any CDSC will be
paid to PFS.
To provide an example, assume an investor purchased 100 Class B
shares at $10
per share for a cost of $1,000. Subsequently, the investor acquired 5
addi-
tional shares through dividend reinvestment. During the fifteenth month
after
the purchase, the investor decided to redeem $500 of his or her
investment.
Assuming at the time of the redemption the net asset value had
appreciated to
$12 per share, the value of the investor's shares would be $1,260 (105
shares
at $12 per share). The CDSC would not be applied to the amount which
represents
appreciation ($200) and the value of the reinvested dividend shares ($60).
Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be
charged at a rate of 4.00% (the applicable rate for Class B shares) for a
total
deferred sales charge of $9.60.
26
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PURCHASE OF SHARES (CONTINUED)
WAIVERS OF CDSC
The CDSC will be waived on: (a) exchanges (see "Exchange
Privilege"); (b)
automatic cash withdrawals in amounts equal to or less than 1.00% per
month of
the value of the shareholder's shares at the time the withdrawal plan
com-
mences (see "Redemption of Shares-Automatic Cash Withdrawal Plan");
(c) re-
demption of shares within 12 months following the death or disability of
the
shareholder; (d) redemption of shares made in connection with qualified
distributions from retirement plans or IRAs upon the attainment of age
59 1/2;
(e) involuntary redemptions; and (f) redemption of shares in connection
with a
combination of the Fund with any investment company by merger,
acquisition of
assets or otherwise. In addition, a shareholder who has redeemed shares
from
other funds of the Smith Barney Mutual Funds may, under certain
circumstances,
reinvest all or part of the redemption proceeds within 60 days and
receive pro
rata credit for any CDSC imposed on the prior redemption.
CDSC waivers will be granted subject to confirmation by PFS of the
share-
holder's status or holdings, as the case may be.
EXCHANGE PRIVILEGE
Except as otherwise noted below, shares of each Class may be
exchanged at
the net asset value next determined for shares of the same Class in the
fol-
lowing funds of the Smith Barney Mutual Funds, to the extent shares are
offered for sale in the shareholder's state of residence. Exchanges of
Class A
and Class B shares are subject to minimum investment requirements and
all
shares are subject to the other requirements of the fund into which
exchanges
are made and a sales charge differential may apply.
FUND NAME
. Smith Barney Appreciation Fund Inc.
. Smith Barney Growth Opportunity Fund
Class A Exchanges. Class A shares of Smith Barney Mutual Funds sold
without
a sales charge or with a maximum sales charge of less than the maximum
charged
by other Smith Barney Mutual Funds will be subject to the appropriate
"sales
charge differential" upon the exchange of their shares for Class A shares
of a
fund sold with a higher sales charge. The "sales charge differential" is
lim-
ited to a percentage rate no greater than the excess of the sales charge
rate
appli-
27
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
EXCHANGE PRIVILEGE (CONTINUED)
cable to purchases of shares of the mutual fund being acquired in the
exchange
over the sales charge rate(s) actually paid on the mutual fund shares
relin-
quished in the exchange and on any predecessor of those shares. For
purposes of
the exchange privilege, shares obtained through automatic reinvestment
of divi-
dends and capital gains distributions, are treated as having paid the same
sales charges applicable to the shares on which the dividends or
distributions
were paid; however, if no sales charge was imposed upon the initial
purchase of
shares, any shares obtained through automatic reinvestment will be
subject to a
sales charge differential upon exchange.
Class B Exchanges. In the event a Class B shareholder wishes to
exchange all
or a portion of his or her shares in any of the funds imposing a higher
CDSC
than that imposed by the Fund, the exchanged Class B shares will be
subject to
the higher applicable CDSC. Upon an exchange, the new Class B shares
will be
deemed to have been purchased on the same date as the Class B shares
of the
Fund that have been exchanged.
Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange
transactions can
be detrimental to the Fund's performance and its shareholders. The
Manager may
determine that a pattern of frequent exchanges is excessive and contrary
to the
best interests of the Fund's other shareholders. In this event, the
Manager
will notify PFS that the Fund and PFS may, at its discretion, decide to
limit
additional purchases and/or exchanges by a shareholder. Upon such a
determina-
tion by the Fund, PFS will provide notice in writing or by telephone to
the
shareholder at least 15 days prior to suspending the exchange privilege
and
during the 15 day period the shareholder will be required to (a) redeem
his or
her shares in the Fund or (b) remain invested in the Fund or exchange
into any
of the Smith Barney Mutual Funds listed under "Exchange Privilege",
which posi-
tion the shareholder would be expected to maintain for a significant
period of
time. All relevant factors will be considered in determining what
constitutes
an abusive pattern of exchanges.
Exchanges will be processed at the net asset value next determined,
plus any
applicable sales charge differential. Redemption procedures discussed
below are
also applicable for exchanging shares, and exchanges will be made upon
receipt
of all supporting documents in proper form. If the account registration
of the
shares of the fund being acquired is identical to the registration of the
shares of the fund exchanged, no signature guarantee is required. A
capital
gain or loss for tax purposes will be realized upon the exchange,
depending
upon the cost
28
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
EXCHANGE PRIVILEGE (CONTINUED)
or other basis of shares redeemed. Before exchanging shares, investors
should
read the current prospectus describing the shares to be acquired. The
Fund
reserves the right to modify or discontinue exchange privileges upon 60
days'
prior notice to shareholders.
REDEMPTION OF SHARES
Shareholders may redeem for cash some or all of their shares of the
Fund at
any time by sending a written request in proper form directly to the Sub-
Transfer Agent, PFS Shareholder Services, at 3100 Breckenridge Blvd.,
Bldg.
200, Duluth, Georgia 30199-0062. If you should have any questions
concerning
how to redeem your account after reviewing the information below,
please con-
tact the Sub-Transfer Agent at (800) 544-5445, Spanish-speaking
representa-
tives (800) 544-7278 or TDD Line for the Hearing Impaired (800)
824-1721.
As described under "Purchase of Shares", redemptions of Class B
shares are
subject to a contingent deferred sales charge.
The request for redemption must be signed by all persons in whose
names the
shares are registered. Signatures must conform exactly to the account
regis-
tration. If the proceeds of the redemption exceed $50,000, or if the
proceeds
are not to be paid to the record owner(s) at the record address, if the
share-
holder(s) has had an address change in the past 45 days, or if the
sharehold-
er(s) must be guaranteed by one of the following: a bank or trust
company; a
broker-dealer; a credit union; a national securities exchange, registered
securities association or clearing agency; a savings and loan association;
or
a federal savings bank.
Generally, a properly completed Redemption Form with any required
signature
guarantee is all that is required for a redemption. In some cases,
however,
other documents may be necessary. For example, in the case of
shareholders
holding certificates, the certificates for the shares being redeemed must
accompany the redemption request. Additional documentary evidence of
authority
is also required by the Sub-Transfer Agent in the event redemption is
requested by a corporation, partnership, trust, fiduciary, executor or
admin-
istrator. Additionally, if a shareholder requests a redemption from a
Retire-
ment Plan account (IRA, SEP or 403(b)(7)), such request must state
whether or
not federal income tax is to be withheld from the proceeds of the
redemption
check.
29
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
REDEMPTION OF SHARES (CONTINUED)
A shareholder may utilize the Sub-Transfer Agent's FAX to redeem
their
account as long as a signature guarantee or other documentary evidence
is not
required. Redemption requests should be properly signed by all owners
of the
account and faxed to the Sub-Transfer Agent at (800) 554-2374. Facsimile
redemptions may not be available if the shareholder cannot reach the
Sub-
Transfer Agent by FAX, whether because all telephone lines are busy or
for any
other reason; in such case, a shareholder would have to use the Fund's
regular
redemption procedure described above. Facsimile redemptions received
by the
Sub-Transfer Agent prior to 4:00 p.m. Eastern time on a regular
business day
will be processed at the net-asset value per share determined that day.
In all cases, the redemption price is the net asset value per share of the
Fund next determined after the request for redemption is received in
proper
form by the Sub-Transfer Agent. Payment for shares redeemed will be
made by
check mailed within three days after acceptance by the Sub-Transfer
Agent of
the request and any other necessary documents in proper order. Such
payment may
be postponed or the right of redemption suspended as provided by the
rules of
the SEC. If the shares to be redeemed have been recently purchased by
check or
draft, the Sub-Transfer Agent may hold the payment of the proceeds until
the
purchase check or draft has cleared, usually a period of up to 15 days.
Any
taxable gain or loss will be recognized by the shareholder upon
redemption of
shares.
After following the above-stated redemption guidelines, a shareholder(s)
may
elect to have the redemption proceeds wire-transferred directly to the
share-
holder's bank account of record (defined as a currently established
pre-autho-
rized draft on the shareholder's account with no changes within the
previous 45
days), as long as the bank account is registered in the same name(s) as
the
account with the Fund. If the proceeds are not to be wired to the bank
account
of record, or mailed to the registered owner(s), a signature guarantee
will be
required from all shareholder(s). A $25 service fee will be charged by
the Sub-
Transfer Agent to help defray the administrative expense of executing a
wire
redemption. Redemption proceeds will normally be wired to the
designated bank
account on the next business day following the redemption, and should
ordinar-
ily be credited to your bank account by your bank within 48 to 72 hours.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under
which
shareholders who own shares with a value of at least $10,000 may elect
30
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
REDEMPTION OF SHARES (CONTINUED)
to receive periodic cash payments of at least $50 monthly or quarterly.
Retirement plan accounts are eligible for automatic cash withdrawal plans
only
where the shareholder is eligible to receive qualified distributions and has
an account value of at least $5,000. The withdrawal plan will be carried
over
on exchanges between funds or Classes of the Fund. Any applicable
CDSC will
not be waived on amounts withdrawn by a shareholder that exceed
1.00% per
month of the value of the shareholder's shares subject to the CDSC at the
time
the withdrawal plan commences. For further information regarding the
automatic
cash withdrawal plan, shareholders should contact the Sub-Transfer
Agent.
MINIMUM ACCOUNT SIZE
The Fund reserves the right to involuntarily liquidate any shareholder's
account in the Fund if the aggregate net asset value of the shares held in
the
Fund account is less than $500. (If a shareholder has more than one
account in
this Fund, each account must satisfy the minimum account size.) The
Fund, how-
ever, will not redeem shares based solely on market reductions in net
asset
value. Before the Fund exercises such right, shareholders will receive
written
notice and will be permitted 60 days to bring accounts up to the
minimum to
avoid automatic redemption.
PERFORMANCE
YIELD
From time to time, the Fund may advertise its 30 day "yield" for each
Class
of shares. The yield of a Class refers to the income generated by an
invest-
ment in such Class over the 30 day period identified in the
advertisement, and
is computed by dividing the net investment income per share earned by
the
Class during the period by the net asset value per share on the last day
of
the period. This income is "annualized" by assuming that the amount of
income
is generated each month over a one year period and is compounded
semi-annual-
ly. The annualized income is then shown as a percentage of the net asset
val-
ue.
TOTAL RETURN
From time to time, the Fund may include its total return, average
annual
total return and current dividend return in advertisements and/or other
types
of sales literature. These figures are computed separately for Class A and
Class B
31
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
PERFORMANCE (CONTINUED)
shares of the Fund. These figures are based on historical earnings and
are not
intended to indicate future performance. Total return is computed for a
spe-
cific period of time assuming deduction of the maximum sales charge,
if any,
from the initial amount invested and reinvestment of all income dividends
and
capital gains distributions on the reinvestment dates at prices calculated
as
stated in this Prospectus, then dividing the value of the investment at the
end of the period so calculated by the initial amount invested and
subtracting
100%. The standard average annual total return, as prescribed by the
Securi-
ties and Exchange Commission, is derived from this total return which
provides
the ending redeemable value. Such standard total return information may
also
be accompanied with nonstandard total return information for differing
periods
computed in the same manner but without annualizing the total return or
taking
sales charges into account. The Fund calculates current dividend return
for
each Class by annualizing the most recent monthly distribution and
dividing by
the net asset value or the maximum public offering price (including sales
charge) on the last day of the period for which current dividend return
is
presented. The current dividend return for each Class may vary from
time to
time depending on market conditions, the composition of its investment
portfo-
lio and operating expenses. These factors and possible differences in the
methods used in calculating current dividend return should be considered
when
comparing a Class' current return to yields published for other
investment
companies and other investment vehicles. The Fund may also include
comparative
performance information in advertising or marketing its shares. Such
perfor-
mance information may include data from Lipper Analytical Services,
Inc. and
other financial publications. The Fund will include performance data for
Class
A and Class B shares in any advertisement or information including
performance
data of the Fund.
The Fund may from time to time illustrate the benefits of tax-deferral
by
comparing taxable investments to investments made through tax-deferred
retire-
ment plans and the Fund may illustrate in graph or chart form, or
otherwise,
the benefits of the Systematic Investment Plan by comparing investment
made
pursuant to a systematic investment plan to investments made in a rising
mar-
ket.
32
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
Overall responsibility for management and supervision of the Fund
rests with
the Company's Board of Directors. The Directors approve all significant
agree-
ments between the Company and the Fund and companies that furnish
services to
the Fund, including agreements with its distributor, investment adviser,
cus-
todian and transfer agent. The day-to-day operations of the Fund are
delegated
to the Fund's investment manager. The Statement of Additional
Information con-
tains general and background information regarding each Director of the
Fund
and executive officer of the Company.
INVESTMENT ADVISER
The Manager, located at 388 Greenwich Street, New York, New York
10013,
serves as the Fund's investment adviser pursuant to a transfer of the
invest-
ment advisory agreement, effective November 7, 1994, from its affiliate,
Mutual Management Corp. (Mutual Management Corp. and the Manager
are both
wholly-owned subsidiaries of Holdings.) Investment advisory services
continue
to be provided to the Fund by the same portfolio managers who had
provided
services under the agreement with Mutual Management Corp. The
Manager (through
its predecessors entities) has been in the investment counseling business
since 1934 and is a registered investment adviser. The Manager renders
invest-
ment advice to investment companies that had aggregate assets under
management
as of January 31, 1995 in excess of $51.9 billion.
Subject to the supervision and direction of the Fund's Board of
Directors,
the Manager manages the Fund's portfolio in accordance with the Fund's
stated
investment objective and policies, makes investment decisions for the
Fund,
places orders to purchase and sell securities and employs professional
portfo-
lio managers and securities analysts who provide research services to the
Fund. Under an investment advisory agreement, the Fund pays the
Manager a
monthly fee at the annual rate of 0.45% of the value of the Fund's
average
daily net assets up to $500 million and 0.42% of the value of average
daily
net assets thereafter. For the fiscal year ended December 31, 1994, the
Man-
ager was paid investment advisory fees equal to 0.45% of the value of
the
Fund's average daily net assets.
PORTFOLIO MANAGEMENT
George E. Mueller, Jr., Managing Director of the Manager, has served
as the
Investment Officer of the Fund since January 1, 1985, and manages the
day-to-
day operations of the Fund, including making all investment decisions.
33
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
MANAGEMENT OF THE FUND (CONTINUED)
Management's discussion and analysis and additional performance
information
regarding the Fund during the fiscal year ended December 31, 1994 is
included
in the Annual Report dated December 31, 1994. A copy of the Annual
Report may
be obtained upon request and without charge from the Sub-Transfer
Agent or by
writing or calling the Fund at the address or phone number listed on
page one
of this Prospectus.
ADMINISTRATOR
The Manager also serves as the Fund's administrator and oversees all
aspects
of the Fund's administration. For administration services rendered, the
Fund
paid an administration fee at the annual rate of 0.20% of the value of the
Fund's average daily net assets.
SUB-ADMINISTRATOR -- BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts
02108,
serves as the Fund's sub-administrator. Boston Advisors provides
investment
management, investment advisory, administrative and/or
sub-administrative serv-
ices to investment companies which had aggregate assets under
management as of
January 31, 1995, in excess of $69.7 billion.
Boston Advisors calculates the net asset value of the Fund's shares and
gen-
erally assists the Manager in all aspects of the Fund's administration and
operation. Under a sub-administration agreement dated May 5, 1994,
Boston Advi-
sors is paid a portion of the administration fee paid by the Fund to the
Manager at a rate agreed upon from time to time between Boston
Advisors and the
Manager. Prior to May 5, 1994, Boston Advisors served as the Fund's
administrator.
DISTRIBUTOR
PFS is located at 3100 Breckenridge Boulevard, Duluth, Georgia
30199-0062.
PFS distributes shares of the Fund as principal underwriter and as such
con-
ducts a continuous offering pursuant to a "best efforts" arrangement
requiring
PFS to take and pay for only such securities as may be sold to the
public. Pur-
suant to a plan of distribution adopted by the Fund under Rule 12b-1
under the
1940 Act (the "Plan"), PFS is paid an annual service fee with respect to
Class
A and Class B shares of the Fund at the annual rate of [0.25%] of the
average
daily net assets of the respective Class. PFS is also paid an annual
distribu-
tion fee with respect to Class B shares at the annual rate of [0.50%], of
the
34
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
DISTRIBUTOR (CONTINUED)
average daily net assets attributable to that Class. Class B shares that
auto-
matically convert to Class A shares eight years after the date of original
purchase will no longer be subject to distribution fees. The fees are paid
to
PFS which, in turn pays PFS Investments to pay its Investments
Representatives
for servicing shareholder accounts and, in the case of Class B shares, to
cover expenses primarily intended to result in the sale of those shares.
These
expenses include: advertising expenses; the cost of printing and mailing
pro-
spectuses to potential investors; payments to and expenses of Investment
Rep-
resentatives and other persons who provide support services in
connection with
the distribution of shares; interest and/or carrying charges; and indirect
and
overhead costs of PFS Investments associated with the sale of Fund
shares,
including lease, utility, communications and sales promotion expenses.
The payments to PFS Investments Representatives for selling shares of
a
Class include a commission or fee paid by the investor or PFS at the
time of
sale and a continuing fee for servicing shareholder accounts for as long
as a
shareholder remains a holder of that Class. Investments Representatives
may
receive different levels of compensation for selling different Classes of
shares.
PFS Investments may be deemed to be an underwriter for purposes of
the Secu-
rities Act of 1933, as amended. From time to time, PFS or its affiliates
may
also pay for certain non-cash sales incentives provided to PFS
Investments
Representatives. Such incentives do not have any effect on the net
amount
invested. In addition to the reallowances from the applicable public
offering
price described above, PFS may, from time to time, pay or allow
additional
reallowances or promotional incentives, in the form of cash or other
compensa-
tion to PFS Investments Representatives that sell shares of the Fund.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by PFS and the payments
may
exceed distribution expenses actually incurred. The Company's Board of
Direc-
tors will evaluate the appropriateness of the Plan and its payment terms
on a
continuing basis and in doing so will consider all relevant factors,
including
expenses borne by PFS, amounts received under the Plan and proceeds
of the
CDSC.
35
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
ADDITIONAL INFORMATION
The Company was organized as a Maryland corporation pursuant to
Articles of
Incorporation dated September 29, 1981, as amended from time to time.
The Fund
offers to investors purchasing through PFS shares of common stock
currently
classified into two Classes, A and B, with a par value of $.001 per
share. Each
Class represents an identical interest in the Fund's investment portfolio.
As a
result, the Classes have the same rights, privileges and preferences,
except
with respect to: (a) the designation of each Class; (b) the effect of the
respective sales charges for each Class; (c) the distribution and/or service
fees borne by each Class pursuant to the Plan; (d) the expenses allocable
exclusively to each Class; (e) voting rights on matters exclusively
affecting a
single Class; (f) the exchange privilege of each Class; and (g) the
conversion
feature of the Class B shares. The Board of Directors does not anticipate
that
there will be any conflicts among the interests of the holders of the
different
Classes. The Directors, on an ongoing basis, will consider whether any
such
conflict exists and, if so, take appropriate action.
Boston Safe Deposit and Trust Company, an indirect wholly owned
subsidiary of
Mellon, is located at One Boston Place, Boston, Massachusetts 02108
and serves
as custodian of the Fund's investments.
The Shareholder Services Group, Inc. is located at Exchange Place,
Boston,
Massachusetts 02109, and serves as the Company's transfer agent.
PFS Shareholder Services is located at 3100 Breckenridge Blvd., Bldg.
200,
Duluth, Georgia 30199-0062 and serves as the Fund's Sub-Transfer
Agent.
The Company does not hold annual shareholder meetings. There
normally will be
no meeting of shareholders for the purpose of electing Directors unless
and
until such time as less than a majority of the Directors holding office
have
been elected by shareholders. The Directors will call a meeting for any
purpose
upon written request of shareholders holding at least 10% of the
Company's out-
standing shares and the Company will assist shareholders in calling such
a
meeting as required by the 1940 Act. When matters are submitted for
shareholder
vote, shareholders of each Class will have one vote for each full share
owned
and a proportionate, fractional vote for any fractional share held of that
Class. Generally, shares of the Company will be voted on a
Company-wide basis
on all matters except matters affecting only the interests of one Fund or
one
Class of shares.
The Fund sends its shareholders a semi-annual report and an audited
annual
report, each of which includes a list of the investment securities held by
the
36
<PAGE>
SMITH BARNEY
Investment Grade Bond Fund
ADDITIONAL INFORMATION (CONTINUED)
Fund at the end of the reporting period. In an effort to reduce the Fund's
printing and mailing costs, the Company plans to consolidate the mailing
of its
semi-annual and annual reports by household. This consolidation means
that a
household having multiple accounts with the identical address of record
will
receive a single copy of each report. In addition, the Company also plans
to
consolidate the mailing of its Prospectuses so that a shareholder having
multi-
ple accounts (i.e., individual, IRA and/or Self-Employed Retirement Plan
accounts) will receive a single Prospectus annually. Shareholders who do
not
want this consolidation to apply to their accounts should contact the Sub-
Transfer Agent.
37
<PAGE>
Smith Barney
Investment
Grade Bond
Fund
3100 Breckenridge Blvd, Bldg 200
Duluth, Georgia 30199-0062
FDXXXX XX
<PAGE>
SMITH BARNEY INVESTMENT FUNDS INC.
388 Greenwich Street
New York, New York 10013
STATEMENT OF ADDITIONAL INFORMATION
PART B
The Statement of Additional Information dated May 1, 1995, filed with
the Post-Effective Amendment No. 38 to the Fund's Registration
Statement on Form N-1A, is incorporated in its entirety by reference.
<PAGE>
SMITH BARNEY INVESTMENT FUNDS INC.
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Financial Highlights
Included in Part B:
The Registrant's (Investment Grade Bond Fund) Annual
Report for the fiscal year ended
December 31,
1994 and the Report of Independent Accountants dated
February 10, 1995 is
incorporated by reference to the Rule 30(b)2-1
filed on February 27,
1995
as Accession # 0000053798-95-000098.
<PAGE>
Included in Part C:
Consent of Auditors
(b) Exhibits
All references are to the Registrant's registration
statement on Form N-1A (the "Registration Statement") as
filed with the SEC on October 2, 1981 (File Nos. 2-74288 and
811-3275).
(1) Articles of Restatement dated September 17, 1993 to Registrant's
Articles of Incorporation dated September 28, 1981, Articles of
Amendment
dated October 14, 1994, Articles Supplementary, Articles of
Amendments and
Certificates of Correction dated November 7, 1994 are incorporated by
reference to Post-Effective Amendment No. 37 to the Registration
Statement
filed on November 7, 1994 ("Post-Effective Amendment No. 37").
(2) Registrant's By-Laws, as amended on September 30, 1992 are
incorporated by reference to Post-Effective Amendment No. 30 to the
Registration Statement filed on April 30, 1993.
(3) Not Applicable.
(4) Registrant's form of stock certificate for Class A, Class B and
Class
D are incorporated by reference to Post-Effective Amendment No. 27 to
the
Registration Statement filed on October 23, 1992.
(5)(a)Investment Advisory Agreement dated July 30, 1993, between
the
Registrant on behalf of Smith Barney Shearson Investment Grade Bond
Fund,
Smith Barney Shearson Government Securities Fund and Smith Barney
Shearson
Special Equities Fund and Greenwich Street Advisors is incorporated by
reference to the Registration Statement filed on Form N-14 on September
2,
1993. File No. 33-50153.
(b)Investment Advisory Agreement dated April 8, 1994, between
the
Registrant on behalf of Smith Barney Shearson European Fund and
Smith,
Barney Advisers, Inc. is incorporated by reference to Post-Effective
Amendment No. 35 to the Registration Statement filed on June 23, 1994.
(c)Transfer of Investment Advisory Agreement dated November 7,
1994, between the Registrant, Greenwich Street Advisors and Smith
Barney
Mutual Funds Management Inc. ("SBMFM") on behalf of Smith Barney
Investment
Grade Bond Fund, Smith Barney Government Securities Fund and Smith
Barney
Special Equities Fund will be filed by amendment.
(d)Transfer of Investment Advisory Agreement dated November 7,
1994, between the Registrant, Smith, Barney Advisers, Inc. ("SBA") and
SBMFM on behalf of Smith Barney European Fund will be filed by
amendment.<PAGE>
(e)Investment Advisory Agreements on behalf of Smith Barney
Growth
Opportunity Fund and Smith Barney Managed Growth Fund.*
(6)(a)Distribution Agreement dated July 30, 1993, between the
Registrant and Smith Barney Shearson Inc. is incorporated by reference
to
the registration statement filed on Form N-14 on September 2, 1993. File
No. 33-50153.
(b)Supplement to the Distribution Agreement between the Registrant
and Smith Barney Inc. on behalf of Smith Barney Growth Opportunity
Fund and
Smith Barney Managed Growth Fund will be filed by amendment.
(c)Form of Distribution Agreement between the Registrant and PFS
Distributors on behalf of Smith Barney Investment Funds Inc.*
(7) Not Applicable.
(8)(a)Custodian Agreement with Boston Safe Deposit and Trust
Company is incorporated by reference to Post-Effective Amendment No.
20 as
filed on September 6, 1988.
(b)Custodian Agreement with PCN Bank, National Associates will
be
filed by amendment.
(9)(a)Administration Agreement dated May 5, 1994, between the
Registrant and SBA is incorporated by reference to Post-Effective
Amendment
No. 37.
(b) Sub-Administration Agreement dated May 5, 1994, between the
Registrant, SBA and The Boston Company Advisors, Inc. is incorporated
by
reference to Post-Effective Amendment No. 37.
(c) Transfer Agency and Registrar Agreement dated August 5, 1993
with The
Shareholder Services Group, Inc. ("TSSG") is incorporated by reference
to
Post-Effective Amendment No. 31 as filed on December 22, 1993
("Post-
Effective Amendment No. 31").
(d) Supplement to the Transfer Agency and Registrar Agreement
between the
Registrant and TSSG on behalf of Smith Barney Growth Opportunity
Fund and
Smith Barney Managed Growth Fund will be filed by amendment.
(e)Sub-Transfer Agency Agreement between the Registrant and PFS
Shareholders Services on behalf of Smith Barney Investment Funds Inc.*
(10) Not Applicable.
(11) Consent of Independent Accountants.*
- -------------------------------
* Filed herewith<PAGE>
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15)(a)Amended Services and Distribution Plans pursuant to Rule 12b-1
between the Registrant on behalf of Smith Barney Investment Grade
Bond
Fund, Smith Barney Government Securities Fund, Smith Barney Special
Equities Fund and Smith Barney European Fund and Smith Barney, Inc.
("Smith
Barney") are incorporated by reference to Post-Effective Amendment No.
37.
(b)Form of Services and Distribution Plans pursuant to Rule 12b-1
between the Registrant on behalf of Smith Barney Growth Opportunity
Fund
and Smith Barney Managed Growth Fund.*
(16) Performance Data is incorporated by reference to Post-Effective
Amendment No. 22 as filed on May 1, 1989.
(17) Powers of Attorney are incorporated by reference to
Post-Effective
Amendment No. 31.
Item 25 Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
(2) (1)
Number of Record Holders as of May 31, 1995 Title of Class
Common Stock par value Class A Class B Class C
$.001 per share
Special Equities 18,073 15,095 165
Fund
Investment Grade 16,134 16,080 99
Bond Fund
Government 32,891 12,046 48
Securities Fund
<PAGE>
Item 27. Indemnification
The response to this item is incorporated by reference to Pre-
Effective Amendment No. 1 to the registration statement filed on Form
N-14
on October 8, 1993 (File No. 33-50153).
Item 28(a) Business and Other Connections of Investment Adviser
Investment Adviser - - Smith Barney Mutual Funds Management Inc.,
formerly
known as Smith, Barney Advisers, Inc. ("SBMFM")
SBMFM was incorporated in December 1968 under the laws of the State
of
Delaware. SBMFM is a wholly owned subsidiary of Smith Barney
Holdings Inc.
("Holdings") (formerly known as Smith Barney Shearson Holdings Inc.),
which
in turn is a wholly owned subsidiary of The Travelers Inc. (formerly
known
as Primerica Corporation) ("Travelers"). SBMFM is registered as an
investment adviser under the Investment Advisers Act of 1940 (the
"Advisers
Act").
The list required by this Item 28 of officers and directors of SBMFM
together with information as to any other business, profession, vocation
or
employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to
Schedules A and D of FORM ADV filed by SBMFM pursuant to the
Advisers Act
(SEC File No. 801-8314).
Prior to the close of business on November 7, 1994, Greenwich Street
Advisors served as investment adviser. Greenwich Street Advisors,
through
its predecessors, has been in the investment counseling business since
1934
and is a division of Mutual Management Corp. ("MMC"). MMC was
incorporated
in 1978 and is a wholly owned subsidiary of Smith Barney Holdings Inc.
(formerly known as Smith Barney Shearson Holdings Inc.) ("Holdings"),
which
is in turn a wholly owned subsidiary of Travelers Group Inc. (formerly
known
as Primerica Corporation) ("Travelers"). The list required by this Item
28
of officers and directors of MMC and Greenwich Street Advisors,
together
with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and
directors during the past two fiscal years, is incorporated by reference to
Schedules A and D of FORM ADV filed by MMC on behalf of
Greenwich Street
Advisors pursuant to the Advisers Act (SEC File No. 801-14437).
Prior to the close of business on July 30, 1993 (the "Closing"), Shearson
Lehman Advisors, a member of the Asset Management Group of
Shearson Lehman
Brothers Inc. ("Shearson Lehman Brothers"), served as the Registrant's
investment adviser. On the Closing, Travelers and Smith Barney Inc.
(formerly known as Smith Barney Shearson Inc.) acquired the domestic
retail
brokerage and asset management business of Shearson Lehman Brothers,
which
included the business of the Registrant's prior investment adviser.
Shearson Lehman Brothers was a wholly owned subsidiary of Shearson
Lehman
Brothers Holdings Inc. ("Shearson Holdings"). All of the issued and
outstanding common stock of Shearson Holdings (representing 92% of
the
voting stock) was held by American Express Company. Information as
to any
past business vocation or employment of a substantial nature engaged in
by
officers and directors of Shearson Lehman Advisors can be located in
Schedules A and D of FORM ADV filed by Shearson Lehman Brothers
on behalf
of Shearson Lehman Advisors prior to July 30, 1993. (SEC FILE NO.
801-
3701)
6/--/95
Item 29. Principal Underwriters
Smith Barney Inc. ("Smith Barney") currently acts as distributor for
Smith
Barney Managed Municipals Fund Inc., Smith Barney New York
Municipals Fund
Inc., Smith Barney California Municipals Fund Inc., Smith Barney
Massachusetts Municipals Fund, Smith Barney Aggressive Growth Fund
Inc., Smith Barney Appreciation Fund Inc., Smith Barney Principal
Return Fund, Smith Barney Managed Governments
Fund Inc., Smith Barney Income Funds, Smith Barney Equity Funds,
Smith
Barney Investment Funds Inc., Smith Barney Precious Metals and
Minerals
Fund Inc., Smith Barney Telecommunications Trust, Smith Barney
Arizona
Municipals Fund Inc., Smith Barney New Jersey Municipals Fund Inc.,
The USA
High Yield Fund N.V., Garzarelli Sector Analysis Portfolio N.V., Smith
Barney Fundamental Value Fund Inc., Smith Barney Series Fund,
Consulting
Group Capital Markets Funds, Smith Barney Income Trust, Smith
Barney
Adjustable Rate Government Income Fund, Smith Barney Florida
Municipals
Fund, Smith Barney Oregon Municipals Fund, Smith Barney Funds,
Inc., Smith
Barney Muni Funds, Smith Barney World Funds, Inc., Smith Barney
Money
Funds, Inc., Smith Barney Tax Free Money Fund, Inc., Smith Barney
Variable
Account Funds, Smith Barney U.S. Dollar Reserve Fund (Cayman),
Worldwide
Special Fund, N.V., Worldwide Securities Limited, (Bermuda), Smith
Barney
International Fund (Luxembourg) and various series of unit investment
trusts.
Smith Barney is a wholly owned subsidiary of Smith Barney Holdings
Inc. (formerly known as Smith Barney Holdings Inc.), which in turn is
a
wholly owned subsidiary of The Travelers Inc. (formerly known as
Primerica
Corporation) ("Travelers"). On June 1, 1994, Smith Barney changed
its
name from Smith Barney Shearson Inc. to its current name. The
information
required by this Item 29 with respect to each director, officer and partner
of Smith Barney is incorporated by reference to Schedule A of FORM
BD filed
by Smith Barney pursuant to the Securities Exchange Act of 1934 (SEC
File
No. 812-8510).
PFS Distributors ("PFS") currently acts as distributor for Common Sense
Growth;
Common Sense Growth/Income; Common Sense Government; Common
Sense Money Market;
Common Sense Municipal Bond; CSII Aggressive Opportunity - A; CSII
Aggressive
Opportunity - B; CSII Growth - A; CSII Growth - B; CSII
Growth/Income - A;
CSII Growth/Income - B; CSII Government - A; CSII Government - B;
CSII
Emerging Growth - A; CSII Emerging Growth - B; CSII International
Equity - A;
and CSII International Equity - B.<PAGE>
On May 8, 1995, PFS changed its name from Common Sense
Distributors to PFS
Distributors, its current name. The information required by this Item 29
with
respect to each director, officer and partner of PFS is incorporated by
reference
to Schedule A of FORM BD, filed by PFS pursuant to the Securities
Exchange Act
of 1934 (SEC File No. 8-37352).
Item 30. Location of Accounts and Records
(1) Smith Barney Investment Funds Inc.
3100 Breckenridge Blvd., Bldg 200
Duluth, Georgia 30199-0062
(2) Smith Barney Mutual Funds Management Inc.
388 Greenwich Street
New York, New York 10013
(3) PFS Shareholders Services
3100 Breckenridge Blvd., Bldg 200
Duluth, Georgia 30199-0062
(4) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA 19103
(5) Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108
(6) The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
The Registrant hereby undertakes to furnish to each person to
whom a
prospectus of any series of the Registrant is delivered a copy of the
Registrant's latest annual report, upon request and without charge.
485(b) Certification
The Registrant hereby certifies that it meets all requirements for
effectiveness pursuant to Rule 485(b) under the Securities Act of 1933,
as
amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant, SMITH BARNEY INVESTMENT FUNDS INC., has duly
caused
this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the
City of New York, State of New York on the --th day of June, 1995.
SMITH BARNEY INVESTMENT FUNDS INC.
By: /s/ Heath B.
McLendon*
Heath B.
McLendon
Chief Executive
Officer
WITNESS our hands on the date set forth below.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment to the Registration Statement
has been
signed below by the following persons in the capacities and on the
dates indicated.
Signature Title
Date
/s/ Heath B. McLendon* Chairman of the Board
6/--/95
Heath B. McLendon (Chief Executive Officer)
/s/ Lewis E. Daidone* Senior Vice President and
6/--/95
Lewis E. Daidone Treasurer (Chief Financial
and Accounting Officer)
/s/ Paul R. Ades* Director
6/--/95
Paul R. Ades
/s/ Herbert Barg* Director
6/--/95
Herbert Barg
/s/ Alger B. Chapman* Director
6/--/95
Alger B. Chapman
/s/ Dwight B. Crane* Director
6/--/95
Dwight B. Crane
<PAGE>
/s/ Frank Hubbard* Director
6/--/95
Frank Hubbard
/s/ Allan R. Johnson* Director
6/--/95
Allan R. Johnson
/s/ Ken Miller* Director
6/--/95
Ken Miller
/s/ John F. White* Director
6/--/95
John F. White
* Signed by Lee D. Augsburger, their duly authorized attorney-in-
fact, pursuant to power of attorney dated November 3, 1994.
/s/ Lee D. Augsburger
Lee D. Augsburger
<PAGE>
EXHIBITS
Exhibit No. Description of Exhibits
1 Form of Investment Advisory
Agreement between the
Registrant and Smith Barney
Mutual Funds Management Inc.
2 Form of Services and
Distribution Plan between the
Registrant and each of Managed
Growth Fund and Growth
Opportunity Fund, both separate
series of the Registrant
3 Form of Sub-Transfer Agency
Agreement between the
Registrant and PFS Shareholders
Services
4 Form of Distribution Agreement
between the Registrant and PFS
Distributors
5 Consent of Coopers & Lybrand
L.L.P.
6 Cover Letter to SEC
FORM OF INVESTMENT ADVISORY AND ADMINISTRATION
AGREEMENT
June [ ], 1995
Smith Barney Mutual Fund Management, Inc.
388 Greenwich Street
New York, NY 10013
Dear Sirs:
This Investment Advisory and Administration Agreement (the
"Agreement") is made on this [ ] day of June, 1995, by and between
Smith Barney Inc.*, a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Fund"), and Smith Barney Mutual
Fund Management, Inc. ("SBMFM") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in its: (i) Master Trust Agreement, as
amended from time to time (the "Master Trust Agreement"); (ii)
Prospectus (the "Prospectus"); and (iii) Statement of Additional
Information (the "Statement") filed with the Securities and
Exchange Commission (the "SEC") as part of the Fund's
Registration Statement on Form N-lA, as amended from time to
time, and in such manner and to such extent as may from time
to time be approved by the Board of Trustees of the Fund (the
"Board"). Copies of the Fund's Prospectus, the Statement and
the Master Trust Agreement have been or will be submitted to
SBMFM. The Fund desires to employ and hereby appoints
SBMFM to act as its investment adviser and administrator.
SBMFM accepts the appointment and agrees to furnish the
services for the compensation set forth below. SBMFM is hereby
authorized to retain third parties and is hereby authorized to
delegate some or all of its duties and obligations hereunder to
such persons, provided such persons shall remain under the
general supervision of SBMFM.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board, SBMFM
will: (a) manage the Fund's portfolio in accordance with the
Fund's investment objective and policies as stated in the
Prospectus and the Statement; (b) make investment decisions for
the Fund; (c) place purchase and sale orders for portfolio
transactions for the Fund; and (d) employ professional portfolio
managers and securities analysts to provide research services to
the Fund. In providing those services, SBMFM will conduct a
continual program of investment, evaluation and, if appropriate,
sale and reinvestment of the Fund's assets.
*Security and Growth Series 2000 is a separate series
of Smith Barney Principal Return
Fund; Growth Opportunity Fund and
Managed Growth Fund are both separate series of
Smith Barney Investment Funds Inc.
<PAGE>
3. Services as Administrator
Subject to the supervision and direction of the Board, SBMFM
will: (a) assist in supervising all aspects of the Fund's
operations; (b) supply the Fund with office facilities (which may
be in SBMFM's own offices), statistical and research data, data
processing services, clerical, accounting and bookkeeping
services, including, but not limited to, the calculation of (i) the
net asset value of shares of the Fund, (ii) applicable contingent
deferred sales charges and similar fees and charges, and (iii)
distribution fees, internal auditing and legal services, internal
executive and administrative services, and stationary and office
supplies; and (c) prepare reports to shareholders of the Fund, tax
returns and reports to and filings with the SEC and state blue sky
authorities.
4. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Fund will pay SBMFM, on the first business day
of each month, a fee for the previous month at an annual rate of
[ ] percent ([ ]%)* of the Fund's average daily net assets. The
fee for the period from the date the Fund commences its
investment operations to the end of the month during which the
Fund commences its investment operations shall be pro-rated
according to the proportion that such period bears to the full
monthly period. Upon any termination of this Agreement before
the end of any month, the fee for such part of that month shall
be pro-rated 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 SBMFM, the value of the Fund's net assets shall
be computed at the times and in the manner specified in the
Fund's Prospectus and/or the Statement, as from time to time in
effect.
5. Expenses
SBMFM 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: investment advisory, sub-investment advisory and
administration fees; charges of custodians and transfer and
dividend disbursing agents; fees for necessary professional
services, such as the Fund's and Board members' proportionate
share of insurance premiums, professional associations, dues
and/or assessments; and brokerage services, including taxes,
interest and commissions; costs of preparing and printing
prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders;
the costs of regulatory compliance, such as SEC fees and state
blue sky qualifications fees; outside auditing and legal expenses
and costs associated with maintaining the Fund's legal existence;
costs of shareholders' reports and meetings of the officers or
Board; fees of the members of the Board who are not officers,
directors or employees of Smith Barney, Inc. or its affiliates or
any person who is an affiliate of any person to whom duties may
be delegated hereunder.
* Please see Exhibit A attached hereto for the fees
associated
with each of Security and
Growth Series 2000, Growth Opportunity
Fund and Managed Growth Fund.<PAGE>
6. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement, but excluding
distribution fees, interest, taxes, brokerage and, if permitted by
state securities commissions, extraordinary expenses) exceed the
expense limitations of any state having jurisdiction over the
Fund, SBMFM will reimburse the Fund for that excess expense
to the extent required by state law in the same proportion as its
respective fees bear to the combined fees for investment advice
and administration. The expense reimbursement obligation of
SBMFM will be limited to the amount of its fees hereunder.
Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis.
7. Brokerage
In selecting brokers or dealers to execute transactions on behalf
of the Fund, SBMFM will seek the best overall terms available.
In assessing the best overall terms available for any transaction,
SBMFM 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, and in evaluating the best overall terms
available, SBMFM 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, as amended) provided to
the Fund and/or other accounts over which SBMFM or its
affiliates exercise investment discretion.
8. Information Provided to the Fund
SBMFM will keep the Fund informed of developments materially
affecting the Fund's portfolio, and will, on its own initiative,
furnish the Fund from time to time with whatever information
SBMFM believes is appropriate for this purpose.
9. Standard of Care
SBMFM shall exercise its best judgment in rendering the
services listed in paragraphs 2 and 3 above. SBMFM 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
SBMFM against any liability to the Fund or to its shareholders
to which SBMFM would otherwise be subject by reason of
willful malfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of SBMFM's reckless
disregard of its obligations and duties under this Agreement.
10. Services to Other Companies or Accounts
The Fund understands that SBMFM now acts, will continue to
act and may act in the future as: investment adviser to fiduciary
and other managed accounts, as well as to other investment
companies; and acts as administator to one or more other
investment companies, and the Fund has no objection to
SBMFM's so acting, provided that whenever the Fund and one
or more other investment companies advised by SBMFM 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. 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 SBMFM to assist
in the performance of SBMFM'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 SBMFM or any affiliate of SBMFM to engage in
and devote time and attention to other businesses or to render
services of whatever kind or nature.
l1. Term of Agreement
This Agreement shall become effective as of the date the Fund
commences its investment operations and 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 or (ii) a vote of a "majority" (as 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 or by
proxy 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 or by vote of holders of a
majority of the Fund's shares, or upon 90 days' written notice,
by SBMFM. This Agreement will also terminate automatically
in the event of its assignment (as defined in the 1940 Act).
12. Representation by the Fund
The Fund represents that a copy of the Master Trust Agreement
is on file with the Secretary of the Commonwealth of
Massachusetts and with the City of Boston.
13. Indemnification
The Fund agrees to indemnify SBMFM and its officers,
directors, employees, affiliates, controlling persons, agents
(including persons to whom responsibilities are delegated
hereunder) against any loss, claim, expense or cost of any kind
(including reasonable attorney's fees) resulting or arising in
connection with this Agreement, or from the performance or
failure to perform any act hereunder, provided that no such
indemnification shall be available if the indemnitee violated the
standard of care in paragraph 8 above. This indemnification shall
be limited by the 1940 Act and relevant state law. Each
indemnitee shall be entitled to advance of its expenses in
accordance with the requirements of the 1940 Act and the rules,
regulations and interpretations thereof as in effect from time to
time.
<PAGE>
14. Limitation of Liability
The Fund and SBMFM agree that the obligations of the Fund
under this Agreement shall not be binding upon any of the Board
members, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Fund individually, but are
binding only upon the assets and property of the Fund, as
provided in the Master Trust Agreement. The execution and
delivery of this Agreement have been duly authorized by the
Fund and SBMFM, and signed by an authorized officer of each,
acting as such. Neither the authorization by the Board members
of the Fund, nor the execution and delivery by the officer of the
Fund shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally,
but shall bind only the assets and property of the Fund as
provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning the enclosed
copy of this Agreement to us.
Very truly yours,
Smith Barney Inc.
By:
Title:
Accepted:
Smith Barney Mutual Fund Management, Inc.
By:
Title:
INVESTMENT ADVISORY AND ADMINISTRATION
AGREEMENT
Exhibit A
SMITH BARNEY, INC.
Name of Fund Fee
Growth Opportunity Fund 1.00%
Managed Growth Fund 0.85%
<PAGE>
SERVICES AND DISTRIBUTION PLAN
Smith Barney Investment Funds Inc.*
This Services and Distribution Plan (the "Plan") is adopted in
accordance with Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), by Smith
Barney Investment Funds Inc., a corporation organized under the laws
of the state of Maryland (the "Company"), in respect of its Managed
Growth Fund and its Growth Opportunity Fund (hereinafter
collectively referred to as the "Funds"), subject to the following terms
and conditions:
Section 1. Annual Fee.
(a) Class A Service Fee. The Funds will pay to the
distributor of its shares, Smith Barney, Inc., a
corporation organized under the laws of the State of
Delaware (the "Distributor"), a service fee under the
Plan at an annual rate of 0.25% of the average daily
net assets of the Funds attributable to the Class A
shares (the "Class A Service Fee").
(b) Service Fee for Class B shares. The Funds will pay to
the Distributor a service fee under the Plan at the
annual rate of 0.25% of the average daily net assets of
the Funds attributable to the Class B shares (the "Class
B Service Fee").
(c) Service Fee for Class C shares. The Funds will pay to
the Distributor a service fee under the Plan at the
annual rate of 0.25% of the average daily net assets of
the Funds attributable to the Class C shares (the "Class
C Service Fee", and collectively with the Class A
Service Fee and the Class B Service Fee, the "Service
Fees").
(d) Distribution Fee for Class B shares. In addition to the
Class B Service Fee, the Funds will pay the
Distributor a distribution fee under the Plan at the
annual rate of 0.75%] of the average daily net assets
of the Funds attributable to the Class B shares (the
"Class B Distribution Fee").
(e) Distribution Fee for Class C shares. In addition to the
Class C Service Fee, the Funds will pay the
Distributor a distribution fee under the Plan at the
annual rate of 0.75% of the average daily net assets of
the Funds attributable to the Class C shares (the "Class
C Distribution Fee", and collectively with the Class B
Distribution Fee, the "Distribution Fees").
(f) Payment of Fees. The Service Fees and Distribution
Fees will be calculated daily and paid monthly by the
Funds with respect to the foregoing classes of the
Funds' shares (each a "Class" and together, the
"Classes") at the annual rates indicated above.
Section 2. Expenses Covered by the Plan.
With respect to expenses incurred by each Class, its respective
Service Fees and/or Distribution Fees may be used by the Distributor:
(a) costs of printing and distributing the Funds' prospectus, statement
of additional information and reports to prospective investors in the
Funds; (b)
* Managed Growth Fund and Growth Opportunity Fund
are both separate series of
Smith Barney Investment Funds Inc.<PAGE>
costs involved in preparing, printing
and distributing sales literature
pertaining to the Funds; (c) an allocation of overhead and other branch
office distribution-related expenses of the Distributor; (d) payments
made to, and expenses of, Smith Barney financial consultants and
other persons who provide support services to the Funds' shareholders
in connection with the distribution of the Funds' shares, including but
not limited to, office space and equipment, telephone facilities,
answering routine inquires regarding the Funds and its operations,
processing shareholder transactions, forwarding and collecting proxy
material, changing dividend payment elections and providing any other
shareholder services not otherwise provided by the Funds' transfer
agent; and (e) accruals for interest on the amount of the foregoing
expenses that exceed the Distribution Fee and, in the case of Class B
shares, the contingent deferred sales charge received by the
Distributor; provided, however, that the Distribution Fees may be
used by the Distributor only to cover expenses primarily intended to
result in the sale of the Funds' Class B and C shares, including,
without limitation, payments to Distributor's financial consultants at
the time of the sale of Class B and C shares. In addition, Service Fees
are intended to be used by the Distributor primarily to pay its financial
consultants for servicing shareholder accounts, including a continuing
fee to each such financial consultant, which fee shall begin to accrue
immediately after the sale of such shares.
Section 3. Approval by Shareholders
The Plan will not take effect, and no fees will be payable in
accordance with Section 1 of the Plan, with respect to a Class until the
Plan has been approved by a vote of at least a majority of the
outstanding voting securities of the Class. The Plan will be deemed to
have been approved with respect to a Class, so long as a majority of
the outstanding voting securities of the Class votes for the approval of
the Plan, notwithstanding that: (a) the Plan has not been approved by
a major of the outstanding voting securities of any other Class; or (b)
the Plan has not been approved by a majority of the outstanding voting
securities of the Funds.
Section 4. Approval by Directors.
Neither the Plan nor any related agreements will take effect
until approved by a majority vote of both (a) the Board of Directors
and (b) those Directors who are not interested persons of the Company
and who have no direct or indirect financial interest in the operation
of the Plan or in any agreements related to it (the "Qualified
Directors"), cast in person at a meeting called for the purpose of
voting on the Plan and the related agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect with respect to each Class
until [ ], 1995 and thereafter for successive twelve-month
periods with respect to each Class; provided, however, that such
continuance is specifically approved at least annually by the Directors
of the Funds [and by a majority of the Qualified Directors.
Section 6. Termination.
The Plan may be terminated at any time with respect to a
Class (i) by the Funds without the payment of any penalty, by the vote
of a majority of the outstanding voting securities of such Class or (ii)
by a majority vote of the Qualified Directors. The Plan may remain in
effect with respect to a particular Class even if the Plan has been
terminated in accordance with this Section 6 with respect to any other
Class.
<PAGE>
Section 7. Amendments.
The Plan may not be amended with respect to any Class so as
to increase materially the amounts of the fees described in Section 1
above, unless the amendment is approved by a vote of holders of at
least a majority of the outstanding voting securities of that Class. No
material amendment to the Plan may be made unless approved by the
Funds' Board of Directors in the manner described in Section 4
above.
Section 8. Selection of Certain Directors.
While the Plan is in effect, the selection and nomination of the
Funds' Directors who are not interested persons of the Funds will be
committed to the discretion of the Directors then in office who are not
interested persons of the Funds.
Section 9. Written Reports
In each year during which the Plan remains in effect, any
person authorized to direct the disposition of monies paid or payable
by the Funds pursuant to the Plan or any related agreement will
prepare and furnish to the Funds' Board of Directors and the Board
will review, at least quarterly, written reports complying with the
requirements of the Rule, which set out the amounts expended under
the Plan and the purposes for which those expenditures were made.
Section 10. Preservation of Materials.
The Funds will preserve copies of the Plan, any agreement
relating to the Plan and any report made pursuant to Section 9 above,
for a period of not less than six years (the first two years in an easily
accessible place) from the date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be deemed to have
the same meaning that those terms have under the rules and
regulations under the 1940 Act, subject to any exemption that may be
granted to the Funds under the 1940 Act, by the Securities and
Exchange Commission.
IN WITNESS WHEREOF, the Funds have executed the Plan
as of May 1, 1995.
SMITH BARNEY
INVESTMENT FUNDS INC.
By:____________________________________
Heath B. McLendon
Chairman of the Board
FORM OF
SUB-TRANSFER AGENCY AGREEMENT
AGREEMENT made as of the day of 1995 by and
between Smith Barney Investment Funds, Inc. (collectively, the
"Funds") and PFS Shareholders Services (the "Sub-Transfer
Agent").
WITNESSETH:
WHEREAS, the Funds desire that Sub-Transfer Agent be
retained to perform certain recordkeeping and accounting
services and functions with respect to transactions in Fund
shares ("Shares") made by shareholders of the Funds (the
"Shareholders") when with respect to each Fund the Sub-
Transfer Agent maintains with the Fund's transfer agent
("Transfer Agent") a single master shareholder account with
respect to the Shareholders; and
WHEREAS, Sub-Transfer Agent desires to provide such
services on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the following
premises and mutual covenants, the parties agree as follows:
1. Services Provided by Sub-Transfer Agent
When and to the extent requested by the Funds, Sub-Transfer
Agent agrees to perform recordkeeping and accounting services
and functions with respect to transactions in Shares made by the
Shareholders when with respect to each Fund the Sub-Transfer
Agent maintains with the Transfer Agent a single master
shareholder account. To the extent requested, Sub-Transfer will
provide the following services:
A. Maintain separate records for each Shareholder
reflecting Shares purchased, redeemed and exchanged on
behalf of such Shareholder and outstanding balances of
Shares owned by or for the benefit of such Shareholder.
B. Prepare and transmit to Shareholders periodic account
statements indicating the number of Shares of each Fund
owned by or for the benefit of Shareholders and
purchases, redemptions and exchanges made on behalf of
Shareholders.
C. Transmit to Shareholders copies of proxy materials,
periodic reports and other materials relating to the
Funds.
D. With respect to each Shareholder, aggregate all
purchase, redemption and exchange orders made by or
on behalf of the Shareholders and transmit instructions
based on such aggregate orders ("Instructions") to the
Transfer Agent for acceptance.
E. Transmit to the Shareholders confirmations of
transactions made in accordance with Instructions.
<PAGE>
F. Provide to the Funds, the Transfer Agent and/or other
parties designated by them such other information
relating to transactions in and holdings of Shares by or
on behalf of the Shareholders as is reasonably requested.
G. Arrange for the delivery to the Transfer Agent of
appropriate documentation and, in the case of purchase
orders, payment, in connection with each aggregate order
transmitted to the Transfer Agent.
2. Appointment as Agent for Limited Purpose
Sub-Transfer Agent shall be deemed the be agent of each Fund
for the sole and limited purpose of receiving purchase,
redemption and exchange orders from Shareholders and
transmitting corresponding Instructions to the Transfer Agent.
Except as provided specifically herein, neither Sub-Transfer
Agent nor any person to which Sub-Transfer Agent may
delegate any of its duties hereunder shall be or hold itself out as
an agent of the Transfer Agent or any Fund.
3. Delegation by Sub-Transfer Agent
With respect to any Shareholder, Sub-Transfer Agent may
delegate some or all of its duties under this Agreement to other
parties which after reasonable inquiry Sub-Transfer Agent deems
to be competent to assume such duties. In the event of any such
delegation, Sub-Transfer Agent shall enter into a written
agreement with the delegatee in which the delegatee will, among
other things:
A. agree to forward Instructions to the Transfer Agent
within such time periods as are specified by the Transfer
Agent, the Fund's prospectus and applicable law and
regulation; and
B. represent and warrant that it is duly registered as
required under all federal and state securities laws.
4. Records and Reporting
Sub-Transfer Agent will maintain and preserve all records as
required by law in connection with its provision of services
under this Agreement. Upon the reasonable request of the
Funds or the Transfer Agent, Sub-Transfer Agent will provide
copies of: historical records relating to transactions involving the
Funds and Shareholders; written communications regarding the
Funds to or from Shareholders; and other materials relating to
the provision of services by Sub-Transfer under this Agreement.
Sub-Transfer Agent will comply with any reasonable request for
such information and documents made by the board of directors
of the Funds or any governmental body or self-regulatory
organization. Sub-Transfer Agent agrees that it will permit the
Funds, the Transfer Agent or their representatives to have
reasonable access to its personnel and records in order to
facilitate the monitoring of the quality of the services provided
by Sub-Transfer Agent. Notwithstanding anything herein to the
contrary, Sub-Transfer Agent shall not be required to provide
the names and addresses of Shareholders to the Funds or the
Transfer Agent, unless applicable law or regulation otherwise
requires.
<PAGE>
5. Sub-Transfer Agent's Ability to Provide Services
Sub-Transfer Agent agrees to notify the Funds promptly if for
any reason it is unable to perform its obligations under this
Agreement.
6. Compensation
A. In consideration of performance of the services by
Sub-Transfer Agent hereunder and the costs it will incur
in providing those services, each Fund agrees to
reimburse Sub-Transfer for its costs (including payments
to delegatees) in amounts that do not exceed those
indicated in the maximum reimbursement schedule
attached as Schedule A hereto. With respect to any
Shareholder, to the extent Sub-Transfer Agent delegates
any obligations hereunder to a third party, Sub-Transfer
Agent will negotiate in good faith with such third party
delegatee regarding the fees to be paid to the delegatee.
Sub-Transfer Agent, and not the Funds, will be solely
responsible for compensating such a delegatee. If as a
result of its fee negotiations with such a delegatee Sub-
Transfer Agent is required to pay the delegatee less than
would be the case if Exhibit A were the delegatee's fee
schedule, Sub-Transfer Agent will reduce the amount of
compensation it receives from the Funds hereunder by
the amount of such differential.
B. The Funds agree to reimburse Sub-Transfer Agent or
its delegatees for their reasonable out-of-pocket costs
incurred in connection with mailings to Shareholders of
materials as described in Paragraph 1 hereto.
C. Sub-Transfer Agent will permit the Funds or their
representatives (including counsel and independent
accountants) with reasonable access to its records to
enable the Funds to verify that Sub-Transfer Agent's
changes to the Funds hereunder comply with the
provisions of this Agreement. Such access shall include,
but not be limited to, up to four on-site inspections of
Sub Transfer Agent's records each year.
7. Indemnification
Sub-Transfer Agent shall indemnify and hold harmless each
Fund from and against any and all losses and liabilities that any
one or more of them may incur, including without limitation
reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance of Sub-Transfer
Agent or any of its delegatees of its responsibilities under this
Agreement; excluding, however, any such claims, suits, loss,
damage or costs caused by, contributed to or arising from any
noncompliance by any of the Funds with their obligations under
this Agreement, as to which the Funds shall indemnify, hold
harmless and defend Sub-Transfer Agent on the same basis as
set forth above.
8. Termination
With respect to any Fund, this Agreement may be terminated at
any time by Sub-Transfer Agent or that Fund upon 30 days
written notice. The provisions of paragraphs 4 and 7 shall
continue in full force and effect after termination of this
Agreement.
<PAGE>
9. Addition of Funds
In addition to the Funds, any other mutual fund sponsored by
Smith Barney Inc. or its affiliates may become a party to this
Agreement by having this Agreement executed on its behalf.
10. Miscellaneous
This Agreement represents the entire agreement between the
parties with regard to the matters described herein, and may not
be modified or amended except by written instrument executed
by all parties. This Agreement may not be assigned by any party
hereto without the prior written consent of the other parties.
This Agreement is made and shall be construed under the laws
of the State of New York. This Agreement supersedes all
previous agreements and understandings between the parties
with respect to its subject matter. If any provision of the
Agreement shall be held or made invalid by a statute, rule,
regulation, decision of a tribunal or otherwise, the remainder of
the Agreement shall not be affected thereby. No Fund shall be
responsible for the liabilities of any other Fund hereunder.
IN WITNESS HEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
SMITH BARNEY INVESTMENT PFS
SHAREHOLDER SERVICES
FUNDS INC.
By: By:
Title: Title:
DISTRIBUTION AGREEMENT
[DATE]
PFS Distributors
[address]
Dear Sirs:
This is to confirm that, in consideration of the
agreements hereinafter contained, the undersigned, [Name of
Fund] a [business trust/Corporation] organized under the laws of
the [Commonwealth of Massachusetts/State of Maryland] has
agreed that PFS Distributors ("PFS") shall be, for the period of
this Agreement, the distributor of shares (the "Shares") of the
Fund.
1. Services as Distributor
1.1 PFS will act as agent for the distribution of
Shares covered by the registration statement, prospectus and
statement of additional information then in effect under the
Securities Act of 1933, as amended (the "1933 Act"), and the
Investment Company Act of 1940, as amended (the "1940
Act").
1.2 PFS agrees to use its best efforts to solicit
orders for the sale of Shares and will undertake such advertising
and promotion as it believes is reasonable in connection with
such solicitation.
1.3 All activities by PFS as distributor of the
Shares shall comply with all applicable laws, rules, and
regulations, including, without limitation, all rules and
regulations made or adopted by the Securities and Exchange
Commission (the "SEC") or by any securities association
registered under the Securities Exchange Act of 1934.
1.4 PFS will provide one or more persons during
normal business hours to respond to telephone questions
concerning the Fund.
1.5 PFS will transmit any orders received by it
for purchase or redemption of Shares to PFS Shareholder
Service (the "Sub-Transfer Agent"), the Fund's sub-transfer and
dividend agent, or any successor to Sub-Transfer Agent of
which the Fund has notified PFS in writing.
1.6 Whenever in their judgment such action is
warranted for any reason, including, without limitation, market,
economic or political conditions, the Fund's officers may
decline to accept any orders for, or make any sales of, the
Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.<PAGE>
1.7 PFS will act only on its own behalf as
principal should it choose to enter into selling agreements with
selected dealers or others.
(For Funds with Plans adopted pursuant to Rule 12b-1)
1.8 The Fund will pay to PFS an annual fee in
connection with the offering and sale of the Shares under this
Agreement. The annual fee paid to PFS, will be calculated
daily and paid monthly by the Fund at an annual rate set forth in
the [Services and Distribution/Shareholder Servicing] Plan (the
"Plan") based on the average daily net assets of [each
portfolio/series of the Fund which has adopted a Plan/the Fund];
provided that payment shall be made in any month only to the
extent that such payment shall not exceed the sales charge
limitations established by the National Association of Securities
Dealers, Inc.
The annual fee paid to PFS under this Section 1.8 maybe
used by PFS to cover any expenses primarily intended to result
in the sale of Shares, including, but not limited to, the
following:
(a) cost of payments made to PFS Investments
Representatives and other employees of PFS or other
broker-dealers that engage in the distribution of the
Fund's Shares;
(b) payments made to, and expenses of,
persons who provide support services in connection with
the distribution of the Fund's Shares, including, but not
limited to, office space and equipment, telephone
facilities, answering routine inquiries regarding the Fund,
processing shareholder transactions and providing any
other shareholder services;
(c) costs relating to the formulation and
implementation of marketing and promotional activities,
including, but not limited to, direct mail promotions and
television, radio, newspaper, magazine and other mass
media advertising;
(d) costs of printing and distributing
prospectuses and reports of the Fund to prospective
shareholders of the Fund;
(e) costs involved in preparing, printing and
distributing sales literature pertaining to the Fund; and
(f) costs involved in obtaining whatever
information, analyses and reports with respect to
marketing and promotional activities that the Fund may,
from time to time, deem advisable;
except that distribution expenses shall not include any
expenditures in connection with services which PFS, any of its
affiliates, or any other person have agreed to bear without
reimbursement.<PAGE>
1.9 PFS shall prepare and deliver reports to the
Treasurer of the Fund and to the sub-investment advisor and/or
administrator of the Fund on a regular, at least quarterly, basis,
showing the distribution expenses incurred pursuant to this
Agreement and the Plan and the purposes therefor, as well as
any supplemental reports as the Directors, from time to time,
may reasonably request.
2. Duties of the Fund
2.1 The Fund agrees at its own expense to
execute any and all documents, to furnish any and all
information and to take any other actions that may be reasonably
necessary in connection with the qualification of the Shares for
sale in those states that PFS may designate.
2.2 The Fund shall furnish from time to time for
use in connection with the sale of the Shares, such information
reports with respect to the Fund and its Shares as PFS may
reasonably request, all of which shall be signed by one or more
of the Fund's duly authorized officers; and the Fund warrants
that the statements contained in any such reports, when so
signed by the Fund's officers, shall be true and correct. The
Fund shall also furnish PFS upon request with (a) annual audits
of the Fund's books and accounts made by independent certified
public accountants regularly retained by the Fund; (b) semi-
annual unaudited financial statements pertaining to the Fund; (c)
quarterly earnings statements prepared by the Fund; (d) a
monthly itemized list of the securities in the Fund's portfolio;
(e) monthly balance sheets as soon as practicable after the end
of each month; and (f) from time to time such additional
information regarding the Fund's financial condition as PFS may
reasonably request.
3. Representations and Warranties
The Fund represents to PFS that all registration
statements, prospectuses and statements of additional
information filed by the Fund with the SEC under the 1933 Act
and the 1940 Act with respect to the Shares have been carefully
prepared in conformity with the requirements of the 1933 Act,
the 1940 Act and the rules and regulations of the SEC
thereunder. As used in this Agreement, the terms "registration
statement", "prospectus" and "statement of additional
information" shall mean any registration statement, prospectus
and statement of additional information filed by the Fund with
the SEC and any amendments and supplements thereto which at
any time shall have been filed with the SEC. The Fund
represents and warrants to PFS that any registration statement,
prospectus and statement of additional information, when such
registration statement becomes effective, will include all
statements required to be contained therein in conformance with
the 1933 Act, the 1940 Act and the rules and regulations of the
SEC; that all statements of fact contained in any registration
statement, prospectus or statement of additional information will
be true and correct when such registration statement becomes
effective; and that neither any registration statement nor any
prospectus or statement of additional information when such
registration statement becomes effective will include an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of the Fund's Shares. The
Fund may, but shall not be obligated to, propose from time to
time such amendment or amendments to any registration
statement and such supplement or supplements to any prospectus
or statement of additional information as, in the light of future
developments, may, in the opinion of the Fund's counsel, be
necessary or advisable. If the Fund shall not propose such
amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Fund of a written request
from PFS to do so, PFS may, at its option, terminate this
Agreement. The Fund shall not file any amendment to any
registration statement or supplement to any prospectus or
statement of additional information without giving PFS
reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the
Fund's right to file at any time such amendments to any
registration statement and/or supplements to any prospectus or
statement of additional information, of whatever character, as
the Fund may deem advisable, such right being in all respects
absolute and unconditional.
4. Indemnification
4.1 The Fund authorizes PFS and dealers to use
any prospectus or statement of additional information furnished
by the Fund from time to time, in connection with the sale of
the Shares. The Fund agrees to indemnify, defend and hold
PFS, its several officers and directors, and any person who
controls PFS within the meaning of Section 15 of the 1933 Act,
free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any such counsel fees incurred in connection therewith)
which PFS, its officers and directors, or any such controlling
person, may incur under the 1933 Act or under common law or
otherwise, arising out of or based upon any untrue statement, or
alleged untrue statement, of a material fact contained in any
registration statement, any prospectus or any statement of
additional information or arising out of or based upon any
omission, or alleged omission, to state a material fact required
to be stated in any registration statement, any prospectus or any
statement of additional information or necessary to make the
statements in any thereof not misleading; provided, however,
that the Fund's agreement to indemnify PFS, its officers or
directors, and any such controlling person shall not be deemed
to cover any claims, demands, liabilities or expenses arising out
of any statements or representations made by PFS or its
representatives or agents other than such statements and
representations as are contained in any prospectus or statement
of additional information and in such financial and other
statements as are furnished to PFS pursuant to paragraph 2.2 of
this Agreement; and further provided that the Fund's agreement
to indemnify PFS and the Fund's representations and warranties
herein before set forth in paragraph 3 of this Agreement shall
not be deemed to cover any liability to the Fund or its
shareholders to which PFS would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of PFS's reckless
disregard of its obligations and duties under this Agreement.
The Fund's agreement to indemnify PFS, its officers and
directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund's being notified of any
action brought against PFS, its officers or directors, or any such
controlling person, such notification to be given by letter or by
telegram addressed to the Fund at its principal office in New
York, New York and sent to the Fund by the person against
whom such action is brought, within ten days after the summons
or other first legal process shall have been served. The failure
so to notify the Fund of any such action shall not relieve the
Fund from any liability that the Fund may have to the person
against whom such action is brought by reason of any such
untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of the Fund's indemnity
agreement contained in this paragraph 4.1. The Fund will be
entitled to assume the defense of any suit brought to enforce any
such claim, demand or liability, but, in such case, such defense
shall be conducted by counsel of good standing chosen by the
Fund and approved by PFS. In the event the Fund elects to
assume the defense of any such suit and retains counsel of good
standing approved by PFS, the defendant or defendants in such
suit shall bear the fees and expenses of any additional counsel
retained by any of them; but if the Fund does not elect to
assume the defense of any such suit, or if PFS does not approve
of counsel chosen by the Fund, the Fund will reimburse PFS, its
officers and directors, or the controlling person or persons
named as defendant or defendants in such suit, for the fees and
expenses of any counsel retained by PFS or them. The Fund's
indemnification agreement contained in this paragraph 4.1 and
the Fund's representations and warranties in this Agreement
shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of PFS, its officers and
directors, or any controlling person, and shall survive the
delivery of any of the Fund's Shares. This agreement of
indemnity will inure exclusively to PFS's benefit, to the benefit
of its several officers and directors, and their respective estates,
and to the benefit of the controlling persons and their
successors. The Fund agrees to notify PFS promptly of the
commencement of any litigation or proceedings against the Fund
or any of its officers or trustees in connection with the issuance
and sale of any of the Fund's Shares.
4.2 PFS agrees to indemnify, defend and hold
the Fund, its several officers and [Directors/Trustees], and any
person who controls the Fund within the meaning of Section 15
of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) that the
Fund, its officers or [Directors/Trustees] or any such controlling
person may incur under the 1933 Act, or under common law or
otherwise, but only to the extent that such liability or expense
incurred by the Fund, its officers or [Directors/Trustees], or
such controlling person resulting from such claims or demands
shall arise out of or be based upon any untrue, or alleged
untrue, statement of a material fact contained in information
furnished in writing by PFS to the Fund and used in the answers
to any of the items of the registration statement or in the
corresponding statements made in the prospectus or statement of
additional information, or shall arise out of or be based upon
any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by PFS to
the Fund and required to be stated in such answers or necessary
to make such information not misleading. PFS's agreement to
indemnify the Fund, its officers or [Directors/Trustees], and any
such controlling person, as aforesaid, is expressly conditioned
upon PFS being notified of any action brought against the Fund,
its officers or [Directors/Trustees], or any such controlling
person, such notification to be given by letter or telegram
addressed to PFS at its principal office in New York, New York
and sent to PFS by the person against whom such action is
brought, within ten days after the summons or other first legal
process shall have been served. PFS shall have the right to
control the defense of such action, with counsel of its own
choosing, satisfactory to the Fund, if such action is based solely
upon such alleged misstatement or omission on PFS's part, and
in any other event the Fund, its officers or [Directors/Trustees]
or such controlling person shall each have the right to
participate in the defense or preparation of the defense of any
such action. The failure to so notify PFS of any such action
shall not relieve PFS from any liability that PFS may have to
the Fund, its officers or [Directors/Trustees], or to such
controlling person by reason of any such untrue, or alleged
untrue, statement or omission, or alleged omission, otherwise
than on account of PFS's indemnity agreement contained in this
paragraph 4.2. PFS agrees to notify the Fund promptly of the
commencement of any litigation or proceedings against PFS or
any of its officers or directors in connection with the issuance
and sale of any of the Fund's Shares.
4.3 In case any action shall be brought against
any indemnified party under paragraph 4.1 or 4.2, and it shall
notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the
extent that it shall wish to do so, to assume the defense thereof
with counsel satisfactory to such indemnified party. If the
indemnifying party opts to assume the defense of such action,
the indemnifying party will not be liable to the indemnified
party for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof
other than (a) reasonable costs of investigation or the furnishing
of documents or witnesses and (b) all reasonable fees and
expenses of separate counsel to such indemnified party if (i) the
indemnifying party and the indemnified party shall have agreed
to the retention of such counsel or (ii) the indemnified party
shall have concluded reasonably that representation of the
indemnifying party and the indemnified party by the same
counsel would be inappropriate due to actual or potential
differing interests between them in the conduct of the defense of
such action.
5. Effectiveness of Registration
None of the Fund's Shares shall be offered by either PFS
or the Fund under any of the provisions of this Agreement and
no orders for the purchase or sale of the Shares under this
Agreement shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of
the provision of the 1933 Act or if and so long as a current
prospectus as required by Section 5(b) (2) of the 1933 Act is not
on file with the SEC; provided, that nothing contained in this
paragraph 5 shall in any way restrict or have an application to
or bearing upon the Fund's obligation to repurchase its Shares
from any shareholder in accordance with the provisions of the
Fund's prospectus, statement of additional information or
[Master Trust Agreement/Articles of Incorporation] dated [Date
of Master Trust Agreement/Articles of Incorporation], as
amended from time to time.
<PAGE>
6. Notice to PFS
The Fund agrees to advise PFS immediately in writing:
(a) of any request by the SEC for amendments to
the registration statement, prospectus or statement of additional
information then in effect or for additional information;
(b) In the event of the issuance by the SEC of
any stop order suspending the effectiveness of the registration
statement, prospectus or statement of additional information then
in effect or the initiation of any proceeding for that purpose;
(c) of the happening of any event that makes
untrue any statement or a material fact made in the registration
statement, prospectus or statement of additional information then
in effect or that requires the making of a change in such
registration statement, prospectus or statement of additional
information in order to make the statements therein not
misleading; and
(d) of all actions of the SEC with respect to any
amendment to any registration statement, prospectus or
statement of additional information which may from time to time
be filed with the SEC.
7. Term of the Agreement
This Agreement shall become effective on the date first
written above and shall continue in effect for successive annual
periods thereafter so long as such continuance is specifically
approved at least annually by (a) the Fund's Board of
[Directors/Trustees] or (b) by a vote of a majority (as defined in
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 [Directors/Trustees] of the Fund 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' notice by the Fund's
Board of [Directors/Trustees], by vote of the holders of a
majority of the Fund's Shares, or on 90 days' notice by PFS.
This Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act).
8. Limitation of Liability (Massachusetts business
trusts only)
The Fund and PFS agree that the obligations of the Fund
under this Agreement shall not be binding upon any of the
Trustees, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Fund, individually, but
are binding only upon the assets and property of the Fund, as
provided in the Master Trust Agreement. The execution and
delivery of this Agreement have been authorized by the Trustees
and signed by an authorized officer of the Fund, acting as such,
and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property
of the Fund as provided in its Master Trust Agreement.
If the foregoing is in accordance with your
understanding, kindly indicate your acceptance
of this Agreement by signing and returning to us the enclosed
copy of this Agreement.
Very truly yours,
[Name of Fund]
By:
_____________________
[Title]
Accepted:
PFS DISTRIBUTORS
By: __________________________
Authorized Officer
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Smith Barney Investment Funds Inc.:
We hereby consent to the following with respect to
Post-Effective Amendment No. 40 to the Registration Statement
on
Form N-1A (File No. 2-74288) under the Securities Act of
1933,
as amended, of Smith Barney Investment Funds Inc. (formerly
Smith Barney Shearson Investment Funds Inc.):
1. The incorporation by reference of our reports
dated February
10, 1995 accompanying the Annual Reports for the fiscal year
ended December 31, 1994 of Investment Grade Bond Fund, in
the Statement of Additional Information.
2. The reference to our firm under the heading
"Financial
Highlights" in the Prospectuses.
3. The reference to our firm under the heading
"Counsel and
Auditors" in the Statement of Additional Information.
COOPERS &
LYBRAND L.L.P.
Boston, Massachusetts
June 26, 1995
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> SB GOVERNMENT SECURITIES -
CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 654,843,986
<INVESTMENTS-AT-VALUE> 651,631,445
<RECEIVABLES> 624,155,869
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 115,000,361
<TOTAL-ASSETS> 990,787,675
<PAYABLE-FOR-SECURITIES> 217,517,543
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117,514,407
<TOTAL-LIABILITIES> 335,031,950
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,281,245,819
<SHARES-COMMON-STOCK> 52,579,944
<SHARES-COMMON-PRIOR> 705,750
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (622,061,928)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,428,166)
<NET-ASSETS> 655,755,725
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54,732,208
<OTHER-INCOME> 0
<EXPENSES-NET> 12,156,647
<NET-INVESTMENT-INCOME> 42,575,561
<REALIZED-GAINS-CURRENT> (72,596,844)
<APPREC-INCREASE-CURRENT> 3,598,171
<NET-CHANGE-FROM-OPS> (26,423,112)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,072,146
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 1,068,824
<NUMBER-OF-SHARES-SOLD> 55,125,066
<NUMBER-OF-SHARES-REDEEMED> 3,827,269
<SHARES-REINVESTED> 576,397
<NET-CHANGE-IN-ASSETS> (202,874,435)
<ACCUMULATED-NII-PRIOR> 92,682
<ACCUMULATED-GAINS-PRIOR> (556,625,868)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,578,209
<INTEREST-EXPENSE> 1,868,717
<GROSS-EXPENSE> 12,156,647
<AVERAGE-NET-ASSETS> 736,631,154
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> (0.80)
<PER-SHARE-DIVIDEND> 0.49
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.07
<PER-SHARE-NAV-END> 9.17
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 68,664,230
<AVG-DEBT-PER-SHARE> 0.96
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> SB GOVERNMENT SECURITIES -
CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 654,843,986
<INVESTMENTS-AT-VALUE> 651,631,445
<RECEIVABLES> 224,155,869
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 115,000,361
<TOTAL-ASSETS> 990,787,675
<PAYABLE-FOR-SECURITIES> 217,517,543<PAGE>
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117,514,407
<TOTAL-LIABILITIES> 335,031,950
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,281,245,819
<SHARES-COMMON-STOCK> 18,824,589
<SHARES-COMMON-PRIOR> 85,011,511
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (622,061,928)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,428,166)
<NET-ASSETS> 655,755,725
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54,732,208
<OTHER-INCOME> 0
<EXPENSES-NET> 12,156,647
<NET-INVESTMENT-INCOME> 42,575,561
<REALIZED-GAINS-CURRENT> (72,596,844)
<APPREC-INCREASE-CURRENT> 3,598,171
<NET-CHANGE-FROM-OPS> (26,423,112)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 28,417,180
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 4,294,729
<NUMBER-OF-SHARES-SOLD> 3,129,510
<NUMBER-OF-SHARES-REDEEMED> 71,498,609
<SHARES-REINVESTED> 2,182,177
<NET-CHANGE-IN-ASSETS> (202,874,435)
<ACCUMULATED-NII-PRIOR> 92,682
<ACCUMULATED-GAINS-PRIOR> (556,625,868)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,578,209
<INTEREST-EXPENSE> 1,868,717
<GROSS-EXPENSE> 12,156,647
<AVERAGE-NET-ASSETS> 736,631,154
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> (0.78)
<PER-SHARE-DIVIDEND> 0.45
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.07
<PER-SHARE-NAV-END> 9.17
<EXPENSE-RATIO> 1.48<PAGE>
<AVG-DEBT-OUTSTANDING> 68,664,230
<AVG-DEBT-PER-SHARE> 0.96
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> SB GOVERNMENT SECURITIES -
CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 654,843,986
<INVESTMENTS-AT-VALUE> 651,631,445
<RECEIVABLES> 224,155,869
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 115,000,361
<TOTAL-ASSETS> 990,787,675
<PAYABLE-FOR-SECURITIES> 217,517,543
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117,514,407
<TOTAL-LIABILITIES> 335,031,950
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,281,245,819
<SHARES-COMMON-STOCK> 70,470
<SHARES-COMMON-PRIOR> 21,288
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (622,061,928)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,428,166)
<NET-ASSETS> 655,755,725
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54,732,208
<OTHER-INCOME> 0
<EXPENSES-NET> 12,156,647
<NET-INVESTMENT-INCOME> 42,575,561
<REALIZED-GAINS-CURRENT> (72,596,844)
<APPREC-INCREASE-CURRENT> 3,598,171
<NET-CHANGE-FROM-OPS> (26,423,112)<PAGE>
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18,133
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 2,740
<NUMBER-OF-SHARES-SOLD> 58,124
<NUMBER-OF-SHARES-REDEEMED> 11,143
<SHARES-REINVESTED> 2,201
<NET-CHANGE-IN-ASSETS> (202,874,435)
<ACCUMULATED-NII-PRIOR> 92,682
<ACCUMULATED-GAINS-PRIOR> (556,625,868)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,578,209
<INTEREST-EXPENSE> 1,868,717
<GROSS-EXPENSE> 12,156,647
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<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> (0.81)
<PER-SHARE-DIVIDEND> 0.45
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<RETURNS-OF-CAPITAL> 0.07
<PER-SHARE-NAV-END> 9.17
<EXPENSE-RATIO> 1.47
<AVG-DEBT-OUTSTANDING> 68,664,230
<AVG-DEBT-PER-SHARE> 0.96
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> Smith Barney Special Equities Fund -
Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 166,951,531
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<RECEIVABLES> 4,492,822
<ASSETS-OTHER> 0<PAGE>
<OTHER-ITEMS-ASSETS> 543
<TOTAL-ASSETS> 203,340,161
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<OTHER-ITEMS-LIABILITIES> 631,986
<TOTAL-LIABILITIES> 6,839,531
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 170,467,797
<SHARES-COMMON-STOCK> 5,289,999
<SHARES-COMMON-PRIOR> 2,478,169
<ACCUMULATED-NII-CURRENT> 0
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<DIVIDEND-INCOME> 291,049
<INTEREST-INCOME> 765,033
<OTHER-INCOME> 0
<EXPENSES-NET> 3,805,492
<NET-INVESTMENT-INCOME> (2,749,410)
<REALIZED-GAINS-CURRENT> (5,296,726)
<APPREC-INCREASE-CURRENT> (3,369,494)
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 6,100,691
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<NET-CHANGE-IN-ASSETS> 7,793,583
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 1,052,635
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,805,492
<AVERAGE-NET-ASSETS> 191,388,129
<PER-SHARE-NAV-BEGIN> 20.23
<PER-SHARE-NII> (0.13)
<PER-SHARE-GAIN-APPREC> (1.00)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00<PAGE>
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.10
<EXPENSE-RATIO> 1.49
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> Smith Barney Special Equities Fund -
Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 166,951,531
<INVESTMENTS-AT-VALUE> 198,846,796
<RECEIVABLES> 4,492,822
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<TOTAL-ASSETS> 203,340,161
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<OTHER-ITEMS-LIABILITIES> 631,986
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 170,467,797
<SHARES-COMMON-STOCK> 4,989,720
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<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 5,862,432
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<NET-ASSETS> 196,500,630
<DIVIDEND-INCOME> 291,049
<INTEREST-INCOME> 765,033
<OTHER-INCOME> 0
<EXPENSES-NET> 3,805,492<PAGE>
<NET-INVESTMENT-INCOME> (2,749,410)
<REALIZED-GAINS-CURRENT> (5,296,726)
<APPREC-INCREASE-CURRENT> (3,369,494)
<NET-CHANGE-FROM-OPS> (11,415,630)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,054,365
<NUMBER-OF-SHARES-REDEEMED> 7,958,837
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<NET-CHANGE-IN-ASSETS> 7,793,583
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 270,779
<GROSS-ADVISORY-FEES> 1,052,635
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,805,492
<AVERAGE-NET-ASSETS> 191,388,129
<PER-SHARE-NAV-BEGIN> 20.08
<PER-SHARE-NII> (0.27)
<PER-SHARE-GAIN-APPREC> (0.99)
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<PER-SHARE-NAV-END> 18.82
<EXPENSE-RATIO> 2.21
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> Smith Barney Special Equities Fund -
Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994<PAGE>
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 166,951,531
<INVESTMENTS-AT-VALUE> 198,846,796
<RECEIVABLES> 4,492,822
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 543
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<PAYABLE-FOR-SECURITIES> 6,207,545
<SENIOR-LONG-TERM-DEBT> 0
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<PAID-IN-CAPITAL-COMMON> 170,467,797
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 5,862,432
<ACCUM-APPREC-OR-DEPREC> 31,895,265
<NET-ASSETS> 196,500,630
<DIVIDEND-INCOME> 291,049
<INTEREST-INCOME> 765,033
<OTHER-INCOME> 0
<EXPENSES-NET> 3,805,492
<NET-INVESTMENT-INCOME> (2,749,410)
<REALIZED-GAINS-CURRENT> (5,296,726)
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<NET-CHANGE-FROM-OPS> (11,415,630)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 75,807
<NUMBER-OF-SHARES-REDEEMED> 3,844
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,793,583
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 270,779
<GROSS-ADVISORY-FEES> 1,052,635
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,805,492
<AVERAGE-NET-ASSETS> 191,388,129<PAGE>
<PER-SHARE-NAV-BEGIN> 20.08
<PER-SHARE-NII> (0.25)
<PER-SHARE-GAIN-APPREC> (1.01)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.82
<EXPENSE-RATIO> 2.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> Smith Barney Investment Grade Bond
Fund - Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 437,931,193
<INVESTMENTS-AT-VALUE> 396,401,801
<RECEIVABLES> 11,232,667
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 622
<TOTAL-ASSETS> 407,635,090
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,182,394
<TOTAL-LIABILITIES> 4,182,394
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 445,841,688
<SHARES-COMMON-STOCK> 16,997,989
<SHARES-COMMON-PRIOR> 779,050
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 859,600
<ACCUM-APPREC-OR-DEPREC> (41,529,392)<PAGE>
<NET-ASSETS> 403,452,696
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 36,216,097
<OTHER-INCOME> 0
<EXPENSES-NET> 6,455,334
<NET-INVESTMENT-INCOME> 29,760,763
<REALIZED-GAINS-CURRENT> 2,616,051
<APPREC-INCREASE-CURRENT> (76,397,864)
<NET-CHANGE-FROM-OPS> (44,021,050)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,485,918
<DISTRIBUTIONS-OF-GAINS> 5,098,443
<DISTRIBUTIONS-OTHER> 173,244
<NUMBER-OF-SHARES-SOLD> 16,784,949
<NUMBER-OF-SHARES-REDEEMED> 1,245,217
<SHARES-REINVESTED> 679,207
<NET-CHANGE-IN-ASSETS> (82,899,815)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 7,840,829
<OVERDISTRIB-NII-PRIOR> 212,081
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,926,359
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,455,334
<AVERAGE-NET-ASSETS> 428,079,672
<PER-SHARE-NAV-BEGIN> 13.01
<PER-SHARE-NII> 0.74
<PER-SHARE-GAIN-APPREC> (1.88)
<PER-SHARE-DIVIDEND> 0.86
<PER-SHARE-DISTRIBUTIONS> 0.31
<RETURNS-OF-CAPITAL> 0.03
<PER-SHARE-NAV-END> 10.67
<EXPENSE-RATIO> 1.11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2<PAGE>
<NAME> Smith Barney Investment Grade Bond
Fund - Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> Dec-31-1994
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> Smith Barney Investment Grade Bond
Fund - Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> Smith Barney European Fund - Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 31,074,885
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<NUMBER-OF-SHARES-REDEEMED> 641,546<PAGE>
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<NET-CHANGE-IN-ASSETS> (2,174,961)
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<PER-SHARE-NII> (0.02)
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<PER-SHARE-NAV-END> 14.12
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> Smith Barney European Fund - Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 31,074,885
<INVESTMENTS-AT-VALUE> 34,622,500
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<OTHER-ITEMS-LIABILITIES> 217,539<PAGE>
<TOTAL-LIABILITIES> 217,539
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<ACCUMULATED-NET-GAINS> 0
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<NET-ASSETS> 35,230,405
<DIVIDEND-INCOME> 844,891
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<EXPENSES-NET> 1,237,197
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<NET-CHANGE-IN-ASSETS> (2,174,961)
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<OVERDISTRIB-NII-PRIOR> 0
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<PER-SHARE-NII> (0.12)
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<AVG-DEBT-PER-SHARE> 0<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> Smith Barney European Fund - Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 31,074,885
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<SHARES-COMMON-PRIOR> 1
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</TABLE>
