As filed with the Securities and Exchange Commission
on June [ ] , 1996
Registration No.
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [ ] Post-Effective
Amendment No.
SMITH BARNEY INVESTMENT FUNDS INC.
(Exact name of Registrant as specified in
Charter)
Area Code and Telephone Number: (800) 224-7523
388 Greenwich Street, New York, New York 10013
(Address of principal executive offices) (Zip Code)
Christina T. Sydor, Esq.
Smith Barney Inc.
388 Greenwich Street New York, New York 10013 (22nd floor)
(Name and address of agent for service)
copies to:
Burton M. Liebert, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Approximate date of proposed public offering: As soon as possible after the
effective date of this
Registration Statement.
Registrant has registered an indefinite amount of securities pursuant to Rule
24f-2 under the Investment
Company Act of 1940, as amended; accordingly, no fee is payable herewith.
Registrant's Rule 24f-2
Notice for the fiscal period ended December 31, 1995 was filed with the
Securities and Exchange
Commission on February 29, 1996.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to
delay its effective date until the Registrant shall file a further amendment
which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the
Commission, action pursuant to said Section 8(a), may determine.
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
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
SMITH BARNEY INVESTMENT FUNDS INC.
FORM N-14 CROSS REFERENCE SHEET
Pursuant to Rule 481(a) Under the Securities Act of 1933
Prospectus/Proxy
Part A Item No. and Caption Statement Caption
Item 1. Beginning of Registration Cover Page; Cross
Reference
Statement and Outside Front Sheet
Cover Page of Prospectus
Item 2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
Item 3. Fee Table,Synopsis Information and Summary; Risk Factors;
Comparison of
Risk Factors Investment Objectives and
Policies
Item 4. Information About the Transaction Summary: Reasons for the
Reorganization;
Information About the
Reorganization;
Information on Shareholder's Rights;
Exhibit A (Agreement and Plan of
Reorganization)
Item 5. Information About the Registrant Cover Page; Summary;
Information About
the Reorganization; Comparison of
Investment Objectives and Policies;
Comparative Information on
Shareholder's
Rights; Additional Information About
the
Telecommunications Growth Fund and
Special
Equities Fund Prospectuses of both
the
Acquiring Fund and the Acquired Fund
dated April 29, 1996.
Item 6. Information About the Summary; Information
About the
Company Being Acquired Reorganization; Comparison of
Investment
Objectives and Policies; Information
on
Shareholder's Rights; Additional
Information About the
Telecommunications
Growth Fund
Item 7. Voting Information Summary; Information
About the
Reorganization; Comparative
Information
on Shareholder's Rights; Voting
Information
Item 8. Interest of Certain Persons Financial Statements and
Experts; Legal
and Experts Matters
Item 9. Additional Information Not Applicable
Required for Reoffering By
Persons Deemed to be Underwriters
Statement of Additional
Part B Item No. and Caption Information Caption
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. Additional Information Cover Page; Statement of
Additional
About the Registrant Information of Smith
Barney Investment
Funds Inc. dated April 29, 1996
Item 13. Additional Information Not Applicable
About the Company Being
Acquired
Item 14. Financial Statements Annual Report and Semi-Annual
Report of the Telecommunications
Trust
dated December 31, 1995 and June 30,
1996 respectively; Annual Report and
Semi-Annual Report of Smith Barney
Special Equities Fund dated December
31, 1995 and June 30, 1996,
respectively; Pro forma Financial
Statements
Part C Item No. and Caption Other Information Caption
Item 15. Indemnification Incorporated by reference to
Part A
caption "Comparative Information on
Shareholder's Rights - Liability of
Directors"
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
SMITH BARNEY TELECOMMUNICATIONS TRUST
388 Greenwich Street
New York, New York 10013
[ ],1996
Dear Shareholder:
The Board of Trustees of Smith Barney Telecommunications Trust (the "Trust"),
has recently
reviewed and unanimously endorsed a proposal for the reorganization of the
Smith Barney
Telecommunications Growth Fund (the "Telecommunications Growth Fund"), a
separate series of the
Trust, which it judges to be in the best interests of the Telecommunications
Growth Fund
shareholders.
Under the terms of the proposed reorganization, the Smith Barney Special
Equities Fund (the
"Special Equities Fund"), a separate series of Smith Barney Investment Funds
Inc., would acquire
substantially all of the assets and liabilities of the Telecommunications
Growth Fund. After the
transaction, the Telecommunications Growth Fund would be dissolved and you
would become a
shareholder of the Special Equities Fund, having received shares with an
aggregate net asset value
equivalent to the aggregate net asset value of your Telecommunications Growth
Fund investment at
the time of the transaction. The transaction would, in the opinion of
counsel, be free from Federal
income taxes to you and the Telecommunications Growth Fund.
SPECIAL MEETING OF SHAREHOLDERS: YOUR VOTE IS IMPORTANT
The Board of Trustees of the Trust has determined that the proposed
reorganization should
provide benefits to the Telecommunications Growth Fund shareholders due, in
part, to savings in
expenses borne by shareholders. We have therefore called a Special Meeting of
Shareholders to be
held on [ ], 1996 to consider this transaction. We strongly urge your
participation by asking
you to review, complete and return your proxy no later than [ ], 1996.
Detailed information about the proposed transaction is described in the
enclosed proxy statement.
On behalf of the Board, I thank you for your participation as a shareholder
and urge you to please
exercise your right to vote by completing, dating and signing the enclosed
proxy card. A self-
addressed, postage-paid envelope has been enclosed for your convenience. If
you sign and date your
proxy card, but do not provide voting instructions, your shares will be voted
FOR the proposal.
If you have any questions regarding the proposed transaction, please feel free
to call your
Financial Consultant.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED
NO LATER THAN [ ], 1996. THE BOARD OF TRUSTEES HAS UNANIMOUSLY
APPROVED AND RECOMMENDS VOTING FOR THIS TRANSACTION.
Sincerely,
Heath
B. McLendon
Chairman of the Board
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
388 Greenwich Street
New York, New York 10013
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On [ ], 1996
___________________
Notice is hereby given that a Special Meeting of Shareholders (the "Meeting")
of Smith Barney
Telecommunications Growth Fund (the "Telecommunications Growth Fund"), will be
held at 388
Greenwich Street, New York, New York on [ ],1996, at [ ] p.m. for the
following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization (the
"Plan")
dated as of [ ], providing for: (i) the acquisition of
substantially all of the
assets of the Telecommunications Growth Fund by the Special Equities Fund of
the
Smith Barney Investment Funds Inc. (the "Special Equities Fund") in exchange
for
shares of the Special Equities Fund and the assumption by the Special Equities
Fund
of substantially all of the liabilities of the Telecommunications Growth Fund;
(ii) the
distribution of such shares of the Special Equities Fund to shareholders of
the
Telecommunications Growth Fund in liquidation of the Telecommunications Growth
Fund; and (iii) the subsequent dissolution of the Telecommunications Growth
Fund.
2. To transact any other business which may properly come before the
Meeting or any
adjournment thereof.
The Trustees of the Telecommunications Growth Fund have approved the
transactions and have
approved fixed the close of business on [ ],1996, as the record date for
the determination of
shareholders of the Telecommunications Growth Fund entitled to notice of and
to vote at this Meeting
or any adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO
SIGN AND RETURN WITHOUT DELAY THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT THEIR SHARES MAY BE
REPRESENTED AT THE MEETING. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXIES ARE SET FORTH ON THE FOLLOWING PAGE. PROXIES
MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE
SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING
WRITTEN NOTICE OF REVOCATION TO THE TELECOMMUNICATIONS GROWTH
FUND AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY VOTING IN
PERSON AT THE MEETING.
By order of
the Trustees
Christina T.
Sydor
Secretary
[ ], 1996
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP
TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
PROSPECTUS/PROXY STATEMENT DATED [ ], 1996
Acquisition of the Assets Of
SMITH BARNEY TELECOMMUNICATIONS TRUST--TELECOMMUNICATIONS
GROWTH FUND
388 Greenwich Street
New York, New York 10013
(212) 723-9218
By And In Exchange For Shares Of
SMITH BARNEY INVESTMENT FUNDS INC.-- SPECIAL EQUITIES FUND
388 Greenwich Street
New York, New York 10013
(212) 720-9150
This Prospectus/Proxy Statement is being furnished to shareholders of
Smith Barney
Telecommunications Growth Fund (the "Telecommunications Growth Fund"), a
separate series of Smith
Barney Telecommunications Trust (the "Trust"), in connection with a proposed
Agreement and Plan of
Reorganization (the "Plan"), to be submitted to shareholders for consideration
at a Special Meeting of
Shareholders to be held on [ ], 1996 at [ ] p.m., New York City time,
at the offices of Smith Barney
Inc., located at 388 Greenwich Street, [ ]nd Floor, New York, New York, and
any adjournments thereof
(collectively, the "Meeting"). The Plan provides for all of the assets of the
Telecommunications Growth
Fund to be acquired by the Smith Barney Special Equities Fund (the "Special
Equities Fund"), a separate
series of Smith Barney Investment Funds Inc. (the "Investment Funds"), in
exchange for shares of the
Special Equities Fund and the assumption by the Special Equities Fund of
certain liabilities of the
Telecommunications Growth Fund (hereinafter referred to as the
"Reorganization"). (The
Telecommunications Growth Fund and the Special Equities Fund are herein
referred to individually as a
"Fund" and collectively as the "Funds"). Following the Reorganization, shares
of the Special Equities Fund
will be distributed to shareholders of the Telecommunications Growth Fund in
liquidation of the
Telecommunications Growth Fund and the Telecommunications Growth Fund will be
dissolved. As a
result of the proposed Reorganization, each shareholder of the
Telecommunications Growth Fund will
receive that number of shares of the Special Equities Fund having an aggregate
net asset value equal to the
aggregate net asset value of such shareholder's shares of the
Telecommunications Growth Fund. Currently
no CDSC is payable, but if continues to be applicable. Holders of Class A
shares in the
Telecommunications Growth Fund will receive Class A shares of the Special
Equities Fund, and no sales
charge will be imposed on the Class A shares of the Special Equities Fund
received by the
Telecommunications Growth Fund Class A shareholders. Holders of Class B,
Class C and Class Y shares
in the Telecommunications Growth Fund will receive Class B, Class C and Class
Y shares, respectively, of
the Special Equities Fund; any contingent deferred sales charge ("CDSC") which
is applicable to a
shareholder's investment will continue to apply, and, in calculating the
applicable CDSC payable upon the
subsequent redemption of Class B or Class C shares of the Special Equities
Fund, the period during which
a Telecommunications Growth Fund shareholder held Class B or Class C shares of
the
Telecommunications Growth Fund will be counted. This transaction is being
structured as a tax-free
reorganization.
The Special Equities Fund is an open-end diversified management
investment company whose
investment objective is to seek long-term capital appreciation by investing
primarily in equity securities
which the investment adviser believes have superior appreciation potential.
The Telecommunications
Growth Fund is an open-end non-diversified investment management company whose
investment objective
is to achieve capital appreciation, with income as a secondary consideration,
by investing primarily in
equity securities of companies engaged in the telecommunications industry.
Each Fund invests primarily,
but not exclusively in equity securities (common and preferred stock). Smith
Barney Mutual Funds
Management Inc. ("SBMFM"), a subsidiary of Smith Barney Holdings, Inc.
("Holdings"); serves as
investment manager to the Special Equities Fund and Smith Barney Strategy
Advisers Inc. ("Strategy
Advisers") also a subsidiary of Holdings, serves as the investment manager of
the Telecommunications
Growth Fund (the "Manager").
The investment policies of the Special Equities Fund are generally
similar to those of the
Telecommunications Growth Fund. However, certain differences in the Funds'
investment policies are
described under "Comparison of Investment Objectives and Policies" in this
Prospectus/Proxy Statement.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely
the information about the Special Equities Fund that a prospective investor
should know before investing.
Certain relevant documents listed below, which have been filed with the
Securities and Exchange
Commission ("SEC"), are incorporated by reference. A Statement of Additional
Information dated [
], 1996 relating to this Prospectus/Proxy Statement and the
Reorganization, has been filed with
the SEC and is incorporated by reference into this Prospectus/Proxy Statement.
A copy of such Statement
of Additional Information and the Telecommunications Growth Fund Prospectus
referred to below are
available upon request and without charge by writing to the Telecommunications
Growth Fund at the
address listed on the cover page of this Prospectus/Proxy Statement or by
calling [800) ].
1. The Prospectus dated April 29, 1996 of the Special Equities Fund is
incorporated in
its entirety by reference and a copy is included herewith.
2. The Prospectus dated April 29, 1996, as supplemented on May 7, 1996, of
the
Telecommunications Growth Fund is incorporated in its entirety by reference.
Also accompanying this Prospectus/Proxy Statement as Exhibit
A is a copy of the
Plan for the proposed transaction.
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/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
Additional Materials
1
Summary
1
Risk Factors 5 Reasons for the Reorganization
5
Information about the Reorganization
6
Information about the Special Equities Fund
10
Information about the
Telecommunications Growth Fund 10
Comparison of Investment Objectives and Policies
11
Comparative Information on
Shareholders' Rights
13
Additional Information About the Special
Equities Fund and
the Telecommunications
Growth Fund
15
Other Business
15
Voting Information
15
Financial Statements and Experts
17
Legal Matters
17
Exhibit A: Agreement and Plan of
Reorganization
A-
ADDITIONAL MATERIALS
The following additional materials, which have been incorporated by
reference into the Statement of
Additional Information dated [ ], 1996 relating to this
Prospectus/Proxy Statement and the
Reorganization, will be sent to all shareholders requesting a copy of such
Statement of Additional
Information.
1. Statement of Additional Information of Investment Funds Inc. dated April
29, 1996.
2. Statement of Additional Information of Smith Barney Telecommunications
Trust
dated April 29, 1996.
3. Annual Report of Special Equities Funds Inc. dated December 31, 1995.
4. Annual Report of Telecommunications Growth Fund dated December 31, 1995.
5. Semi-Annual Report of Telecommunications Growth Fund dated June 30,
1996.
6. Semi-Annual Report of Special Equities Fund dated June 30, 1996.
FEE TABLES
Following are tables showing current costs and expenses of the
Telecommunications Growth Fund and
the Special Equities Fund and the pro forma costs and expenses expected to be
incurred by the Special
Equities Fund after giving effect to the Reorganization, each based on the
maximum sales charge or
maximum CDSC that may be incurred at the time of purchase or redemption.
CLASS A SHARES
Telecommunications Growth
Fund
Special Equities
Fund
Pro Forma***
Shareholder Transaction Expenses
Maximum sales charge imposed
on purchases (as a percentage of
offering price).................................
5.00%
5.00%
5.00%
Maximum CDSC (as a percentage
of original cost or redemption proceeds,
whichever is lower)..............
None*
None*
None*
Annual Operating Expenses
(as a percentage of average net
assets)
Management fees.............................
12b-1 fees.......................................
Other expenses................................
0.75%
0.25
0.27**
0.75%
0.25
0.19**
0.75%
0.25
0.19**
Total Operating Expenses
1.27%
1.19%
1.19%
____________________
* Purchases of Class A shares which, 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.
** "Other expenses" for Class A shares of the Telecommunications Growth
Fund , the Special Equities Fund and for the pro
forma financial figures are based on annualized amounts as of June 30, 1996.
*** The pro forma financial figures are intended to provide shareholders with
information about the continuing impact
of the Reorganization as if the Reorganization had taken place as of June 30,
1996.
CLASS B SHARES
Telecommunications Growth
Fund
Special Equities
Fund
Pro Forma***
Shareholder Transaction Expenses
Maximum sales charge imposed
on purchases (as a percentage of
offering price).................................
None
None
None
Maximum CDSC (as a percentage
of original cost or redemption proceeds,
whichever is lower)..............
5.00%
5.00%
5.00%*
Annual Operating Expenses
(as a percentage of average net
assets)
Management fees.............................
12b-1 fees*......................................
Other expenses**..............................
0.75%
1.00
0.27
0.75%
1.00
0.20
0.75%
1.00
0.20
Total Operating Expenses
2.02%
1.95%
1.95%
____________________
* Upon conversion of Class B shares to Class A shares, such shares will no
longer be subject to a distribution fee.
** "Other expenses" for Class B shares of the Telecommunications Growth
Fund , the Special Equities Fund and for the pro
forma financial figures are based on annualized amounts as of June 30, 1996.
*** The pro forma financial figures are intended to provide shareholders with
information about the continuing impact
of the Reorganization as if the Reorganization had taken place as of June 30,
1996.
CLASS C SHARES
Telecommunications Growth
Fund
Special Equities
Fund
Pro Forma***
Shareholder Transaction Expenses
Maximum sales charge imposed
on purchases (as a percentage of
offering price)............................................
None
None
None
Maximum CDSC (as a percentage
of original cost or redemption proceeds,
whichever is lower)...................................
1.00%
1.00%
1.00%
Annual Operating Expenses
(as a percentage of average net
assets)
Management fees......................................
12b-1 fees.................................................
Other expenses..........................................
0.75%
1.00*
0.27
0.75%
1.00*
0.19
0.75%*
1.00*
0.19
Total Operating Expenses
2.02%
1.94%
1.94%
____________________
* Class C shares do not have a conversion feature and, therefore, are
subject to an ongoing distribution fee. As a result, long-
term shareholders of Class C shares may pay more than the economic equivalent
of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
** "Other expenses" for Class C shares of the Telecommunications Growth
Fund , the Special Equities Fund and for the pro
forma financial figures are based on annualized amounts as of June 30, 1996.
*** The pro forma financial figures are intended to provide shareholders with
information about the continuing impact
of the Reorganization as if the Reorganization had taken place as of June 30,
1996.
EXAMPLES
The following examples are intended to assist an investor in understanding the
various costs that an
investor in the Fund will bear directly or indirectly. The examples assume
payment by the Fund of
operating expenses at the levels set forth in the tables above.
1 year
3 years
5 years
10 years*
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
Telecommunications Growth Fund.....................................
Special Equities Fund........................................................
Pro
Forma.........................................................................
.
Class B
Telecommunications Growth Fund.....................................
Special Equities Fund........................................................
Pro
Forma.........................................................................
.
Class C
Telecommunications Growth Fund.....................................
Special Equities Fund........................................................
Pro
Forma.........................................................................
.
_________________________
* 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.
An investor would pay the following expenses on the same investment,
assuming the same annual
return and no redemption:
1 year
3 years
5 years
10 years*
Class A
Telecommunications Growth Fund....................................
Special Equities Fund.......................................................
Pro
Forma........................................................................
Class B
Telecommunications Growth Fund....................................
Special Equities Fund.......................................................
Pro
Forma.........................................................................
Class C
Telecommunications Growth Fund....................................
Special Equities Fund.......................................................
Pro
Forma........................................................................
_________________________
* 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 examples also provide 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%. These examples should not be considered a representation
of past or future
expenses and actual expenses may be greater or less than those shown.
SUMMARY
This summary is qualified in its entirety by reference to the additional
information
contained elsewhere in this Prospectus/Proxy Statement, the Prospectus of the
Special Equities
Fund dated April 29, 1996, the Statement of Additional Information of the
Investment Funds,
dated April 29, 1996, the Prospectus of the Telecommunications Growth Fund
dated April 29,
1996, as supplemented on May [ ], 1996, and the Statement of Additional
Information of the
Trust dated April 29, 1996, and the Plan, a copy of which is attached to this
Prospectus/Proxy
Statement as Exhibit A
Proposed Reorganization. The Plan provides for the transfer of all or
substantially all of the assets of
the Telecommunications Growth Fund in exchange for shares of the Special
Equities Fund and the
assumption by the Special Equities Fund of substantially all liabilities of
the Telecommunications Growth
Fund. The Plan also calls for the distribution of shares of the Special
Equities Fund to the
Telecommunications Growth Fund shareholders in liquidation of the
Telecommunications Growth Fund.
As a result of the Reorganization, each shareholder of the Telecommunications
Growth Fund will become
the owner of that number of full and fractional shares of the Special Equities
Fund having an aggregate net
asset value equal to the aggregate net asset value of their shares of the
Telecommunications Growth Fund,
as of the close of business on the date that the Telecommunications Growth
Fund's assets are exchanged for
shares of the Special Equities Fund. (Shareholders of Class A, Class B, Class
C and Class Y shares of the
Telecommunications Growth Fund will receive Class A, Class B, Class C and
Class Y shares, respectively,
of the Special Equities Fund.) See "Information About the Reorganization."
For the reasons set forth below under "Reasons for the Reorganization," the
Board of Trustees of the
Trust, on behalf of the Telecommunications Growth Fund and the Board of
Directors of the Investment
Funds, including all of the "non-interested" Trustees/Directors, as that term
is defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), has unanimously concluded
that the Reorganization
would be in the best interests of the shareholders of the both Funds and the
Trust and that the interests of
both Funds existing shareholders would not be diluted as a result of the
transaction contemplated by the
Reorganization, and therefore has submitted the Plan for approval by the
Telecommunications Growth
Fund's shareholders. The Board of Trustees of Trust on behalf of the
Telecommunications Growth Fund
recommends approval of the Plan effecting the Reorganization.
The Board of Directors of the Investment Funds has also approved the
Reorganization on behalf of the
Special Equities Fund and the Investment Funds.
Approval of the Reorganization will require the affirmative vote of a majority
of the outstanding
shares of the Telecommunications Growth Fund. No Vote of Special Equities
Fund is required. See
"Voting Information."
Tax Consequences. Prior to completion of the Reorganization, the
Telecommunications Growth Fund
will have received an opinion from counsel that, upon the Reorganization and
the transfer of the assets of
the Telecommunications Growth Fund, no gain or loss will be recognized by the
Telecommunications
Growth Fund or its shareholders for Federal income tax purposes. The holding
period and tax basis of
shares of the Special Equities Fund that are received by each
Telecommunications Growth Fund
shareholder will be the same as the holding period and tax basis of the shares
of the Telecommunications
Growth Fund previously held by such shareholder. In addition, the holding
period and tax basis of the
assets of the Telecommunications Growth Fund in the hands of the Special
Equities Fund as a result of the
Reorganization will be the same as in the hands of the Telecommunications
Growth Fund immediately prior
to the Reorganization.
Investment Objectives, Policies and Restrictions. The Telecommunications
Growth Fund and the
Special Equities Fund have generally similar investment policies and
restrictions. The Special Equities
Fund and the Telecommunications Growth Fund both seek long-term capital
appreciation by investing
primarily in equity securities.
Although the respective investment policies of the Special Equities Fund and
the Telecommunications
Growth Fund are generally similar, shareholders of the Telecommunications
Growth Fund should consider
certain differences in such objectives and policies. See "Information About
the Special Equities Fund",
"Information About the Telecommunications Growth Fund" and "Comparison of
Investment Objectives and
Policies."
Fees and Expenses. The Special Equities Fund pays SBMFM a monthly investment
advisory fee
calculated at the rate of 0.55% of the Fund's average daily net assets. The
Telecommunications Growth
Fund pays Strategy Advisers a monthly investment advisory fee calculated at
the rate of 0.55% of the
Fund's average daily net assets, of which Strategy Advisers pays to The
Boston Company Asset
Management, Inc. ("TBCAM"), the Fund's sub-advisor, a fee in the amount of
0.275% of the Fund's
average daily net assets. In addition to the investment advisory fees, both
Funds pay SBMFM an
administration fee payable monthly at the rate of 0.20% of the respective
Fund's average daily net assets.
The expense ratio of the Special Equities Fund subsequent to the
Reorganization is expected to be
lower than that of the Telecommunications Growth Fund. See "Reasons for the
Reorganization." Total
Special Equities Fund operating expenses stated as a percentage of average net
assets for the fiscal year
ended December 31, 1995 for Class A, Class B and Class C shares were 1.43%,
2.04% and 2.25%,
respectively. Total Telecommunications Growth Fund operating expenses stated
as a percentage of
average net assets as of ended December 31, 1995 for Class A, Class B and
Class C shares were 1.27%,
2.02% and 2.02%, respectively. As of December 31, 1995, no Class Y shares
were outstanding for either
Fund. Annualized expense ratios for Class Y shares of the Special Equities
Fund and the
Telecommunications Growth Fund, based on estimated amounts and stated as a
percentage of average net
assets are [ %] and [ %] respectively. As of June 30, 1995, total Special
Equities Fund operating
expenses were [ %], [ %] and [ %], respectively for Class A, Class B
and Class C shares. As of June
30, 1995, total Telecommunications Growth Find operating expenses were [ %],
[ %] and [ %],
respectively for Class A, Class B and Class C shares. Total Special Equities
Fund annual operating
expenses stated as a percentage of average net assets subsequent to the
Reorganization (based upon pro
forma financial statements included in the Statement of Additional Information
dated [ ], 1996 and
incorporated herein) are expected to be [ ], [ ], [ ], and [ ], for
Class A, Class B, Class C and Class Y
shares, respectively.
Class A, Class B and Class C shares of both the Special Equities Fund and the
Telecommunications
Growth Fund are sold subject to distribution plans adopted pursuant to Rule
12b-1 under the 1940 Act.
Under the plans applicable to each Fund, Smith Barney Inc.("Smith Barney") is
paid a service fee
calculated at the annual rate of 0.25% of the value of each Fund's average
daily net assets attributable to
the Fund's Class A, Class B and Class C shares. There is no service fee for
Class Y shares of either Fund.
In addition, each Fund's Class B and Class C shares pay a distribution fee
primarily intended to
compensate Smith Barney for its initial expense of paying financial
consultants a commission upon sales of
the respective shares preparation of sales literature, advertising and
printing and distributing prospectuses,
statements of additional information and other materials. The distribution
fees for both Funds' Class B
shares and Class C shares are calculated at the annual rate of 0.75% of the
value of the respective Fund's
average net assets attributable to the shares of the respective class.
Purchase and Redemption Procedures. Purchase of shares of the Special
Equities Fund and the
Telecommunications Growth Fund must be made : (i) through Smith Barney; (ii)
by a broker that clears
securities transactions through Smith Barney on a fully disclosed basis (an
"Introducing Broker"); or (iii)
by investment dealers in the selling group at their respective public offering
prices (net asset value next
determined plus any applicable sales charge). Class A shares of both the
Special Equities Fund and the
Telecommunications Growth Fund are sold subject to a maximum initial sales
charge of 5.00% of the
public offering price. Class B and Class C shares of both Funds are sold
without an initial sales charge but
are subject to certain higher ongoing expenses and a "CDSC" payable upon
certain redemptions.
Class Y shares of both Funds are sold without an initial sales charge or CDSC,
and are available only
to investors investing a minimum of $5,000,000.
Class A shares and Class Y shares of both Funds may be redeemed at their next
determined net asset
value per share without charge. Class B shares of both Funds may be redeemed
at their next determined
net asset value per share, subject to a maximum CDSC of 5.00% of the lower of
original cost of the shares
or redemption proceeds, declining by 1.00% each year after the date of
purchase to zero. Class C shares of
both Funds may be redeemed at their net asset value per share, subject to a
CDSC of 1.00%, if such shares
are redeemed during the first 12 months following their purchase. Shares of
both Funds held by Smith
Barney as custodian must be redeemed by submitting a written request to a
Smith Barney Financial
Consultant. All other shares may be redeemed through a Financial Consultant,
Introducing Broker or by
forwarding an appropriate written request for redemption to First Data
Investor Services Group, Inc.
("FDISG") . See "Redemption of Shares" in the accompanying Prospectus of the
Special Equities Fund.
Exchange Privileges. The exchange privileges available to shareholders of the
Special Equities Fund
are identical to those available to shareholders of the Telecommunications
Growth Fund. Shareholders of
both the Telecommunications Growth Fund and the Special Equities Fund may
exchange at net asset value
all or a portion of their shares for shares of the same class in certain funds
of the Smith Barney Mutual
Funds. Any exchange will be a taxable event for which a shareholder may have
to recognize a gain or a
loss under Federal income tax provisions. No initial sales charge is imposed
on the shares being acquired,
and no CDSC is imposed on the shares being disposed of, through an exchange.
However, a sales charge
differential may apply to exchanges of Class A shares of the Funds. With
respect to Class B and Class C
shares of the Funds, the Class B and Class C shares acquired in the exchange
will be deemed to have been
purchased on the same date as the Class B and Class C shares that were
exchanged. In the event a class B
shareholder wishes to exchange his or her shares for Class B shares of a fund
with a higher CDSC that
imposed by the funds, The exchanged Class B shares will be subject to the
higher applicable CDSC.
Dividends. The policies regarding dividends and distributions are generally
the same for both Funds.
Each Fund's policy is to declare and pay dividends of investment income
annually and to make distributions
of any realized capital gains at least annually. Unless a shareholder
otherwise instructs, 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. The distribution option
currently in effect for a
shareholder of the Telecommunications Growth Fund will remain in effect after
the Reorganization. After
the Reorganization, however, the former Telecommunications Growth Fund
shareholders may change their
distribution option at any time by contacting a Smith Barney Financial
Consultant or FDISG in writing.
See "Dividends, Distributions and Taxes" in the accompanying prospectus of the
Special Equities Fund.
Shareholder Voting Rights. The Special Equities Fund and the
Telecommunications Growth Fund are
both open-end, diversified investment companies. The Special Equities Fund is
a separate series of Smith
Barney Investment Funds Inc., a Maryland corporation. The Telecommunications
Growth Fund is a
separate series of Smith Barney Telecommunications Trust, Inc., a
Massachusetts business trust. As
permitted by both Maryland and Massachusetts law, normally no meetings of
shareholders will be held for
the purpose of electing directors/trustees unless and until such time as less
than a majority of the
directors/trustees holding office have been elected by shareholders. At that
time, the directors/trustees in
each Fund then in office will call a shareholders' meeting for the election of
directors/trustees. Shareholders
may, at any meeting called for such purpose, remove a director/trustee by the
affirmative vote of the
holders of record of a majority of the votes entitled to be cast for the
election of directors/trustees. For
purposes of voting on said Reorganization, the Class A, Class B, Class C and
Class Y shares of the
Telecommunications Growth Fund shall vote together as a single class. See
"Comparative Information on
Shareholder's Rights-Voting Rights."
RISK FACTORS
The Telecommunications Growth Fund concentrates its assets in the
telecommunications industry
which include companies engaged in competition for market share. The
Telecommunications Growth
Fund's assumption of large positions in the securities of a small number of
issuers may cause the Fund's
share price to fluctuate to a greater extent than that of other diversified
investment companies. The Special
Equities Fund invests primarily in securities of secondary growth companies,
generally not within the S&P
500. These companies may still be in the developmental stage and may not have
reached a fully mature
stage of earnings growth. Investing in smaller, newer issuers generally
involves greater risk than investing
in larger, more established issuers.
Both the Special Equities Fund and the Telecommunications Growth Fund invest
primarily in common
stocks. The risks typically associated with investing in common stocks and
certain differences in the risks
associated with investing in the Funds, are discussed under the caption
"Comparison of Investment
Objectives and Policies".
REASONS FOR THE REORGANIZATION
The Board of Trustees of the Trust has determined that it is advantageous to
combine the
Telecommunications Growth Fund with the Special Equities Fund. The Funds have
generally similar
investment objectives and policies and the Funds have the same Manager and
Shareholder Servicing Agent.
The Board of Trustees of the Trust has determined that the Reorganization
should provide certain
benefits to Telecommunication Growth Fund shareholders. In making such
determination, the Board of
Trustees considered, among other things: (i) the terms and conditions of the
Reorganization; (ii) the savings
in expenses borne by shareholders expected to be realized by the
Reorganization; (iii) the fact that the
Funds have similar investment policies and the overlap of assets of each Fund
invested in the same industry
sectors; (iv) the fact that the Reorganization will be effected as a tax-free
reorganization; and (iv) the
comparative investment performance of the Funds.
In light of the foregoing, the Board of Trustees of the Trust, on behalf of
the Telecommunications
Growth Fund including the non-interested Trustees, have decided that it is in
the best interests of the
Telecommunications Growth Fund and its shareholders to combine with the
Special Equities Fund. The
Board of Trustees has also determined that a combination of the
Telecommunications Growth Fund and the
Special Equities Fund would not result in a dilution of the Telecommunications
Growth Fund's
shareholders' interests.
The Board of Directors of the Investment Funds considered the following
factors, among others, in
approving the Reorganization and determining that it is advantageous to
acquire the assets of the
Telecommunications Growth Fund: (i) the terms and conditions of the
Reorganization; (ii) the fact that the
Reorganization will be effected as a tax-free reorganization; and (iii) the
fact that the acquisition of
significant assets would allow the Fund to be more efficiently managed and
permit the portfolio manager to
increase the Special Equities Fund's position in certain stocks and more
broadly diversify the Fund's
portfolio. Accordingly, the Board of Directors of the Investment Funds,
including a majority of the non-
interested Directors, has determined that the Reorganization is in the best
interests of the Special Equities
Fund's shareholders and that the interests of the Special Equities Fund's and
Investment Fund's shareholders
and Investment Funds will not be diluted as a result of the Reorganization.
INFORMATION ABOUT THE REORGANIZATION
Plan of Reorganization. The following summary of the Plan is qualified in its
entirety by reference to
the Plan (Exhibit A hereto). The Plan provides that the Special Equities Fund
will acquire substantially all
of the assets of the Telecommunications Growth Fund in exchange for shares of
the Special Equities Fund
and the assumption by the Special Equities Fund of certain liabilities of the
Telecommunications Growth
Fund on [ ], 1996, or such later date as may be agreed upon by the
parties (the "Closing Date"). Prior
to the Closing Date, the Telecommunications Growth Fund will endeavor to
discharge all of its known
liabilities and obligations. The Special Equities Fund will not assume any
liabilities or obligations of the
Telecommunications Growth Fund other than those reflected in an unaudited
statement of assets and
liabilities of the Telecommunications Growth Fund prepared as of the close of
regular trading on the New
York Stock Exchange, Inc. (the "NYSE"), currently 4:00 p.m. New York time, on
the Closing Date. The
number of full and fractional Class A, Class B, Class C and Class Y shares of
the Special Equities Fund to
be issued to the Telecommunications Growth Fund shareholders will be
determined on the basis of the
Special Equities Fund's and the Telecommunications Growth Fund's relative net
asset values per Class A,
Class B, Class C and Class Y shares, respectively, computed as of the close of
regular trading on the
NYSE on the Closing Date. The net asset value per share of each Class will be
determined by dividing
assets, minus liabilities, by the total number of outstanding shares.
Both the Telecommunications Growth Fund and the Special Equities Fund will
utilize the procedures
set forth in the Prospectus of the Special Equities Fund to determine the
value of their respective portfolio
securities. The method of valuation employed will be consistent with Rule
22c-1 under the 1940 Act, and
with the interpretation of such rule by the SEC's Division of Investment
Management.
At or prior to the Closing Date, the Telecommunications Growth Fund will, and
the Special Equities
Fund may, declare a dividend or dividends which, together with all previous
such dividends, shall have the
effect of distributing to their respective shareholders all taxable income for
the taxable year ending on or
prior to the Closing Date (computed without regard to any deduction for
dividends paid) and all of its net
capital gains realized in the taxable year ending on or prior to the Closing
Date (after reductions for any
capital loss carryforward).
As soon after the Closing Date as conveniently practicable, the
Telecommunications Growth Fund will
liquidate and distribute pro rata to shareholders of record as of the close of
business on the Closing Date,
the full and fractional shares of the Special Equities Fund received by the
Telecommunications Growth
Fund. Such liquidation and distribution will be accomplished by the
establishment of accounts in the
names of the Telecommunications Growth Fund's shareholders on the share
records of the Special Equities
Fund's shareholder servicing agent. Each account will represent the
respective pro rata number of full and
fractional shares of the Special Equities Fund due to each of the
Telecommunications Growth Fund's
shareholders.
The consummation of the Reorganization is subject to the conditions set forth
in the Plan.
Notwithstanding approval of the Telecommunications Growth Fund's shareholders,
the Plan may be
amended as set forth in [ ] of the Plan and may be terminated at any
time at or prior to the Closing Date
by either party: (i) the mutual agreement of Telecommunications Trust on
behalf of the Acquired Fund
and Smith Barney Investment Funds on behalf of the Acquiring Fund; (ii)
Telecommunications Trust in
respect of the Acquired Fund in the event that Smith Barney Investment Funds
in respect of the Acquiring
Fund shall, or Smith Barney Investment Funds in respect of the Acquiring Fund
in he event that
Telecommunications Trust or the Acquired Fund shall, materially breach any
representation, warranty or
agreement contained herein to be performed at or prior to the Closing Date; or
(iii) a condition herein
expressed to be precedent tot he obligations of the terminating party has not
been met and it reasonably
appears that it will not or cannot be met.
Approval of the Plan will require the affirmative vote of a majority, as
defined in the 1940 Act, of the
outstanding shares of the Telecommunications Growth Fund, which is the lesser
of: (i) 67% of the voting
securities of the Telecommunications Growth Fund present at the Meeting, if
the holders of more than 50%
of the outstanding voting securities of the Telecommunications Growth Fund are
present or represented by
proxy, or (ii) more than 50% of the outstanding shares of the
Telecommunications Growth Fund. If the
Reorganization is not approved by shareholders of the Telecommunications
Growth Fund, the Board of
Trustees will consider other possible courses of action, including liquidation
of the Telecommunications
Growth Fund.
Description of the Special Equities Fund's Shares. Full and fractional shares
of the respective Classes
of shares of common stock of the Special Equities Fund will be issued to the
Telecommunications Growth
Fund in accordance with the procedures detailed in the Plan and as described
in the Special Equities Fund's
Prospectus. Generally, the Special Equities Fund does not issue share
certificates to shareholders unless a
specific request is submitted to FDISG. The shares of the Special Equities
Fund to be issued to the
Telecommunications Growth Fund shareholders and registered on the shareholder
records of FDISG will
have no pre-preemptive or conversion rights.
Federal Income Tax Consequences. For Federal income tax purposes, the
exchange of assets for
shares of the Special Equities Fund is intended to qualify as a tax-free
reorganization under Section 368 (a)
of the Internal Revenue Code of 1986, as amended (the "Code"). As a condition
to the closing of the
Reorganization, the Telecommunications Growth Fund will receive an opinion
from Willkie Farr &
Gallagher, counsel to the Telecommunications Growth Fund and the Special
Equities Fund, to the effect
that, on the basis of the existing provisions of the Code, U.S. Treasury
regulations issued thereunder,
current administrative rules, pronouncements and court decisions, for Federal
income tax purposes, upon
consummation of the Reorganization, the following will apply:
(1) the Reorganization will constitute a reorganization within the meaning
of Section 368
(a)(1)(C) of the Code, and the Special Equities Fund and the
Telecommunications
Growth Fund are each a "party to a reorganization" within the meaning of
Section
368(b) of the Code;
(2) no gain or loss will be recognized by either the Special Equities Fund
or the
Telecommunications Growth Fund upon the transfer of the Telecommunications
Growth Fund's assets to, and the assumption of the Telecommunications Growth
Fund's liabilities by, the Special Equities Fund in exchange for the Special
Equities
Fund's shares, or upon the distribution of the Special Equities Fund's shares
to the
Telecommunications Growth Fund's shareholders in exchange for their shares in
the
Telecommunications Growth Fund;
(3) no gain or loss will be recognized by shareholders of the
Telecommunications Growth
Fund upon the exchange of their shares for the Special Equities Fund shares;
(4) the basis of the Special Equities Fund shares received by each
Telecommunications
Growth Fund shareholder pursuant to the Reorganization will be the same as the
basis of the Telecommunications Growth Fund shares surrendered in exchange
therefor;
(5) the holding period of the Special Equities Fund shares to be received by
each
Telecommunications Growth Fund shareholder will include the holding period of
the
shares of the common stock of the Telecommunications Growth Fund which are
surrendered in exchange therefor (provided the Telecommunications Growth Fund
shares were held as capital assets on the date of the Reorganization);
(6) the basis of the Telecommunications Growth Fund's assets acquired by the
Special
Equities Fund will be the same as the basis of such assets to the
Telecommunications
Growth Fund immediately prior to the Reorganization; and
(7) the holding period of the assets of the Telecommunications Growth Fund
acquired by
the Special Equities Fund will include the period for which such assets were
held by
the Telecommunications Growth Fund.
Shareholders of the Telecommunications Growth Fund should consult their tax
advisors regarding the
effect, if any, of the proposed Reorganization in light of their individual
circumstances. Since the foregoing
discussion only relates to the Federal income tax consequences of the
Reorganization, shareholders of the
Telecommunications Growth Fund should also consult their tax advisors as to
state and local tax
consequences, if any, of the Reorganization.
Capitalization. The following table, which is unaudited, shows the
capitalization of the Special
Equities Fund and the Telecommunications Growth Fund as of [ ], 1996
and on a pro forma basis as
of that date, giving effect to the proposed acquisition of assets at net asset
value:
(In thousands, except
per share values)
(Unaudited)
Telecommunications
Growth
Fund
Special
Equities
Fund
Pro forma
For
Reorganization
Class A
Net Assets.................................................................
Net asset value per share..........................................
Shares outstanding.....................................................
Class B
Net Assets.................................................................
Net asset value per share..........................................
Shares outstanding.....................................................
Class C
Net Assets.................................................................
Net asset value per share..........................................
Shares outstanding.....................................................
Class Y
Net Assets.................................................................
Net asset value per share..........................................
Shares outstanding.....................................................
As of the Record Date, [ ], there were [ ] outstanding Class A
shares, [ ] outstanding Class
B shares, [ ] outstanding Class C and [ ] outstanding Class Y shares of
the Trust and [ ] outstanding
Class A shares, [ ] outstanding Class B shares, [ ] outstanding Class C
shares and [ ] outstanding Class
Y shares of the Special Equities Fund. As of the Record Date, the officers
and trustees of the Trust as a
group beneficially owned less than 1% of the outstanding shares of the
Telecommunications Growth Fund.
To the best knowledge of the Trustees, as of the Record Date, no shareholder
or "group" (as that term is
used in Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange
Act")) owned beneficially or
of record 5% or more of the Telecommunications Growth Fund. As of the Record
Date, the officers and
Directors of the Investment Funds as a group beneficially owned less than 1%
of the outstanding shares of
the Special Equities Fund.
INFORMATION ABOUT THE SPECIAL EQUITIES FUND
Management's discussion and analysis of Market Condition and Portfolio Review.
The year 1995 began slowly, rose to a loud crescendo, tapered off a bit and
ended strongly. Coming
into 1995, analyst expectations about both the equity markets and the economy
were less than spectacular.
Many investment professionals had expected a difficult year of the stock
market. Yet what unfolded in
1995 has to be considered one of the "great" years of the markets, much like a
classic "great" wine.
In the early part of the year, when investor concerns about economic growth,
inflation concerns
subsided, the equity markets were essentially calm. Then, as the economy
slowed down, interest rates
declined and inflation concerns subsided, the markets began to hit new highs
with such frequency it soon
became the norm. All of the major stock market indices participated: The Dow
Jones Industrial Average
and the Standard & Poor's 500-Stock Price Index finished the year up 36.94%
and 37.53%, respectively.
The NASDAQ Composite Index and the Russell 2000 Index rose 39.92% and 28.45%,
respectively.
The stock market rally, led by a huge concentration of investors in technology
stocks, began to falter in
August with the announcement of a slight disappointment in earnings from
Intel. This earnings report from
Intel raised a red flag to investors about other technology stocks which began
a sharp decline from their
highs. This sell-off in technology stocks affected the markets, especially
the universe of small-
capitalization stocks. Small-capitalization stocks underperformed large-
capitalization stocks over the full
year. Then, in mid-December, technology stocks rebounded, causing a strong
finish for all the major stock
market averages. Because Smith Barney Special Equities invests in small,
emerging growth companies, its
holdings are generally not affected by broad economic and market conditions.
For the one-year period
ended December 31, 1995, Smith Barney Special Equities Fund posted a
cumulative total return (which
excludes the effects of all sales charges) of 63.48% for Class A shares.
Fund's Investment Strategy
In the past year, Smith Barney Special Equities Fund continued to buy stocks
of companies with strong
fundamentals and above-average growth prospects with the intention of holding
them. We do not focus on
short-term price fluctuations as long as the Fund believes a company's
fundamentals remain viable and
growth can be sustained over a full market cycle. At year end, the Fund's
top-five holdings were:
- Ascend Communications Inc.
- - Macromedia Inc.
- - Baby Superstore Inc.
- - Starbucks Corp.
- - Callaway Golf Co.
For 1996, we expect the early part of the year to be challenging for small-
capitalization stocks.
However, we believe the relative performance of small-capitalization stocks
may improve as the year
progresses.
Management. George V. Novello, a Managing Director of Smith Barney is an
Investment Officer of
the Special Equities Fund. Mr. Novello has managed the day to day operations
of the Special Equities
Fund, including making all investment decisions, since September, 1990.
SMITH BARNEY SPECIAL EQUITIES FUND
Historical Performance - Class A Shares
Net Asset Value
Beginning End
Income
Capital Gain
Return
Total
Year Ended
of Year of Year
Dividends
Distributions
of Capital
Returns(1)
12/31/95
$19.10
$30.44
$0.00
$0.76
$0.00
63.48%
12/31/94
20.23
19.10
0.00
0.00
0.00
(5.59)
12/31/93
15.47
20.23
0.00
0.33
0.00
32.90
Inception* - 12/31/92
14.13
15.47
0.00
0.00
0.00
9.48+
Total
$0.00
$1.09
$0.00
Historical Performance - Class B Shares
Net Asset Value
Beginning End
Income
Capital Gain
Return
Total
Year Ended
of Year of Year
Dividends
Distributions
of Capital
Returns(1)
12/31/95
$18.82
$29.76
$0.00
$0.76
$0.00
62.30%
12/31/94
20.08
18.82
0.00
0.00
0.00
(6.27)
12/31/93
15.47
20.08
0.00
0.33
0.00
31.93
12/31/92
14.18
15.47
0.00
0.00
0.00
9.10
12/31/91
9.82
14.18
0.00
0.00
0.03
44.76
12/31/90
13.77
9.82
0.29
0.23
0.02
(24.71)
12/31/89
12.04
13.77
0.27
0.00
0.24
18.60
12/31/88
11.48
12.04
0.55
0.30
0.00
12.60
12/31/87
13.02
11.48
0.00
0.14
0.00
(10.91)
12/31/86
13.15
13.02
0.05
1.00
0.00
7.05
Total
$1.16
$2.76
$0.29
Historical Performance - Class C Shares
Net Asset Value
Beginning End
Income
Capital Gain
Return
Total
Year Ended
of Year of Year
Dividends
Distributions
of Capital
Returns(1)
12/31/95
$18.82
$29.77
$0.00
$0.76
$0.00
62.35%
12/31/94
20.08
18.82
0.00
0.00
0.00
(6.27)
Inception* - 12/31/93
22.62
20.08
0.00
0.33
0.00
(9.77)+
Total
$0.00
$1.09
$0.00
SMITH BARNEY SPECIAL EQUITIES FUND
Average Annual Return
Without Sales Charge(1)
Class A
Class B
Class C
Year Ended 12/31/95
63.48%
62.30%
62.35%
Five Years Ended 12/31/95
N/A
25.95
N/A
Ten Years Ended 12/31/95
N/A
11.76
N/A
Inception* through 12/31/95
29.39
11.98
15.48
With Sales Charge(2)
Class A
Class B
Class C
Year Ended 12/31/95
55.31%
57.30%
61.35%
Five Years Ended 12/31/95
N/A
25.87
N/A
Ten Years Ended 12/31/95
N/A
11.76
N/A
Inception* through 12/31/95
27.30
11.98
15.48
Cumulative Total Return
Without Sales Charge(1)
Class A (Inception* through 12/31/95)
124.59%
Class B (12/31/85 through 12/31/95)
203.96
Class C (Inception* through 12/31/95)
37.29
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect
deduction of the applicable sales charge with respect to Class A shares or the
applicable contingent deferred sales charges
("CDSC") with respect to Class B an d C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares
reflect the deduction of the maximum initial sales charge of 5.00%; Class B
shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed less than one year from initial purchase
and declines thereafter by 1.00% per year until no
CDSC is incurred. Class C shares reflect the deduction of a 1.00% CDSC, which
applies if shares are redeemed within the
first year of purchase.
* Inception dates for Class A, B, C and Z shares are November 6, 1992,
December 13, 1982, October 18, 1993 and October
2, 1995, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
SMITH BARNEY SPECIAL EQUITIES FUND
Historical Performance (unaudited)
Growth of $10,000 Invested in Class B Shares of the
Smith Barney Special Equities Fund vs.
Standard & Poor's 500 Index+
December 1985 - December 1995
Plot Points
Smith Barney
Special Equities
Date Fund S&P 500 Index Return
12/85 10000 10000
6/86 12022.3 12083 0.2083
12/86 10705.3 11866.71 -0.0179
6/87 12536.9 15122.94 0.2744
12/87 9537.7 12490.04 -0.1741
6/88 10995.3 14076.27 0.127
12/88 10739.8 14559.09 0.0343
6/89 11792.4 16964.25 0.1652
12/89 12737.9 19164.51 0.1297
6/90 12812 19754.78 0.0308
12/90 9590.8 18569.49 -0.06
6/91 10684.7 21211.93 0.1423
12/91 13883.2 24215.54 0.1416
6/92 11562.8 24053.3 -0.0067
12/92 15146.2 26059.34 0.0834
6/93 17515.6 27325.82 0.0486
12/93 19982.5 28678.45 0.0495
6/94 16837.8 27709.12 -0.0338
12/94 18728.6 29055.78 0.0486
6/95 22271.3 34922.15 0.2019
12/95 30396 39961.41 0.1443
+Hypothetical illustration of $10,000 invested in Class B shares on
December 31, 1985, assuming reinvestment of dividends
and capital gains, if any, at net asset value through December 31, 1995. The
Standard & Poor's 500 Index is composed of widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the over-the-counter market. Figures
for the index include reinvestment of dividends.. The index is unmanaged and
is not subject to the same management and trading
expenses as a mutual fund. The performance of the Fund's other classes may be
greater or less than the Class B shares'
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders
investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will
fluctuate, and redemption value may be more or less than the original cost.
No adjustment has been made for shareholder tax
liability on dividends or capital gains.
INFORMATION ABOUT THE TELECOMMUNICATIONS GROWTH FUND
Management's discussion and analysis of Market Condition and Portfolio Review
As you know, the investment management team of Smith Barney Telecommunications
Growth Fund
seeks to provide shareholders with capital growth through common stocks and,
secondarily, income. The
Fund's 1995 annual total return for Class A and Class B shares was 8.54% and
7,67%, respectively. In
comparison, the Standard & Poor's 500-Stock Price Index (the "S&P 500," a
capitalization-weighted
measure of 500 widely held common stocks listed on the New York Stock
Exchange, American Stock
Exchange and over-the-counter market) has a total return of 37.53% in 1995.
The Fund's performance in 1995 was disappointing as its stocks in our primary
area of investment
lagged the performance of the U.S. market in general. We have attempted to
position the portfolio to
benefit from technological change and rapid growth that is occurring in the
telecommunications industry
worldwide. Last year, foreign markets were either flat or down and the
domestic market was affected by
anxiety caused by pending legislative and regulatory activity in Washington,
D.C.
The telecommunications industry is undergoing unprecedented change. Major
capital spending plans to
enable telephones to provide video, the wireless revolution and the explosive
growth of the Internet are jest
some of the many factors that have positively impacted the telecommunications
sector. On the other hand,
fears of entry barriers coming down and the acceleration of capital investment
requirements have
heightened investor concerns.
Our long-term outlook for the telecommunications industry is positive. A
global revolution in
communications is underway and technological advances are fueling its growth.
In order to capitalize on
this long-term trend, the Fund intends to target companies that are directly
involved in growth areas such as
software, networking, on-line services and enhancing the power of computers.
Management. Guy Scott, Senior Vice President of the TBCAM, has served as
portfolio manager of the
Fund since October, 1991 and manages the day to day operations of the Fund
including making all
investment decisions.
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
Historical Performance - Class A Shares
Net Asset Value
Beginning End
Income
Capital Gain
Return
Total
Year Ended
of Year of Year
Dividends
Distributions
of Capital
Returns(1)
12/31/95
$11.91
$12.71
$0.00
$0.21
$0.00
$8.54%
12/31/94
12.86
11.91
0.13
0.00
0.00
(6.37)
12/31/93
9.63
12.86
0.00
0.17
0.00
35.27
12/31/92
8.68
9.63
0.02
0.71
0.00
19.41
12/31/91
7.36
8.68
0.06
0.14
0.01
20.94
12/31/90
8.78
7.36
0.14
0.10
0.00
(13.46)
12/31/89
7.08
8.78
0.16
0.82
0.00
37.85
12/31/88
6.10
7.08
0.10
0.00
0.00
17.69
12/31/87
11.05
6.10
0.69
3.96
0.00
(3.53)
12/31/86
12.64
11.05
0.32
3.39
0.00
18.84
Total
$1.62
$9.50
$0.01
Historical Performance - Class B Shares
Net Asset Value
Beginning End
Income
Capital Gain
Return
Total
Year Ended
of Year of Year
Dividends
Distributions
of Capital
Returns(1)
12/31/95
$11.82
$12.51
$0.00
$0.21
$0.00
7.67%
12/31/94
12.77
11.82
0.03
0.00
0.00
(7.17)
12/31/93
9.63
12.77
0.00
0.17
0.00
34.34
Inception* - 12/31/92
9.33
9.63
0.01
0.71
0.00
10.98+
Total
$0.04
$1.09
$0.00
Historical Performance - Class C Shares
Net Asset Value
Beginning End
Income
Capital Gain
Return
Total
Year Ended
of Year of Year
Dividends
Distributions
of Capital
Returns(1)
12/31/95
$12.00
$12.71
$0.00
$0.21
$0.00
7.73%
Inception* - 12/31/94
12.70
12.00
0.03
0.00
0.00
(5.24)+
Total
$0.03
$0.21
$0.00
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
Average Annual Total Return
Without Sales Charge(1)
Class A
Class B
Class C
Year Ended 12/31/95
8.54%
7.67%
7.73%
Five Years Ended 12/31/95
14.70
N/A
N/A
Ten Years Ended 12/31/95
12.32
N/A
N/A
Inception* through 12/31/95
14.17
13.50
1.81
With Sales Charge(2)
Class A
Class B
Class C
Year Ended
3.11%
2.67%
6.73%
Five Years Ended 12/31/95
13.53
N/A
N/A
Ten Years Ended 12/31/95
11.74
N/A
N/A
Inception* through 12/31/95
13.68
13.02
1.81
Cumulative Total Return
Without Sales Charge(1)
Class A (12/31/85 through 12/31/95)
219.53%
Class B (Inception* through 12/31/95)
49.04
Class C (Inception* through 12/31/95)
2.08
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect
deduction of the applicable sales charge with respect to Class A shares or the
applicable contingent deferred sales charges
("CDSC") with respect to Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares
reflect the deduction of the maximum initial sales charge of 5.00%; Class B
shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed less than one year from initial purchase
and declines thereafter by 1.00% per year until
no CDSC is incurred. Class C shares reflect the deduction of a 1.00% CDSC,
which applies if shares are redeemed within the
first year of purchase.
* Inception dates for Class A, B, C and shares are January 1, 1984,
November 6, 1992 and November 7, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
Historical Performance (unaudited)
Growth of $10,000 Invested in Class A Shares of the
Smith Barney Telecommunications Fund vs.
Standard & Poor's 500 Index, Lipper Science & Technology Fund Average
and Lipper Growth Fund Index+
December 1985 - December 1995
Plot Points
Smith Barney Lipper Science
Telecommunications Lipper Growth & Technology
Date Growth Fund S&P 500 Index Return Fund Index Return Fund
Average Return
12/31/85 9497.7 10000 10000 10000
6/86 11939.6 12083 0.2083 12143 0.2143 11483 0.1483
12/86 11287 11866.71 -0.0179 11560.14 -0.048 10818.13 -
0.0579
6/87 13542.1 15122.94 0.2744 14191.22 0.2276 14070.07
0.3006
12/87 10888.8 12490.04 -0.1741 11930.56 -0.1593 11284.19
-0.198
6/88 12641.5 14076.27 0.127 13537.61 0.1347 12956.51 0.1482
12/88 12814.8 14559.09 0.0343 13617.48 0.0059 12118.22
-0.0647
6/89 16372.7 16964.25 0.1652 15935.17 0.1702 13702.08
0.1307
12/89 17665.6 19164.51 0.1297 17362.97 0.0896 15010.62
0.0955
6/90 16659.6 19754.78 0.0308 18040.12 0.039 17304.25 0.1528
12/90 15287.4 18569.49 -0.06 16423.73 -0.0896 14893.77 -
0.1393
6/91 16128.1 21211.93 0.1423 18975.97 0.1554 17421.24
0.1697
12/91 18489.3 24215.54 0.1416 22272.1 0.1737 21853.2
0.2544
6/92 18425.4 24053.3 -0.0067 21488.12 -0.0352 20461.15
-0.0637
12/92 22078 26059.34 0.0834 23972.15 0.1156 25265.43 0.2348
6/93 26617.4 27325.82 0.0486 25048.5 0.0449 28362.97
0.1226
12/93 29864.9 28678.45 0.0495 26844.48 0.0717 31678.6
0.1169
6/94 26706.6 27709.12 -0.0338 25472.72 -0.0511 30249.9
-0.0451
12/94 27961.3 29055.78 0.0486 26422.86 0.0373 36668.93
0.2122
6/95 30309 34922.15 0.2019 31363.93 0.187 46807.88 0.2765
12/95 30349.5 39961.41 0.1443 34901.78 0.1128 50547.83
0.0799
PLEASE USE HIGHLIGHTED SECTIONS ONLY.
+Hypothetical illustration of $10,000 invested in Class A shares on
December 31, 1985, assuming deduction of the
maximum 5.00% sales charge at the time of investment and reinvestment of
dividends and capital gains, if any, at net asset value
through December 31, 1995. The Standard & Poor's 500 Index is composed of
widely held common stocks listed on the New
York Stock Exchange, American Stock Exchange and the over-the-counter market.
Figures for the index include reinvestment of
dividends.. The Lipper Science & Technology Fund Average is composed of the
Fund's peer group of 37 mutual funds investing
within the science and technology investment objective category as of December
31, 1995. The Lipper Growth Fund Index is a
net asset value weighted index of the 30 largest funds within the Growth
category. The index is unmanaged and is not subject to
the same management and trading expenses as a mutual fund. The performance of
the Fund's other classes may be greater or less
than the Class A shares' performance indicated on this chart, depending on
whether greater or lesser sales charges and fees were
incurred by shareholders investing in other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value
will fluctuate, and redemption value may be or less than the original cost.
No adjustment has been made for shareholder tax
liability on dividends or capital gains.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion which compares investment objectives, policies and
restrictions of the Special
Equities Fund to the Telecommunications Growth Fund is based upon and
qualified in its entirety by the
investment objectives, policies and restriction section of the Prospectuses of
the Special Equities Fund and
the Telecommunications Growth Fund. For a full discussion of the investment
objectives, policies and
restrictions of the Special Equities Fund, refer to the Special Equities
Fund's Prospectus, which
accompanies this Prospectus/Proxy Statement, under the captions, "Investment
Objectives and
Management Policies" and for a discussion of these issues as they apply to
the Telecommunications
Growth Fund, refer to the Telecommunications Growth Fund's Prospectus under
the caption, "Investment
Objectives and Management Policies."
Investment Objective. The investment objective of the Telecommunications
Growth Fund is capital
appreciation, with income as a secondary consideration. The investment
objective of the Special Equities
Fund is also long-term capital appreciation. Both the Special Equities Fund's
and the Telecommunications
Growth Fund's investment objective is fundamental and, as such, may be changed
only by the "vote of a
majority of the outstanding voting securities," as defined in the 1940 Act.
The investment policies of the
Special Equities Fund and the Telecommunications Growth Fund are non-
fundamental and, as such, may
be changed by the Board of Directors/Trustees, without shareholder approval,
provided such change is not
prohibited by the investment restrictions (which are set forth in the
applicable Statement of Additional
Information) or applicable law, and any such change will first be disclosed in
the then current prospectus.
Primary Investments. Both the Special Equities Fund and the
Telecommunications Growth Fund
invest primarily in equity securities (common stock and preferred stock). The
Telecommunications Growth
Fund seeks to achieve its investment objective primarily through investments
in common stocks and other
securities of companies engaged in the telecommunications industry. The
Telecommunications Growth
Fund broadly defines the telecommunications industry as including companies
engaged in the
communication, display, reproduction, storage and retrieval of information,
and includes companies
involved in communications equipment, electronic components, broadcasting,
computer equipment, cellular
communications and publishing. The Special Equities Fund invests primarily in
equity securities which
SBMBM believes to have superior appreciation potential, which often include
the common stock of
secondary growth companies, generally companies not within the S&P 500.
Although the Special Equities
Fund does not seek to achieve its objective by investing primarily in
telecommunications companies, many
of the companies in which the Special Equities Fund invests are in the
telecommunications industry as
defined by the Telecommunications Growth Fund. As of March 31, 1996,
approximately 35% - 40% of
the Telecommunications Growth Fund's portfolio was invested in industries in
which the Special Equities
Fund was also invested.
The Telecommunications Growth Fund invests primarily in common stock, but it
may also invest in
other types of securities, including convertible bonds, convertible preferred
stocks, warrants, preferred
stocks and debt securities. The Telecommunications Growth Fund may also, for
defensive purposes, invest
less than 65% of its assets in the telecommunications industry.
The Telecommunications Growth Fund is a non-diversified investment company
under the 1940 Act,
which means that the Fund is not limited by the 1940 Act in the proportion of
its assets that it may invest in
the obligations of a single issuer. The Telecommunications Growth Fund
conducts its operations, however,
so as to qualify as a "regulated investment company" for purposes of the Code.
To so qualify, the Fund
will limit its investments so that, at the close of each quarter of the
taxable year, (a) not more than 25% of
the market value of the Fund's total assets will be invested in the securities
of a single issuer and (b) with
respect to 50% of the market value of its total assets, not more than 5% of
the assets will be invested in the
securities of a single issuer and the Fund will not own more than 10% of the
outstanding voting securities
of a single issuer.
Additional Investments. Each Fund has the ability to engage in a number of
specialized investment
strategies and techniques designed to enable the Fund to achieve its
investment objectives, certain of which
are discussed below.
Repurchase Agreements. Each Fund may engage in repurchase agreement
transactions (typically the
acquisition of 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 buyer to resell,
the obligation at an agreed-upon
price and time) with certain member banks of the Federal Reserve System and
with certain dealers on the
Federal Reserve Bank of New York's list of reporting dealers. The value of
the underlying securities will
be at least equal at all times to the total amount of the repurchase
obligation, including interest. SBMFM,
Strategy Advisers or TBCAM, as the case may be, acting under the supervision
of the Board of
Directors/Trustees, reviews on an ongoing basis the value of the collateral
and creditworthiness of those
banks and dealers with which the Funds enter into repurchase agreements to
evaluate potential risks.
Foreign Securities and American Depository Receipts. The Telecommunications
Growth Fund may
invest up to 10% of its net assets in the securities of foreign issuers. Both
Funds may invest in American
Depository Receipts ("ADRs") which are U.S. dollar-denominated receipts issued
generally by domestic
banks, 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.
Lending Portfolio Securities. Each Fund is authorized to lend its portfolio
securities to brokers,
dealers and other financial institutions. The Funds' loans of securities will
be collateralized by cash or
U.S. government securities which are maintained in a segregated account in an
amount at least equal to the
current market value of the loaned securities. The risks associated with
lending portfolio securities, as with
other extensions of credit, consists of possible loss of rights in the
collateral should the borrower fail
financially.
Short Sales Against the Box. Each Fund may sell securities short if at all
times when a position is
open, the Fund owns the stock or owns securities convertible or exchangeable
for securities of the same
issue as the securities sold short. Short sales of this kind are referred to
as "against the box".
Options Activities. The Telecommunications Growth Fund may write covered call
options and
purchase call options for the purpose of terminating its outstanding
obligations with respect to securities
upon which call option contracts have been written. A call is covered if the
Fund (a) owns the optioned
securities, (b) maintains in a segregated account with its custodian, cash,
cash equivalents or U.S.
government securities with a value sufficient to meet the Fund's obligations
under the call, or (c) owns an
offsetting call option. The Telecommunications Growth Fund will write covered
call options on securities
to attempt to realize, through the receipt of premiums, a greater return than
would be realized on the
securities alone. The Telecommunications Growth Fund will not write option
contracts on its securities in
excess of 20% of the value of its net assets at the time such options are
written.
Restricted and Illiquid Securities. Each Fund may purchase securities subject
to restrictions on
disposition under the Securities Act of 1933 ("restricted securities") and
securities for which there are no
readily available market quotations. Each Fund may be forced to sell these
securities at less than fair
market value or may not be able to sell them when the investment adviser
believes it desirable to do so.
Investment Restrictions. Each Fund has adopted the following investment
restrictions for the
protection of shareholders. Each of the following restrictions, with respect
to the Special Equities Fund,
and restrictions 1,2,6,7,9,12 and 14, with respect to the Telecommunications
Growth Fund, are
fundamental and may not be changed without the approval of the holders of a
majority, as defined in the
1940 Act, of the voting securities of the Fund.
1. The Special Equities Fund may not purchase the securities of any one
issuer, other
than the U.S. government or its agencies or instrumentalities, if immediately
after
such purchase more than 5% of the value of the total assets of the Fund would
be
invested in securities of such issuer. As discussed above, this same
limitation applies
to the Telecommunications Growth Fund only as to 50% of the market value of
its
total assets.
2. Each Fund is prohibited from investing in securities of issuers
conducting their
business activities in the same industry, except that, for the Special
Equities Fund, (a)
neither utilities companies, as a group, nor all banks, savings and loan
associations
and savings banks, as a group, will be considered a single industry, and (b)
there is
no such limitation with respect to repurchase agreements, and for the
Telecommunications Growth Fund, this restriction shall not apply to issuers in
the
telecommunications industry as determined by Strategy Advisers.
3. Each Fund is prohibited from investing in real estate, real estate
mortgages, oil, gas
or mineral exploration or development programs, commodities or commodities
contracts, except that the Telecommunications Growth Funds may (a) invest in
companies engaged in the real estate business and securities which are secured
by real
estate and (b) trade in futures contracts and options on futures contracts,
and the
Special Equities Fund may purchase securities of companies, including real
estate
investment trusts, which invest in real estate.
4. Each Fund is prohibited from purchasing the securities of any other
investment
company, except in connection with a merger, consolidation, reorganization, or
acquisition of assets.
5. Each Fund is prohibited from purchasing securities of companies for the
purpose of
exercising control.
6. The Special Equities Fund may not participate on a joint or a joint and
several basis
in any trading account in securities, except that the "bunching" of orders of
two or
more funds or the Fund and other accounts for the sale or purchase of
portfolio
securities shall not be considered participation in a joint securities trading
account.
7. Each Fund is prohibited from purchasing more than 10% of the outstanding
voting
securities of any one issuer, except that, with respect to the
Telecommunications
Growth Fund, this restriction shall only apply to 50% of the Fund's total
assets.
8. Each Fund is prohibited from purchasing securities on margin or selling
any
securities short (except "against the box").
9. Each Fund is prohibited from making loans, except for the purchase of
debt
obligations, repurchase agreements, and loans of portfolio securities.
10. Each Fund is prohibited from investing more than 5% of its assets in
securities of
issuers which have been in operation for less than three years.
11. Each Fund is prohibited from purchasing the securities of an issuer if
one or more of
the Directors/Trustees or officers of the Fund individually own beneficially
more
than 1/2 of 1% of the outstanding securities of such issuer or together own
beneficially more than 5% of such securities.
12. The Telecommunications Growth Fund is prohibited from borrowing money,
except
that the Fund may borrow from banks for temporary or emergency (not
leveraging)
purposes, including the meeting of redemption requests which might otherwise
require
the untimely disposition of securities in an amount not exceeding 10% of the
Telecommunications Growth Fund's assets. Whenever borrowings exceed 5% of the
value of the Telecommunications Growth Fund's assets, the Fund will not make
additional investments. The Special Equities Fund is prohibited from
borrowing
money, except from banks as a temporary measure for extraordinary or emergency
purposes in an amount not exceeding 5% of the Fund's total assets. This
restriction
shall not prohibit the Special Equities Fund from entering into reverse
repurchase
agreements, provided that the Fund may not enter into a reverse repurchase
agreement if, as a result, its current obligations under such agreements would
exceed
one-third the current market value of the Fund's total assets.
13. Each Fund is prohibited from investing in puts, calls straddles, spreads
or any
combination thereof, except that the Telecommunications Growth Fund may write
covered call options.
14. Each Fund is prohibited from acting as an underwriter of securities.
15. Each Fund is prohibited from pledging, hypothecating, mortgaging or
otherwise
encumbering its assets, except that the Telecommunications Growth Fund may
encumber its assets in an amount up to 10% of the value of its total assets to
secure
borrowings for temporary or emergency purposes.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
General. The Telecommunications Growth Fund and the Special Equities Fund are
open-end,
management investment companies registered under the 1940 Act, which
continuously offer to sell shares
at their current net asset value. The Telecommunications Growth Fund is a
series of the Trust, which was
organized on June 2, 1983 under the laws of Massachusetts and is a business
entity commonly referred to
as a "Massachusetts business trust". The Trust is governed by its Master
Trust Agreement, by-laws and
Trustees. The Special Equities Fund is a series of the Investment Funds,
which is a Maryland corporation,
incorporated on September 28, 1984 and is governed by its Articles of
Incorporation, By-Laws and Board
of Directors. Each Fund is also governed by applicable state and Federal law.
The beneficial interest in
the Telecommunication Growth Fund is divided into shares, all with a par value
of $0.001 per share. The
number of authorized shares that may be issued by the Trust is unlimited. The
Investment Funds has an
authorized capital of 10,000,000,000 shares of common stock with a par value
of $.001 per share. The
Board of Directors has authorized the issuance of five series of shares, each
representing shares in one of
five separate portfolios, and may authorize the issuance of additional series
of shares in the future. The
assets of each portfolio are segregated and separately managed and a
shareholder's interest is in the assets
of the portfolio in which he or she holds shares. In both the
Telecommunications Growth Fund and the
Special Equities Fund, Class A, Class B, Class C and Class Y shares represent
interests in the assets of the
Fund and have identical voting, dividend, liquidation, and other rights on the
same terms and conditions
except that expenses related to the distribution of each class of shares are
borne solely by each class and
each class of shares has exclusive voting rights with respect to provisions of
each Fund's Rule 12b-1
distribution plan which pertains to a particular class. Notwithstanding the
foregoing, Class B shares of
either Fund will convert automatically to Class A shares of such Fund, based
on relative net asset value,
eight years after the date of the original purchase of such shares. 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 will be
converted to Class A shares
of the respective Fund at that time.
Directors/Trustees. The Master Trust Agreement of the Trust provides that the
term of office of each
Trustee shall be from the time of his or her election until the termination of
the Trust or until such
Trustee's death, resignation or removal. The By-laws of the Investment Funds
provide that the term of
office of each Director of the Investment Funds shall be from the time of his
or her election and
qualification until the next annual meeting of shareholders or until his or
her successor shall have been
elected and shall have qualified. Trustee of the Trust may be removed with or
without cause at any time (i)
by written instrument, signed by at least two-thirds of the number of Trustees
prior to such removal, (ii) by
vote of shareholders of the Trust holding not less than two-thirds of the
shares of the Trust outstanding at
any meeting called for the purpose or (iii) by a written declaration signed by
shareholders holding not less
than two-thirds of the shares then outstanding and filed with the Trust's
custodian. Vacancies on the
Boards of either the Trust or the Investment Funds may be filled by the
Trustees or Directors, as the case
may be, remaining in office. A meeting of shareholders will be required for
the purpose of electing
additional Trustees or Directors whenever fewer than a majority of the
Trustees or Directors then in office
were elected by shareholders.
Voting Rights. Neither the Trust nor the Investment Funds holds a meeting of
shareholders annually,
and there normally is no meeting of shareholders held for the purpose of
electing trustees/directors unless
and until such time as less than a majority of the directors holding office
have been elected by shareholders.
A meeting of shareholders of the Investment Funds, for any purpose, must be
called upon the written
request of shareholders holding at least 25% of the outstanding shares
entitled to vote at such meeting. On
each matter submitted to a vote of the shareholders of either the Trust or the
Investment Funds, each
shareholder is entitled to one vote for each whole share owned and a
proportionate, fractional vote for each
fractional share outstanding in the shareholder's name on the respective
Fund's books. The affirmative
vote of the holders of a majority of the outstanding shares entitled to vote
thereon, present in person or by
proxy at a shareholder meeting at which a quorum is present, shall decide any
questions except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or as may
otherwise be set forth in the applicable organizational documents, or in cases
where the vote is submitted to
the holders of one or more but not all portfolios or classes, a majority of
the votes cast of the particular
portfolio or class affected by the matter shall decide such matter.
Liquidation or Dissolution. In the event of the liquidation or dissolution of
the Special Equities Fund
or the Telecommunications Growth Fund, the shareholders of the Funds are
entitled to receive, when, and
as declared by the Directors or the Trustees, the excess of the assets
belonging to the Funds over the
liabilities belonging to the Funds. In either case, the assets so distributed
to shareholders of the Funds will
be distributed among the shareholders in proportion to the number of shares of
the Funds held by them and
recorded on the books of the Funds.
Liability of Directors. The Master Trust Agreement of the Trust provides that
the Trustees and
officers shall be indemnified against all liabilities arising by reason of
such person being or having been
such a Trustee or officer, except for such person's bad faith, willful
misfeasance, gross negligence or
reckless disregard of the duties involved in the conduct of such person's
office. The By-Laws of the
Investment Funds provide that each Director and officer shall be indemnified
against liabilities and
expenses incurred in connection with litigation in which they may be involved
because of their positions
with Fund, except for such person's willful misfeasance, bad faith, gross
negligence or reckless disregard
of the duties involved in the conduct of his or her office or under any
contract or agreement with the
Investment Funds.
Rights of Inspection. Maryland law permits any shareholder of the Investment
Funds or any agent of
such shareholder to inspect and copy during the Special Equities Fund's usual
business hours the Fund's
By-Laws, minutes of shareholder proceedings, annual statements of the Special
Equities Fund's affairs and
voting trust agreements on file at its principal office. Shareholders of the
Trust have the same inspection
rights as are permitted shareholders of a Massachusetts corporation under
Massachusetts corporate law.
Currently, each shareholder of a Massachusetts corporation is permitted to
inspect the records, accounts
and books of a corporation for any legitimate business purpose.
Shareholder Liability. Under Maryland law, Investment Funds' shareholders do
not have personal
liability for the Special Equities Fund's corporate acts and obligations.
Shares of the Special Equities Fund
issued to the shareholders of the Telecommunications Growth Fund in the
Reorganization will be fully paid
and nonassessable when issued, transferable without restrictions and will have
no preemptive rights. Under
Massachusetts law, shareholders of the Telecommunications Growth Fund may,
under certain
circumstances, be held personally liable for the obligations of the
Telecommunications Growth Fund. The
Trust's Master Trust Agreement, however, disclaims shareholder liability for
acts or obligations of the
Telecommunications Growth Fund and requires that notice of such disclaimer be
given in each agreement,
obligation or instrument entered into or executed by the Fund. The Master
Trust Agreement also provides
indemnification out of the property of the Telecommunications Growth Fund for
all losses and expenses of
any shareholder held personally liable for the obligations of the
Telecommunications Growth Fund.
The foregoing is only a summary of certain information with respect to the
Special Equities Fund and
the Telecommunications Growth Fund. The foregoing is not a complete
description of the documents cited.
Shareholders should refer to the provisions of the corporate documents and
state laws governing each Fund
for a more thorough description.
ADDITIONAL INFORMATION ABOUT
THE SPECIAL EQUITIES FUND
AND THE TELECOMMUNICATIONS GROWTH FUND
The Telecommunications Growth Fund. Information about the Telecommunications
Growth Fund is
incorporated herein by reference from its current Prospectus dated April 29,
1996, as supplemented on
May 7, 1996, and the Statement of Additional Information dated April 29, 1996,
which has been filed with
the SEC. A copy of the Prospectus and the Statement of Additional Information
is available upon request
and without charge by writing the Telecommunications Growth Fund at 388
Greenwich Street, New York,
New York 10013 or by calling (800) 224-7523.
The Special Equities Fund. Information concerning the operation and
management of the Special
Equities Fund is incorporated herein by reference from the Prospectus and
Statement of Additional
Information, each dated April 29, 1996, which have been filed with the
Securities and Exchange
Commission (SEC). A copy of such Statement of Additional Information is
available upon request and
without charge by writing the Special Equities Fund at 388 Greenwich Street,
New York, New York 10013
or by calling (800) 224-7523.
Both the Special Equities Fund and the Telecommunications Growth Fund are
subject to the
informational requirements of the Exchange Act and in accordance therewith
file reports and other
information including proxy material, reports and charter documents with the
SEC. These reports can be
inspected and copies obtained at the Public Reference Facilities maintained by
the SEC at 450 Fifth Street,
NW, Washington, D.C. 20549 and at the New York Regional Office of the SEC, 75
Park Place, New
York, New York 10007. Copies of such material can also be obtained from the
Public Reference Branch,
Office of Consumer Affairs and Information Services, SEC, Washington, D.C.
20549 at prescribed rates.
OTHER BUSINESS
The Trustees of the Trust do not intend to present any other business at the
Meeting. If, however, any
other matters are properly brought before the Meeting, the persons named in
the accompanying form of
proxy will vote thereon in accordance with their judgment.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with a solicitation
of proxies by the Board
of Trustees of the Trust to be used at the Special Meeting of Shareholders to
be held at [ ] p.m. on [ ],
1996, at 388 Greenwich Street, New York, New York 10013 and at any
adjournments thereof. This
Prospectus/Proxy Statement, along with a Notice of the Meeting and a proxy
card, is first being mailed to
shareholders of the Telecommunications Growth Fund on or about [ ], 1996.
Only shareholders of record
as of the close of business on the Record Date will be entitled to notice of,
and to vote at, the Meeting or
any adjournment thereof. The holders of a majority of the shares of the
Telecommunications Growth Fund
outstanding at the close of business on the Record Date present in person or
represented by proxy will
constitute a quorum for the Meeting. For purpose determining a quorum for
transacting business at the
Meeting, abstentions and broker "non-votes" (that is, proxies from brokers or
nominees indicating that such
persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on
a particular matter with respect to which the brokers or nominees do not have
discretionary power) will be
treated as shares taht are present but which have not been voted. For this
reason, abstentions and broker
non-votes will have the effect of a "no" vote for purposes of obtaining the
requisite approval of the Plan. If
the enclosed form of proxy is properly executed and returned in time to be
voted at the Meeting, the proxies
named therein will vote the shares represented by the proxy in accordance with
the instructions marked
thereon. Unmarked proxies will be voted FOR the proposed Reorganization and
FOR any other matters
deemed appropriate. A proxy may be revoked at any time on or before the
Meeting by written notice to the
Telecommunications Growth Fund, 388 Greenwich Street, New York, New York
10013, 22nd Floor, c/o
the Corporate Secretary. Unless revoked, all valid proxies will be voted in
accordance with the
specifications thereon or, in the absence of such specifications, FOR approval
of the Plan and the
Reorganization contemplated thereby.
Approval of the Plan will require the affirmative vote of a majority of the
outstanding shares of the
Telecommunications Growth Fund. Shareholders of Class A, Class B, Class C and
Class Y shares of the
Telecommunications Growth Fund shall vote together as a single class.
Shareholders of the
Telecommunications Growth Fund are entitled to one vote for each share.
Proxy solicitations will be made primarily by mail, but proxy solicitations
also may be made by
telephone, telegraph or personal interviews conducted by officers and
employees of Smith Barney and its
affiliates and/or by FDISG. In addition, Applied Mailing Systems, Inc., an
affiliate of FDISG ("Applied
Mailing"), or an agent of Applied Mailing, may call shareholders to ask if
they would be willing to
authorize the voting of their shares in accordance with the instructions given
over the telephone by the
shareholders. The latter telephone vote solicitation procedure is designed to
authenticate the shareholder's
identity by asking the shareholder to provide his or her social security
number (in the case of an individual)
or taxpayer identification number (in the case of an entity). The
shareholder's telephone instructions will
be implemented in a proxy executed by Applied Mailing or its agent and a
confirmation will be sent to the
shareholder to ensure that the vote has been authorized in accordance with the
shareholder's instructions.
Although a shareholder's vote may be solicited and cast in this manner, each
shareholder will receive a
copy of this Prospectus/Proxy Statement and may vote by mail using the
enclosed proxy card. The
Telecommunications Growth Fund believes that this telephonic voting system
will comply with
Massachusetts law and will obtain an opinion of counsel to that effect prior
to implementing such
procedures. The aggregate cost of solicitation of the shareholders of the
Telecommunications Growth Fund
is expected to be approximately $______________. Expenses of the
Reorganization, including the costs of
the proxy solicitation and the preparation of enclosures to the
Prospectus/Proxy Statement, reimbursement
of expenses of forwarding solicitation material to beneficial owners of shares
of the Telecommunications
Growth Fund and expenses incurred in connection with the preparation of this
Prospectus/Proxy Statement
will be borne by the Telecommunications Growth Fund and the Special Equities
Fund in proportion to their
assets.
In the event that sufficient votes to approve the Reorganization are not
received by [ ], 1996, the
persons named as proxies may propose one or more adjournments of the Meeting
to permit further
solicitation of proxies. In determining whether to adjourn the Meeting, the
following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature
of any further solicitation and the information to be provided to shareholders
with respect to the reasons for
the solicitation. Any such adjournment will require an affirmative vote by
the holders of a majority of the
shares present in person or by proxy and entitled to vote at the Meeting. The
persons named as proxies will
vote upon such adjournment after consideration of the best interests of all
shareholders.
The votes of the shareholders of the Special Equities Fund are not being
solicited by this
Prospectus/Proxy Statement.
SMITH BARNEY SPECIAL EQUITIES FUND
Historical Performance - Class A Shares
Net Asset Value
Beginning End
Income
Capital Gain
Return
Total
Year Ended
of Year of Year
Dividends
Distributions
of Capital
Returns(1)
12/31/95
$19.10
$30.44
$0.00
$0.76
$0.00
63.48%
12/31/94
20.23
19.10
0.00
0.00
0.00
(5.59)
12/31/93
15.47
20.23
0.00
0.33
0.00
32.90
Inception* - 12/31/92
14.13
15.47
0.00
0.00
0.00
9.48+
Total
$0.00
$1.09
$0.00
Historical Performnce - Class B Shares
Net Asset Value
Beginning End
Income
Capital Gain
Return
Total
Year Ended
of Year of Year
Dividends
Distributions
of Capital
Returns(1)
12/31/95
$18.82
$29.76
$0.00
$0.76
$0.00
62.30%
12/31/94
20.08
18.82
0.00
0.00
0.00
(6.27)
12/31/93
15.47
20.08
0.00
0.33
0.00
31.93
12/31/92
14.18
15.47
0.00
0.00
0.00
9.10
12/31/91
9.82
14.18
0.00
0.00
0.03
44.76
12/31/90
13.77
9.82
0.29
0.23
0.02
(24.71)
12/31/89
12.04
13.77
0.27
0.00
0.24
18.60
12/31/88
11.48
12.04
0.55
0.30
0.00
12.60
12/31/87
13.02
11.48
0.00
0.14
0.00
(10.91)
12/31/86
13.15
13.02
0.05
1.00
0.00
7.05
Total
$1.16
$2.76
$0.29
Historical Performance - Class C Shares
Net Asset Value
Beginning End
Income
Capital Gain
Return
Total
Year Ended
of Year of Year
Dividends
Distributions
of Capital
Returns(1)
12/31/95
$18.82
$29.77
$0.00
$0.76
$0.00
62.35%
12/31/94
20.08
18.82
0.00
0.00
0.00
(6.27)
Inception* - 12/31/93
22.62
20.08
0.00
0.33
0.00
(9.77)+
Total
$0.00
$1.09
$0.00
SMITH BARNEY SPECIAL EQUITIES FUND
Average Annual Return
Without Sales Charge(1)
Class A
Class B
Class C
Year Ended 12/31/95
63.48%
62.30%
62.35%
Five Years Ended 12/31/95
N/A
25.95
N/A
Ten Years Ended 12/31/95
N/A
11.76
N/A
Inception* through 12/31/95
29.39
11.98
15.48
With Sales Charge(2)
Class A
Class B
Class C
Year Ended 12/31/95
55.31%
57.30%
61.35%
Five Years Ended 12/31/95
N/A
25.87
N/A
Ten Years Ended 12/31/95
N/A
11.76
N/A
Inception* through 12/31/95
27.30
11.98
15.48
Cumulative Total Return
Without Sales Charge(1)
Class A (Inception* through 12/31/95)
124.59%
Class B (12/31/85 through 12/31/95)
203.96
Class C (Inception* through 12/31/95)
37.29
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect
deduction of the applicable sales charge with respect to Class A shares or the
applicable contingent deferred sales charges
("CDSC") with respect to Class B an d C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares
reflect the deduction of the maximum initial sales charge of 5.00%; Class B
shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed less than one year from initial purchase
and declines thereafter by 1.00% per year until no
CDSC is incurred. Class C shares reflect the deduction of a 1.00% CDSC, which
applies if shares are redeemed within the
first year of purchase.
* Inception dates for Class A, B, C and Z shares are November 6, 1992,
December 13, 1982, October 18, 1993 and October
2, 1995, respectively.
+Total return is not annualized, as it may not be representative of the
total return for the year.
SMITH BARNEY SPECIAL EQUITIES FUND
Historical Performance (unaudited)
Growth of $10,000 Invested in Class B Shares of the
Smith Barney Special Equities Fund vs.
Standard & Poor's 500 Index+
December 1985 - December 1995
+Hypothetical illustration of $10,000 invested in Class B shares on
December 31, 1985, assuming reinvestment of dividends
and capital gains, if any, at net asset value through December 31, 1995. The
Standard & Poor's 500 Index is composed of widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the over-the-counter market. Figures
for the index include reinvestment of dividends.. The index is unmanaged and
is not subject to the same management and trading
expenses as a mutual fund. The performance of the Fund's other classes may be
greater or less than the Class B shares'
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders
investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will
fluctuate, and redemption value may be more or less than the original cost.
No adjustment has been made for shareholder tax
liability on dividends or capital gains.
FINANCIAL STATEMENTS AND EXPERTS
The audited statements of assets and liabilities of the Telecommunications
Growth Fund and the
Special Equities Fund each as of December 31, 1995, and the Financial
Highlights tlable related statements
of operations for the year then ended and changes in net assets for the two
years then ended and selected per
share data and ratios, have been incorporated by reference into the Statement
of Additional Information
relating to this Prospectus/Proxy Statement in reliance on the reports of KPMG
Peat Marwick, L.L.P.,
independent auditors for the Telecommunications Growth Fund and the Special
Equities Fund given on the
authority of such firms as experts in accounting and auditing. In addition,
the unaudited financial
statements for the Telecommunications Growth Fund and the Special Equities
Fund for the six-month
period ended June 30, 1995 are incorporated by reference into the
aforementioned Statement of Additional
Information.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the Special
Equities Fund will be passed
upon by Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street,
New York, NY 10022.
THE BOARD OF TRUSTEES OF THE TELECOMMUNICATIONS TRUST ON
BEHALF OF THE TELECOMMUNICATIONS GROWTH FUND, INCLUDING THE
"NON-INTERESTED" TRUSTEES, UNANIMOUSLY RECOMMEND APPROVAL OF
THE PLAN, AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE
CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN.
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made
as of this day of July, 1996, by and between Smith Barney Investment Funds
Inc. ("Smith Barney
Investment Funds"), a Maryland corporation with its principal place of
business at 388 Greenwich Street,
New York, New York 10013, on behalf of the Special Equities Fund (the
"Acquiring Fund"), an investment
portfolio of Smith Barney Investment Funds and Smith Barney Telecommunications
Trust
("Telecommunications Trust"), a business trust organized under the laws of The
Commonwealth of
Massachusetts with its principal place of business at 388 Greenwich Street,
New York, New York 10013,
on behalf of the Telecommunications Growth Fund (the "Acquired Fund"), an
investment fund of
Telecommunications Trust.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation
within the meaning of Section 368(a)(1)(C) of the United States Internal
Revenue Code of 1986, as
amended (the "Code"). The reorganization (the "Reorganization") will consist
of the transfer of all or
substantially all of the assets of the Acquired Fund in exchange for shares of
common stock of the
Acquiring Fund (collectively, the "Acquiring Fund Shares" and each, an
"Acquiring Fund Share") and the
assumption by the Acquiring Fund of certain scheduled liabilities of the
Acquired Fund and the
distribution, after the Closing Date herein referred to, of Acquiring Fund
Shares to the shareholders of the
Acquired Fund in liquidation of the Acquired Fund and the termination of the
Acquired Fund, all upon the
terms and conditions hereinafter set forth in this Agreement.
WHEREAS, Smith Barney Investment Funds and Telecommunications
Trust are
registered investment companies of the management type and the Acquired Fund
owns securities that
generally are assets of the character in which the Acquiring Fund is permitted
to invest;
WHEREAS, Smith Barney Investment Funds is authorized to issue
shares of common
stock and Telecommunications Trust is authorized to issue shares of beneficial
interest;
WHEREAS, the Trustees of Telecommunications Trust have determined
that the exchange
of all or substantially all of the assets and certain of the liabilities of
the Acquired Fund for Acquiring Fund
Shares and the assumption of such liabilities by Smith Barney Investment Funds
on behalf of the Acquiring
Fund is in the best interests of the Acquired Fund's shareholders and that the
interests of the existing
shareholders of the Acquired Fund would not be diluted as a result of this
transaction;
WHEREAS, the Board of Directors of Smith Barney Investment Funds
has determined
that the exchange of all or substantially all of the assets of the Acquired
Fund for Acquiring Fund Shares is
in the best interests of the Acquiring Fund's shareholders and that the
interests of the existing shareholders
of the Acquiring Fund would not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the
covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND ASSUMPTION OF THE ACQUIRED FUND'S
SCHEDULED LIABILITIES AND LIQUIDATION AND TERMINATION OF THE
ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth and on
the basis of the
representations and warranties contained herein, Telecommunications Trust, on
behalf of the Acquired
Fund agrees to transfer the Acquired Fund's assets as set forth in paragraph
1.2 to Smith Barney
Investment Funds on behalf of the Acquiring Fund, and Smith Barney Investment
Funds on behalf of the
Acquiring Fund agrees in exchange therefor: (i) to deliver to the Acquired
Fund the number of Class A
Acquiring Fund Shares, including fractional Class A Acquiring Fund Shares,
determined by dividing the
value of the Acquired Fund's net assets attributable to its Class A shares,
computed in the manner and as of
the time and date set forth in paragraph 2.1, by the net asset value of one
Class A Acquiring Fund Share,
computed in the manner and as of the time and date set forth in paragraph 2.2;
(ii) to deliver to the
Acquired Fund the number of Class B Acquiring Fund Shares, including
fractional Class B Acquiring Fund
Shares, determined by dividing the value of the Acquired Fund's net assets
attributable to its Class B
shares, computed in the manner and as of the time and date set forth in
paragraph 2.1, by the net asset
value of one Class B Acquiring Fund Share, computed in the manner and as of
the time and date set forth
in paragraph 2.2; (iii) to deliver to the Acquired Fund the number of Class C
Acquiring Fund Shares,
including fractional Class C Acquiring Fund Shares, determined by dividing the
value of the Acquired
Fund's net assets attributable to its Class C shares, computed in the manner
and as of the time and date set
forth in paragraph 2.1, by the net asset value of one Class C Acquiring Fund
Share, computed in the
manner and as of the time and date set forth in paragraph 2.2; (iv) to deliver
to the Acquired Fund the
number of Class Y Acquiring Fund Shares, including fractional Class Y
Acquiring Fund Shares,
determined by dividing the value of the Acquired Fund's net assets
attributable to its Class Y shares,
computed in the manner and as of the time and date set forth in paragraph 2.1,
by the net asset value of one
Class Y Acquiring Fund Share, computed in the manner and as of the time and
date set forth in paragraph
2.2; and (v) to assume certain scheduled liabilities of the Acquired Fund, as
set forth in paragraph 1.3.
Such transactions shall take place at the closing provided for in paragraph
3.1 (the "Closing").
1.2. (a) The assets of the Acquired Fund to be acquired by Smith
Barney Investment
Funds on behalf of the Acquiring Fund shall consist of all or substantially
all of its property, including,
without limitation, all cash, securities and dividends or interest receivables
which are owned by the
Acquired Fund and any deferred or prepaid expenses shown as an asset on the
books of the Acquired Fund
on the closing date provided in paragraph 3.1 (the "Closing Date").
(b) The Acquired Fund has provided the Acquiring Fund with
a list of all of the
Acquired Fund's assets as of the date of execution of this Agreement. The
Acquired Fund reserves the right
to sell any of the securities but will not, without the prior approval of the
Acquiring Fund, acquire any
additional securities other than securities of the type in which the Acquiring
Fund is permitted to invest.
The Acquiring Fund will, within a reasonable time prior to the Closing Date,
furnish the Acquired Fund
with a statement of the Acquiring Fund's investment objectives, policies and
restrictions and a list of the
securities, if any, on the Acquired Fund's list referred to in the first
sentence of this paragraph which do not
conform to the Acquiring Fund's investment objectives, policies and
restrictions. In the event that the
Acquired Fund holds any investments which the Acquiring Fund may not hold, the
Acquired Fund will
dispose of such securities prior to the Closing Date. In addition, if it is
determined that the portfolios of the
Acquired Fund and the Acquiring Fund, when aggregated, would contain
investments exceeding certain
percentage limitations imposed upon the Acquiring Fund with respect to such
investments, the Acquired
Fund, if requested by the Acquiring Fund, will dispose of and/or reinvest a
sufficient amount of such
investments as may be necessary to avoid violating such limitations as of the
Closing Date.
1.3. Telecommunications Trust, on behalf of the Acquired Fund
will endeavor to
discharge all the Acquired Fund's known liabilities and obligations prior to
the Closing Date. Smith Barney
Investment Funds on behalf of the Acquiring Fund shall assume all liabilities,
expenses, costs, charges and
reserves reflected on an unaudited Statement of Assets and Liabilities of the
Acquired Fund prepared by the
Acquired Fund's auditors, as of the Valuation Date (as defined in paragraph
2.1), in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. Smith Barney
Investment Funds on behalf of the Acquiring Fund shall assume only those
liabilities of the Acquired Fund
reflected in that unaudited Statement of Assets and Liabilities and shall not
assume any other liabilities,
whether absolute or contingent, not reflected therein.
1.4. As provided in paragraph 3.4, as soon after the Closing Date
as is conveniently
practicable (the "Liquidation Date"), the Acquired Fund will liquidate and
distribute pro rata to the
Acquired Fund's shareholders of record determined as of the close of business
on the Closing Date (the
"Acquired Fund Shareholders"), the Acquiring Fund Shares it receives pursuant
to paragraph 1.1.
Shareholders of Class A, Class B, Class C and Class Y shares of the Acquired
Fund shall receive Class A,
Class B, Class C and Class Y shares, respectively, of the Acquiring Fund.
Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account
of the Acquired Fund on the books of the Acquiring Fund to open accounts on
the share records of the
Acquiring Fund in the name of the Acquired Fund's shareholders and
representing the respective pro rata
number of the Acquiring Fund Shares due such shareholders. All issued and
outstanding shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund, although share
certificates representing interests in the Acquired Fund will represent a
number of Acquiring Fund Shares
after the Closing Date as determined in accordance with paragraph 1.1. The
Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection with
such exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the
books of the Acquiring
Fund's transfer agent. Acquiring Fund Shares will be issued in the manner
described in the Acquiring
Fund's current prospectus and statement of additional information.
1.6. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name
other than the registered holder of the Acquired Fund Shares on the books of
the Acquired Fund as of that
time shall, as a condition of such issuance and transfer, be paid by the
person to whom such Acquiring
Fund Shares are to be issued and transferred.
1.7. Any reporting responsibility of the Acquired Fund is and
shall remain the
responsibility of the Acquired Fund up to and including the Closing Date and
such later dates on which the
Acquired Fund is terminated and deregistered.
1.8. The Acquired Fund shall, following the Closing Date and the
making of all
distributions pursuant to paragraph 1.4, be terminated under the laws of The
Commonwealth of
Massachusetts and in accordance with its governing documents and shall apply
for an order of the
Commission under Section 8(f) of the 1940 Act declaring that it has ceased to
be an investment company.
2. VALUATION
2.1. The value of the Acquired Fund's assets to be acquired by
the Acquiring Fund
hereunder shall be the value of such assets computed as of the close of
regular trading on the New York
Stock Exchange, Inc. (the "NYSE") on the Closing Date (such time and date
being hereinafter called the
"Valuation Date"), using the valuation procedures set forth in the Acquiring
Fund's then current prospectus
or statement of additional information.
2.2. The net asset value of Acquiring Fund Shares shall be the
net asset value per share
computed as of the close of regular trading on the NYSE on the Valuation Date,
using the valuation
procedures set forth in the Acquiring Fund's then current prospectus or
statement of additional information.
2.3. All computations of value shall be made by Smith Barney
Mutual Funds
Management Inc. in accordance with its regular practice as pricing agent for
the Acquired Fund and the
Acquiring Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be [ ], 1996, or such later
date as the parties may agree to
in writing. All acts taking place at the Closing shall be deemed to take
place simultaneously as of the close
of business on the Closing Date unless otherwise provided. The Closing shall
be held as of 5:00 p.m. at the
offices of Smith Barney Inc., 388 Greenwich Street, New York, New York 10013,
or at such other time
and/or place as the parties may agree.
3.2. In the event that on the Valuation Date (a) the NYSE or
another primary trading
market for portfolio securities of the Acquiring Fund or the Acquired Fund
shall be closed to trading or
trading thereon shall be restricted or (b) trading or the reporting of trading
on the NYSE or elsewhere shall
be disrupted so that accurate appraisal of the value of the net assets of the
Acquiring Fund or the Acquired
Fund is impracticable, the Closing Date shall be postponed until the first
business day after the day when
trading shall have been fully resumed and reporting shall have been restored.
3.3. The Acquired Fund shall deliver at the Closing a list of the
names and addresses of
the Acquired Fund's shareholders and the number and percentage ownership of
outstanding shares owned
by each such shareholder immediately prior to the Closing, certified on behalf
of the Acquired Fund by its
President. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund
Shares to be credited to the Acquired Fund's account on the Closing Date to
the Secretary of the Acquired
Fund, or provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1. Telecommunications Trust and the Acquired Fund represent and
warrant to Smith
Barney Investment Funds and the Acquiring Fund as follows:
(a) Telecommunications Trust is a business trust, duly organized,
validly existing and in
good standing under the laws of The Commonwealth of Massachusetts;
(b) Telecommunications Trust is a registered investment company
classified as a
management company of the open-end type, and its registration with the
Securities and Exchange
Commission (the "Commission") as an investment company under the Investment
Company Act of 1940,
as amended (the "1940 Act") is in full force and effect;
(c) Telecommunications Trust is not, and the execution, delivery
and performance of this
Agreement will not result, in a material violation of its Master Trust
Agreement or By-laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquired Fund is a
party or by which it is bound;
(d) Telecommunications Trust has no material contracts or other
commitments (other than
this Agreement) which will be terminated with liability to the Acquired Fund
prior to the Closing Date;
(e) No material litigation or administrative proceeding or
investigation of or before any
court or governmental body is presently pending or to its knowledge threatened
against
Telecommunications Trust or the Acquired Fund or any of the Acquired Fund's
properties or assets, except
as previously disclosed to the Acquiring Fund. The Acquired Fund knows of no
facts which might form the
basis for the institution of such proceedings and is not party to or subject
to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects its business
or its ability to consummate the transactions herein contemplated;
(f) The Statements of Assets and Liabilities of the Acquired Fund
for the period ended [
] have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, and are in
accordance with generally accepted accounting principles consistently applied,
and such statements (copies
of which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired
Fund as of such date, and there are no known contingent liabilities of the
Acquired Fund as of such dates
not disclosed therein;
(g) The Acquired Fund will file its final federal and other tax
returns for the period ending
on the Closing Date in accordance with the Code. At the Closing Date, all
federal and other tax returns and
reports of the Acquired Fund required by law then to have been filed prior to
the Closing Date shall have
been filed, and all federal and other taxes shown as due on such returns shall
have been paid so far as due,
or provision shall have been made for the payment thereof and, to the best of
the Acquired Fund's
knowledge, no such return is currently under audit and no assessment has been
asserted with respect to
such returns;
(h) For the most recent fiscal year of its operation, the
Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment
company;
(i) All issued and outstanding shares of the Acquired Fund are,
and at the Closing Date
will be, duly and validly issued and outstanding, fully paid and non-
assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of Closing, be held
by the persons and in the
amounts set forth in the records of the transfer agent as provided in
paragraph 3.4. The Acquired Fund
does not have outstanding any options, warrants or other rights to subscribe
for or purchase any shares of
the Acquired Fund, nor is there outstanding any security convertible into any
shares of the Acquired Fund;
(j) At the Closing Date, the Acquired Fund will have good and
marketable title to its
assets to be transferred to the Acquiring Fund pursuant to paragraph 1.2 and
full right, power and authority
to sell, assign, transfer and deliver such assets hereunder and, upon delivery
and payment for such assets,
the Acquiring Fund will acquire good and marketable title thereto, subject to
no restrictions on the full
transfer thereof, including such restrictions as might arise under the
Securities Act of 1933, as amended
(the "1933 Act"), other than as disclosed to the Acquiring Fund;
(k) The execution, delivery and performance of this Agreement has
been duly authorized
by all necessary action on the part of Telecommunications Trust's Board of
Trustees, and subject to the
approval of the Acquired Fund's shareholders, this Agreement, assuming due
authorization, execution and
delivery by the Acquiring Fund, will constitute a valid and binding obligation
of the Acquired Fund,
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity
principles;
(l) The information to be furnished by the Acquired Fund for use
in no-action letters,
applications for exemptive orders, registration statements, proxy materials
and other documents which may
be necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and
regulations thereunder applicable thereto; and
(m) The proxy statement of the Acquired Fund (the "Proxy
Statement") to be included in
the Registration Statement referred to in paragraph 5.7 (other than
information therein that relates to the
Acquiring Fund) will, on the effective date of the Registration Statement and
on the Closing Date, not
contain any 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, in light of the circumstances
under which such statements were
made, not materially misleading.
4.2. Smith Barney Investment Funds and the Acquiring Fund
represent and warrant to
Telecommunications Trust and the Acquired Fund as follows:
(a) The Acquiring Fund is a portfolio of Smith Barney Investment
Funds, which is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Maryland;
(b) Smith Barney Investment Funds is a registered investment
company classified as a
management company of the open-end type and its registration with the
Commission as an investment
company under the 1940 Act is in full force and effect;
(c) The current prospectus of the Acquiring Fund and the
statement of additional
information of Smith Barney Investment Funds conform in all material respects
to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they
were made, not materially misleading;
(d) At the Closing Date, Smith Barney Investment Funds will have
good and marketable
title to the Acquiring Fund's assets;
(e) Smith Barney Investment Funds is not, and the execution,
delivery and performance of
this Agreement on behalf of the Acquiring Fund will not result, in a material
violation of its Articles of
Incorporation or By-laws or of any agreement, indenture, instrument, contract,
lease or other undertaking
with respect to the Acquiring Fund to which Smith Barney World Funds is a
party or by which it is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any
court or governmental body is presently pending or threatened against Smith
Barney Investment Funds with
respect to the Acquiring Fund or any of the Acquiring Fund's properties or
assets, except as previously
disclosed in writing to the Acquired Fund. Smith Barney Investment Funds and
the Acquiring Fund know
of no facts which might form the basis for the institution of such proceedings
and neither Smith Barney
Investment Funds nor the Acquiring Fund is a party to or subject to the
provisions of any order, decree or
judgment of any court or governmental body which materially and adversely
affects the Acquiring Fund's
business or Smith Barney Investment Funds' ability on behalf of the Acquiring
Fund to consummate the
transactions contemplated herein;
(g) At the Closing Date, all federal and other tax returns and
reports of the Acquiring
Fund required by law then to have been filed by such dates shall have been
filed, and all federal and other
taxes shown as due on said returns and reports shall have been paid so far as
due, or provision shall have
been made for the payment thereof and, to the best of the Acquiring Fund's
knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(h) For the most recent fiscal year of its operation, the
Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment
company and the Acquiring Fund intends to do so in the future;
(i) At the date hereof, all issued and outstanding shares of the
Acquiring Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable, with no
personal liability attaching to the ownership thereof. The Acquiring Fund
does not have outstanding any
options, warrants or other rights to subscribe for or purchase any shares of
the Acquiring Fund, nor is there
outstanding any security convertible into shares of the Acquiring Fund;
(j) The execution, delivery and performance of this Agreement has
been duly authorized
by all necessary action, if any, on the part of Smith Barney Investment Funds'
Board of Directors and
assuming due authorization, execution and delivery by Telecommunications
Trust, this Agreement
constitutes a valid and binding obligation of Smith Barney Investment Funds on
behalf of the Acquiring
Fund, enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity
principles;
(k) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the
account of the Acquired Fund Shareholders, pursuant to the terms of this
Agreement, will at the Closing
Date have been duly authorized and, when so issued and delivered, will be duly
and validly issued
Acquiring Fund Shares, and will be fully paid and non-assessable with no
personal liability attaching to the
ownership thereof;
(l) The information to be furnished by the Acquiring Fund for use
in no-action letters,
applications for exemptive orders, registration statements, proxy materials
and other documents which may
be necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and
regulations applicable thereto;
(m) The Proxy Statement to be included in the Registration
Statement (only insofar as it
relates to the Acquiring Fund and Smith Barney Investment Funds) will, on the
effective date of the
Registration Statement and on the Closing Date, not contain any 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, in light of
the circumstances under which such statements were made, not materially
misleading; and
(n) Smith Barney Investment Funds, on behalf of the Acquiring
Fund, agrees to use all
reasonable efforts to obtain the approvals and authorizations required by the
1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue the Acquiring
Fund's operations after the Closing Date.
5. COVENANTS OF TELECOMMUNICATIONS TRUST, THE ACQUIRED FUND, THE
ACQUIRING FUND AND SMITH BARNEY INVESTMENT FUNDS
5.1. Smith Barney Investment Funds on behalf of the Acquiring
Fund and
Telecommunications Trust on behalf of the Acquired Fund each will operate its
business in the ordinary
course between the date hereof and the Closing Date. It is understood that
such ordinary course of business
will include the declaration and payment of customary dividends and
distributions and any other dividends
and distributions deemed advisable, in each case payable either in cash or in
additional shares.
5.2. Telecommunications Trust on behalf of the Acquired Fund will
call a meeting of its
shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain
approval of the transactions contemplated herein.
5.3. Telecommunications Trust on behalf of the Acquired Fund
covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any
distribution thereof other than in accordance with the terms of this
Agreement.
5.4. The Acquired Fund will assist the Acquiring Fund in
obtaining such information as
the Acquiring Fund reasonably requests concerning the beneficial ownership of
the Acquired Fund's shares.
5.5. Subject to the provisions of this Agreement,
Telecommunications Trust on behalf of
the Acquired Fund and Smith Barney Investment Funds on behalf of the Acquiring
Fund, each will take, or
cause to be taken, all action, and do or cause to be done, all things
reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.6. As promptly as practicable, but in any case within sixty
days after the Closing Date,
the Acquired Fund shall furnish the Acquiring Fund, in such form as is
reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Acquired Fund
for federal income tax
purposes which will be carried over to the Acquiring Fund as a result of
Section 381 of the Code, and
which will be certified by the President and Treasurer of the Acquired Fund.
5.7. The Acquired Fund will provide the Acquiring Fund with
information reasonably
necessary for the preparation of a prospectus (the "Prospectus") which will
include the Proxy Statement,
referred to in paragraph 4.1(m), all to be included in a Registration
Statement on Form N-14 of Smith
Barney Investment Funds (the "Registration Statement"), in compliance with the
1933 Act, the Securities
Exchange Act of 1934 (the "1934 Act") and the 1940 Act in connection with the
meeting of the Acquired
Fund's shareholders to consider approval of this Agreement and the
transactions contemplated herein.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF TELECOMMUNICATIONS
TRUST IN RESPECT OF THE ACQUIRED FUND
The obligations of Telecommunications Trust and the Acquired Fund
to consummate the
transactions provided for herein shall be subject, at its election, to the
performance by Smith Barney
Investment Funds and the Acquiring Fund of all of the obligations to be
performed by them hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions:
6.1. All representations and warranties of Smith Barney
Investment Funds and the
Acquiring Fund contained in this Agreement shall be true and correct in all
material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the
Closing Date with the same force and effect as if made on and as of the
Closing Date;
6.2. Smith Barney Investment Funds on behalf of the Acquiring
Fund shall have delivered
to Telecommunications Trust a certificate executed in its name by its
President or Vice President and its
Treasurer or Assistant Treasurer, in a form reasonably satisfactory to
Telecommunications Trust and dated
as of the Closing Date, to the effect that the representations and warranties
of Smith Barney Investment
Funds and the Acquiring Fund made in this Agreement are true and correct at
and as of the Closing Date,
except as they may be affected by the transactions contemplated by this
Agreement; and
6.3. Telecommunications Trust shall have received on the Closing
Date a favorable
opinion from Willkie Farr & Gallagher, counsel to the Acquiring Fund, dated as
of the Closing Date, in a
form reasonably satisfactory to Christina T. Sydor, Esq., Secretary of
Telecommunications Trust, covering
the following points:
That (a) Smith Barney Investment Funds is duly organized and
validly existing under the laws of
the State of Maryland; (b) Smith Barney Investment Funds is an open-end
management investment
company registered under the 1940 Act; (c) this Agreement, the reorganization
provided for
hereunder and the execution of this Agreement have been duly authorized and
approved by all
requisite action of Smith Barney Investment Funds, and this Agreement has been
duly executed and
delivered by Smith Barney Investment Funds and is a valid and binding
obligation of Smith Barney
Investment Funds with respect to the Acquiring Fund enforceable in accordance
with its terms
against the assets of the Acquiring Fund; and (d) the Acquiring Fund Shares to
be issued to the
Acquired Fund for distribution to its shareholders pursuant to this Agreement
have been, to the
extent of the number of Acquiring Fund Shares authorized to be issued by the
Acquiring Fund in
the Articles of Incorporation of Smith Barney Investment Funds and then
unissued, duly authorized
and, subject to the receipt by Smith Barney Investment Funds of consideration
equal to the net
asset value thereof (but in no event less than the par value thereof), such
Acquiring Fund Shares,
when issued in accordance with this Agreement, will be validly issued and
fully paid and
non-assessable. Such opinion may state that it is solely for the benefit of
Telecommunications
Trust and the Acquired Fund, its Trustees and its officers. Such counsel may
rely, as to matters
governed by the laws of the State of Maryland, on an opinion of Maryland
counsel.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SMITH BARNEY INVESTMENT
FUNDS IN RESPECT OF THE ACQUIRING FUND
The obligations of Smith Barney Investment Funds on behalf of the
Acquiring Fund to
complete the transactions provided for herein shall be subject, at its
election, to the performance by
Telecommunications Trust and the Acquired Fund of all the obligations to be
performed by it hereunder on
or before the Closing Date and, in addition thereto, the following conditions:
7.1. All representations and warranties of Telecommunications
Trust and the Acquired
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and,
except as they may be affected by the transactions contemplated by this
Agreement, as of the Closing Date
with the same force and effect as if made on and as of the Closing Date;
7.2. The Acquired Fund shall have delivered to the Acquiring Fund
a statement of the
Acquired Fund's assets and liabilities, together with a list of the Acquired
Fund's portfolio securities
showing the tax costs of such securities by lot and the holding periods of
such securities, as of the Closing
Date, certified by the Treasurer or Assistant Treasurer of the Acquired Fund;
7.3. Telecommunications Trust shall have delivered to the
Acquiring Fund on the Closing
Date a certificate executed in its name by its President or Vice President and
its Treasurer or Assistant
Treasurer, in form and substance satisfactory to the Acquiring Fund and dated
as of the Closing Date, to
the effect that the representations and warranties of Telecommunications Trust
and the Acquired Fund
made in this Agreement are true and correct at and as of the Closing Date,
except as they may be affected
by the transactions contemplated by this Agreement; and
7.4. The Acquiring Fund shall have received on the Closing Date a
favorable opinion of
Willkie Farr & Gallagher, counsel to the Acquired Fund, in a form satisfactory
to Christina T. Sydor, Esq.,
Secretary of the Acquiring Fund, covering the following points:
That (a) Telecommunications Trust is duly organized and validly existing
under the laws of The
Commonwealth of Massachusetts; (b) Telecommunications Trust is an open-end
management
investment company registered under the 1940 Act; and (c) this Agreement, the
reorganization
provided for hereunder and the execution of this Agreement have been duly
authorized and
approved by all requisite action of Telecommunications Trust, and this
Agreement has been duly
executed and delivered by Telecommunications Trust and is a valid and binding
obligation of
Telecommunications Trust and the Acquired Fund enforceable in accordance with
its terms against
the assets of the Acquired Fund. Such opinion may state that it is solely for
the benefit of Smith
Barney Investment Funds, its Directors and its officers. Such counsel may
rely, as to matters
governed by the laws of The Commonwealth of Massachusetts, on an opinion of
Massachusetts
counsel.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF
TELECOMMUNICATIONS TRUST, THE ACQUIRED FUND, THE ACQUIRING
FUND AND SMITH BARNEY INVESTMENT FUNDS
If any of the conditions set forth below do not exist on or before
the Closing Date with
respect to Smith Barney Investment Funds on behalf of the Acquiring Fund, or
Telecommunications Trust
on behalf of the Acquired Fund, the other party to this Agreement shall, at
its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein
shall have been approved
by the requisite vote of the holders of the outstanding shares of the Acquired
Fund in accordance with the
provisions of Telecommunications Trust's Master Trust Agreement and By-laws
and certified copies of the
votes evidencing such approval shall have been delivered to the Acquiring
Fund. Notwithstanding anything
herein to the contrary, neither Smith Barney Investment Funds on behalf of the
Acquiring Fund nor
Telecommunications Trust on behalf of the Acquired Fund may waive the
conditions set forth in this
paragraph 8.1;
8.2. On the Closing Date, no action, suit or other proceeding
shall be pending before any
court or governmental agency in which it is sought to restrain or prohibit, or
obtain damages or other relief
in connection with, this Agreement or the transactions contemplated herein;
8.3. All consents of other parties and all other consents, orders
and permits of federal,
state and local regulatory authorities (including those of the Commission and
of state Blue Sky and
securities authorities, including "no-action" positions of and exemptive
orders from such federal and state
authorities) deemed necessary by the Acquiring Fund or the Acquired Fund to
permit consummation, in all
material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to
obtain any such consent, order or permit would not involve a risk of a
material adverse effect on the assets
or properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself
waive any of such conditions;
8.4. The Registration Statement shall have become effective under
the 1933 Act and no
stop orders suspending the effectiveness thereof shall have been issued and,
to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose shall have
been instituted or be pending,
threatened or contemplated under the 1933 Act;
8.5. The Acquired Fund shall have declared and paid a dividend or
dividends on the
outstanding shares of the Acquired Fund, which, together with all previous
such dividends, shall have the
effect of distributing to the shareholders of the Acquired Fund all of the
investment company taxable
income and exempt-interest income of the Acquired Fund for all taxable years
ending on or prior to the
Closing Date. The dividend declared and paid by the Acquired Fund shall also
include all of such fund's
net capital gain realized in all taxable years ending on or prior to the
Closing Date (after reduction for any
capital loss carryforward);
8.6. The parties shall have received a favorable opinion of
Willkie Farr & Gallagher,
addressed to Smith Barney Investment Funds in respect of the Acquiring Fund
and Telecommunications
Trust in respect of the Acquired Fund and satisfactory to Christina T. Sydor,
Esq., as Secretary of the
Acquiring Fund and the Acquired Fund, substantially to the effect that for
federal income tax purposes:
(a) the transfer of all or substantially all of the Acquired Fund's
assets in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
scheduled liabilities
of the Acquired Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C)
of the Code, and the Acquiring Fund and the Acquired Fund are each a "party to
a reorganization"
within the meaning of Section 368(b) of the Code; (b) no gain or loss will be
recognized by the
Acquiring Fund upon the receipt of the assets of the Acquired Fund in exchange
for the Acquiring
Fund Shares and the assumption by the Acquiring Fund of certain scheduled
liabilities of the
Acquired Fund; (c) no gain or loss will be recognized by the Acquired Fund
upon the transfer of
the Acquired Fund's assets to the Acquiring Fund in exchange for the Acquiring
Fund Shares and
the assumption by the Acquiring Fund of certain scheduled liabilities of the
Acquired Fund or upon
the distribution (whether actual or constructive) of the Acquiring Fund Shares
to the Acquired
Fund's shareholders; (d) no gain or loss will be recognized by shareholders of
the Acquired Fund
upon the exchange of their Acquired Fund shares for the Acquiring Fund Shares
and the
assumption by the Acquiring Fund of certain scheduled liabilities of the
Acquired Fund; (e) the
aggregate tax basis for the Acquiring Fund Shares received by each of the
Acquired Fund's
shareholders pursuant to the Reorganization will be the same as the aggregate
tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization, and the
holding period of the Acquiring Fund Shares to be received by each Acquired
Fund shareholder
will include the period during which the Acquired Fund shares exchanged
therefor were held by
such shareholder (provided that the Acquired Fund shares were held as capital
assets on the date of
the Reorganization); and (f) the tax basis of the Acquired Fund's assets
acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the
Reorganization, and the holding period of the assets of the Acquired Fund in
the hands of the
Acquiring Fund will include the period during which those assets were held by
the Acquired Fund.
Notwithstanding anything herein to the contrary, neither Smith
Barney Investment Funds
on behalf of the Acquiring Fund nor Telecommunications Trust on behalf of the
Acquired Fund may waive
the conditions set forth in this paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1. Smith Barney Investment Funds on behalf of the Acquiring
Fund represents and
warrants to Telecommunications Trust and the Acquired Fund, and
Telecommunications Trust on behalf of
the Acquired Fund hereby represents and warrants to Smith Barney Investment
Funds on behalf of the
Acquiring Fund, that there are no brokers or finders entitled to receive any
payments in connection with the
transactions provided for herein.
9.2. (a) Except as may be otherwise provided herein, the
Acquiring Fund and the
Acquired Fund shall each be liable, in proportion to their assets, for the
expenses incurred in connection
with entering into and carrying out the provisions of this Agreement,
including the expenses of: (i) counsel
and independent accountants associated with the Reorganization; (ii) printing
and mailing the
Prospectus/Proxy Statement and soliciting proxies in connection with the
meeting of shareholders of the
Acquired Fund referred to in paragraph 5.2 hereof; (iii) any special pricing
fees associated with the
valuation of the Acquired Fund's of the Acquiring Fund's portfolio on the
Closing Date; (iv) expenses
associated with preparing this Agreement and preparing and filing the
Registration Statement under the
1933 Act covering the Acquiring Fund Shares to be issued in the
Reorganization; (v) registration or
qualification fees and expenses of preparing and filing such forms, if any,
necessary under applicable state
securities laws to qualify the Acquiring Fund Shares to be issued in
connection with the Reorganization.
The Acquired Fund shall be liable for: (i) all fees and expenses related to
the liquidation and termination of
the Acquired Fund; and (ii) fees and expenses of the Acquired Fund's custodian
and transfer agent incurred
in connection with the Reorganization. The Acquiring Fund shall be liable for
any fees and expenses of the
Acquiring Fund's custodian and transfer agent incurred in connection with the
Reorganization.
(b) Consistent with the provisions of paragraph 1.3, the Acquired
Fund, prior to the
Closing, shall pay for or include in the unaudited Statement of Assets and
Liabilities prepared pursuant to
paragraph 1.3 all of its known and reasonably estimated expenses associated
with the transactions
contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The parties hereto agree that no party has made any
representation, warranty or
covenant not set forth herein and that this Agreement constitutes the entire
agreement between the parties.
10.2. The representations, warranties and covenants contained in
this Agreement or in any
document delivered pursuant hereto or in connection herewith shall survive the
consummation of the
transactions contemplated hereunder.
11. TERMINATION
11.1. This Agreement may be terminated at any time prior to the
Closing Date by: (1) the
mutual agreement of Telecommunications Trust on behalf of the Acquired Fund
and Smith Barney
Investment Funds on behalf of the Acquiring Fund; (2) Telecommunications Trust
in respect of the
Acquired Fund in the event that Smith Barney Investment Funds in respect of
the Acquiring Fund shall, or
Smith Barney Investment Funds in respect of the Acquiring Fund in the event
that Telecommunications
Trust or the Acquired Fund shall, materially breach any representation,
warranty or agreement contained
herein to be performed at or prior to the Closing Date; or (3) a condition
herein expressed to be precedent
to the obligations of the terminating party has not been met and it reasonably
appears that it will not or
cannot be met.
11.2. In the event of any such termination, there shall be no
liability for damages on the
part of either Telecommunications Trust on behalf of the Acquired Fund or
Smith Barney Investment
Funds on behalf of the Acquiring Fund or their respective Trustees/Directors
or officers to the other party,
but each shall bear the expenses incurred by it incidental to the preparation
and carrying out of this
Agreement as provided in paragraph 9.
12. AMENDMENTS; WAIVERS
12.1. This Agreement may be amended, modified or supplemented in
such manner as may
be mutually agreed upon in writing by the authorized officers of
Telecommunications Trust and Smith
Barney Investment Funds; provided, however, that following the meeting of the
Acquired Fund
shareholders called by the Acquired Fund pursuant to paragraph 5.2 of this
Agreement, no such
amendment may have the effect of changing the provisions for determining the
number of the Acquiring
Fund Shares to be issued to the Acquired Fund's shareholders under this
Agreement to the detriment of
such shareholders without their further approval.
12.2. At any time prior to the Closing Date either party hereto
may by written instrument
signed by it (i) waive any inaccuracies in the representations and warranties
made to it contained herein and
(ii) waive compliance with any of the covenants or conditions made for its
benefit contained herein.
13. NOTICES
Any notice, report, statement or demand required or permitted by
any provisions of this
Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed
to Telecommunications Trust, [
], Attention: [
]; or to Smith Barney Investment
Funds, 388 Greenwich Street, 22nd Floor, New York, New York 10013, Attention:
Heath B. McLendon.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION
OF LIABILITY
14.1 The article and paragraph headings contained in this
Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
14.2 This Agreement may be executed in any number of
counterparts, each of which shall
be deemed an original.
14.3 This Agreement shall be governed by and construed in
accordance with the laws of
the State of New York.
14.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their
respective successors and assigns, but no assignment or transfer hereof or of
any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm, corporation
or other entity, other than the parties hereto and their respective successors
and assigns, any rights or
remedies under or by reason of this Agreement.
14.5 It is expressly agreed that the obligations of
Telecommunications Trust in respect of
the Acquired Fund shall not be binding upon any of its Trustees, shareholders,
nominees, officers, agents or
employees personally, but bind only the trust property of the Acquired Fund as
provided in the trust
instruments of Telecommunications Trust. The execution and delivery of this
Agreement have been
authorized by the Trustees of Telecommunications Trust and this Agreement has
been executed by
authorized officers of Telecommunications Trust, acting as such, and neither
such authorization by such
Trustees nor such execution and delivery by such officers 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 Acquired Fund provided in Telecommunications Trust's Master
Trust Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be
executed by its Chairman of the Board, President or Vice President and
attested by its Secretary or
Assistant Secretary.
Attest: SMITH BARNEY INVESTMENT FUNDS INC.
on behalf of the SPECIAL EQUITIES FUND
By:
Name: Christina T. Sydor Name: Jessica Bibliowicz
Title: Secretary Title: President
Attest: SMITH BARNEY TELECOMMUNICATIONS
TRUST on behalf of the TELECOMMUNICATIONS
GROWTH FUND
By:
Name: Christina T. Sydor Name: Jessica Bibliowicz
Title: Secretary Title: President
STATEMENT OF ADDITIONAL INFORMATION DATED ____________, 1996
Acquisition Of The Assets Of
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
a separate series of
SMITH BARNEY TELECOMMUNICATIONS TRUST
388 Greenwich Street
New York, New York 10013
(800) 244-7523
By And In Exchange For Shares Of
SMITH BARNEY SPECIAL EQUITIES FUND
a separate series of
SMITH BARNEY INVESTMENT FUNDS
388 Greenwich Street
New York, New York 10013
(800) 244-7523
This Statement of Additional Information, relating specifically to the
proposed transfer of all or
substantially all of the assets of Smith Barney Telecommunications Growth Fund
of Smith Barney
Telecommunications Trust to Smith Barney Investment Funds on behalf of Smith
Barney Special Equities
Fund in exchange for shares of the Smith Barney Special Equities Fund and the
assumption by Smith
Barney Investment Funds on behalf of Smith Barney Special Equities Fund of
certain scheduled liabilities
of the Telecommunications Growth Fund, consists of this cover page and the
following described
documents, each of which accompanies this Statement of Additional Information
and is incorporated herein
by reference.
1. Statement of Additional Information of Smith Barney Special Equities
Fund dated April
29, 1996.
2. Annual Report of Smith Barney Special Equities Fund for the fiscal year
December 31,
1995.
3. Semi-Annual Report of Smith Barney Special Equities Fund for the six-
month period
ended June 30, 1995.
4. Annual Report of Smith Barney Telecommunications Growth Fund for the
fiscal
yearended December 31, 1995.
5. Semi-Annual Report of Smith Barney Telecommunications Growth Fund for
the six-month
period ended June 30, 1995.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy
Statement, dated ___________, 1996, relating to the above-referenced matter
may be obtained without
charge by calling or writing either Smith Barney Special Equities Fund or
Smith Barney
Telecommunications Growth Fund at the telephone numbers or addresses set forth
above or by contacting
any Smith Barney Financial Consultant or by calling toll-free (800) 244-7523.
This Statement of
Additional Information should be read in cunjunction with the Prospectus/Proxy
Statement dated
__________, 1996.
The date of this Statement of Additional Information is
____________, 1996.
PROSPECTUS OF SMITH BARNEY SPECIAL EQUITIES FUND DATED
APRIL 29, 1996 IS INCORPORATED BY REFERENCE TO POST EFFECTIVE
AMENDMENT NO. 43 TO THE INVESTMENT FUNDS REGISTRATION STATEMENT ON FORM
N-1A FILED ON APRIL 29, 1996. REFERENCE NOS 2-74288 811-3275
STATEMENT OF ADDDITIONAL INFORMATION
OF
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
DATED April 29, 1996
is incorporated by reference to Post Effective Amendment No.20 to the
Telecommunications Trust Registration Statement on Form N-1A filed on April
29, 1996. Reference
Numbers 2-86519 and 811-3763
ANNUAL REPORT
OF
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
- -------------
ANNUAL REPORT
-------------
1995
1995
1995
1995
1995
Smith Barney
Telecommunications
Growth Fund
---------------------
December 31, 1995
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
- -------------------------------------------
Smith Barney Telecommunications Growth Fund
- -------------------------------------------
Dear Shareholder:
We are pleased to provide the annual report for the period ended December 31,
1995 for Smith Barney Telecommunications Growth Fund. In this report, we
briefly
cover the Fund's performance and discuss our outlook for its current holdings.
A
more detailed summary of performance and holdings can be found in the
appropriate sections that follow in the annual report.
As you know, the investment management team of Smith Barney Telecommunications
Growth Fund seeks to provide shareholders with capital growth through common
stocks and, secondarily, income. The Fund's 1995 annual total return for Class
A
and Class B shares was 8.54% and 7.67%, respectively. In comparison, the
Standard & Poor's 500-Stock Price Index (the "S&P 500," a
capitalization-weighted measure of 500 widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange and over-the-counter market)
had a total return of 37.53% in 1995.
The Fund's performance in 1995 was disappointing as its stocks in our primary
area of investment lagged the performance of the U.S. market in general. We
have
attempted to position the portfolio to benefit from technological change and
rapid growth that is occurring in the telecommunications industry worldwide.
Last year, foreign markets were either flat or down and the domestic market
was
affected by anxiety caused by pending legislative and regulatory activity in
Washington, D.C.
The telecommunications industry is undergoing unprecedented change. Major
capital spending plans to enable telephones to provide video, the wireless
revolution and the explosive growth of the Internet are just some of the many
factors that have positively impacted the telecommunications sector. On the
other hand, fears of entry barriers coming down and the acceleration of
capital
investment requirements have heightened investor concerns.
1
<PAGE>
Our long-term outlook for the telecommunications industry is positive. A
global
revolution in communications is underway and technological advances are
fueling
its growth. In order to capitalize on this long-term trend, the Fund intends
to
target companies that are directly involved in growth areas such as software,
networking, on-line services and enhancing the power of computers.
Sincerely,
/s/ Heath B. McLendon /s/ Guy R. Scott
Heath B. McLendon Guy R. Scott
Chairman and Investment Officer
Chief Executive Officer
January 12, 1996
2
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Historical Performance -- Class A Shares
- ------------------------------------------------------------------------------
- --
<TABLE>
<CAPTION>
Net Asset Value
------------------
Beginning End Income Capital Gain Return
Total
Year Ended of Year of Year Dividends Distributions of Capital
Returns(1)
==============================================================================
========
<C> <C> <C> <C> <C> <C>
<C>
12/31/95 $11.91 $12.71 $0.00 $0.21 $0.00
8.54%
- ------------------------------------------------------------------------------
- --------
12/31/94 12.86 11.91 0.13 0.00 0.00
(6.37)
- ------------------------------------------------------------------------------
- --------
12/31/93 9.63 12.86 0.00 0.17 0.00
35.27
- ------------------------------------------------------------------------------
- --------
12/31/92 8.68 9.63 0.02 0.71 0.00
19.41
- ------------------------------------------------------------------------------
- --------
12/31/91 7.36 8.68 0.06 0.14 0.01
20.94
- ------------------------------------------------------------------------------
- --------
12/31/90 8.78 7.36 0.14 0.10 0.00
(13.46)
- ------------------------------------------------------------------------------
- --------
12/31/89 7.08 8.78 0.16 0.82 0.00
37.85
- ------------------------------------------------------------------------------
- --------
12/31/88 6.10 7.08 0.10 0.00 0.00
17.69
- ------------------------------------------------------------------------------
- --------
12/31/87 11.05 6.10 0.69 3.96 0.00
(3.53)
- ------------------------------------------------------------------------------
- --------
12/31/86 12.64 11.05 0.32 3.39 0.00
18.84
==============================================================================
========
Total $1.62 $9.50 $0.01
==============================================================================
========
- ------------------------------------------------------------------------------
- --
Historical Performance -- Class B Shares
- ------------------------------------------------------------------------------
- --
<CAPTION>
Net Asset Value
------------------
Beginning End Income Capital Gain Return
Total
Year Ended of Year of Year Dividends Distributions of Capital
Returns(1)
==============================================================================
============
<C> <C> <C> <C> <C> <C>
<C>
12/31/95 $11.82 $12.51 $0.00 $0.21 $0.00
7.67%
- ------------------------------------------------------------------------------
- ------------
12/31/94 12.77 11.82 0.03 0.00 0.00
(7.17)
- ------------------------------------------------------------------------------
- ------------
12/31/93 9.63 12.77 0.00 0.17 0.00
34.34
- ------------------------------------------------------------------------------
- ------------
Inception*-12/31/92 9.33 9.63 0.01 0.71 0.00
10.98+
==============================================================================
============
Total $0.04 $1.09 $0.00
==============================================================================
============
- ------------------------------------------------------------------------------
- --
Historical Performance -- Class C Shares
- ------------------------------------------------------------------------------
- --
<CAPTION>
Net Asset Value
------------------
Beginning End Income Capital Gain Return
Total
Year Ended of Year of Year Dividends Distributions of Capital
Returns(1)
==============================================================================
=============
<C> <C> <C> <C> <C> <C>
<C>
12/31/95 $12.00 $12.71 $0.00 $0.21 $0.00
7.73%
- ------------------------------------------------------------------------------
- -------------
Inception*-12/31/94 12.70 12.00 0.03 0.00 0.00
(5.24)+
==============================================================================
=============
Total $0.03 $0.21 $0.00
==============================================================================
=============
It is the Fund's policy to distribute dividends and capital gains, if
any,
annually.
3
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Average Annual Total Return
- ------------------------------------------------------------------------------
- --
Without Sales Charge(1)
------------------------------------------
- --
Class A Class B Class C
==============================================================================
==
Year Ended 12/31/95 8.54% 7.67% 7.73%
- ------------------------------------------------------------------------------
- --
Five Years Ended 12/31/95 14.70 N/A N/A
- ------------------------------------------------------------------------------
- --
Ten Years Ended 12/31/95 12.32 N/A N/A
- ------------------------------------------------------------------------------
- --
Inception* through 12/31/95 14.17 13.50 1.81
==============================================================================
==
With Sales Charge(2)
-------------------------------------------
- --
Class A Class B Class C
==============================================================================
==
Year Ended 12/31/95 3.11% 2.67% 6.73%
- ------------------------------------------------------------------------------
- --
Five Years Ended 12/31/95 13.53 N/A N/A
- ------------------------------------------------------------------------------
- --
Ten Years Ended 12/31/95 11.74 N/A N/A
- ------------------------------------------------------------------------------
- --
Inception* through 12/31/95 13.68 13.02 1.81
==============================================================================
==
- ------------------------------------------------------------------------------
- --
Cumulative Total Return
- ------------------------------------------------------------------------------
- --
Without Sales Charge(1)
==============================================================================
==
Class A (12/31/85 through 12/31/95) 219.53%
- ------------------------------------------------------------------------------
- --
Class B (Inception* through 12/31/95) 49.04
- ------------------------------------------------------------------------------
- --
Class C (Inception* through 12/31/95) 2.08
==============================================================================
==
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charge with respect to Class A shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the
deduction
of the maximum initial sales charge of 5.00% and Class B shares reflect
the
deduction of a 5.00% CDSC, which applies if shares are redeemed less than
one year from initial purchase and declines thereafter by 1.00% per year
until no CDSC is incurred. Class C shares reflect the deduction of a
1.00%
CDSC, which applies if shares are redeemed within the first year of
purchase.
* Inception dates for Class A, B and C shares are January 1, 1984, November
6, 1992 and November 7, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
4
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Historical Performance (unaudited)
- ------------------------------------------------------------------------------
- --
Growth of $10,000 Invested in Class A Shares of
the Smith Barney Telecommunications Growth Fund vs.
Standard & Poor's 500 Index, Lipper Science &Technology Fund Average
and Lipper Growth Fund Index
- ------------------------------------------------------------------------------
- --
December 1985 -- December 1995
[The following table was represented by a line chart in the printed
material.]
Growth and Income S&P 500 Lipper Growth Lipper
Science
----------------- ------- ------------- ------------
- --
12/31/85 9498 10000 10000 10000
12/86 11287 11867 11560 10818
12/87 10889 12490 11931 11284
12/88 12815 14559 13617 12118
12/89 17666 19165 17363 15011
12/90 15287 18569 16424 14894
12/91 18489 24216 22272 21853
12/92 22078 26059 23972 25265
12/93 29865 28678 26844 31679
12/94 27961 29056 26423 36669
12/95 30350 39961 34902 50548
+ Hypothetical illustration of $10,000 invested in Class A shares on
December
31, 1985, assuming deduction of the maximum 5.00% sales charge at the
time
of investment and reinvestment of dividends and capital gains, if any, at
net asset value through December 31, 1995. The Standard & Poor's 500
Index
is composed of widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and the over-the-counter market.
Figures
for the index include reinvestment of dividends. The Lipper Science
&Technology Fund Average is composed of the Fund's peer group of 37
mutual
funds investing within the science and technology investment objective
category as of December 31, 1995. The Lipper Growth Fund Index is a net
asset value weighted index of the 30 largest funds within the Growth
category. The indexes are unmanaged and are not subject to the same
management and trading expenses as a mutual fund. The performance of the
Fund's other classes may be greater or less than the Class A shares'
performance indicated on this chart, depending on whether greater or
lesser
sales charges and fees were incurred by shareholders investing in other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost. No
adjustment
has been made for shareholder tax liability on dividends or capital
gains.
5
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Portfolio Highlights (unaudited) December 31,
1995
- ------------------------------------------------------------------------------
- --
Portfolio Breakdown
[The following table was represented by a pie chart in the printed
material.]
Capital Goods 5.1
Communications 28.2
Consumer Services 13.5
Energy 7.6
Technology 16.4
Telecommunications 26.9
Repurchase Agreement 2.3
Top Ten Common Stock Holdings
Percentage of
Total
Investments
==============================================================================
==
Ericsson LM Telephone Co., Class B Shares, ADR 4.1%
MFS Communications Corp. 4.0
MCI Communications Corp. 3.5
General Instruments Corp. 3.0
Motorola Inc. 2.9
Sprint Corp. 2.8
Cellular Communications Inc., Class A Shares 2.6
Tele Communications Inc., Class A Shares 2.5
Tellabs Inc. 2.5
Vodafone Group PLC ADR 2.4
==============================================================================
==
6
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Schedule of Investments December 31,
1995
- ------------------------------------------------------------------------------
- --
SHARES SECURITY VALUE
==============================================================================
==
COMMON STOCKS -- 96.4%
Capital Goods -- 5.1%
285,000 General Instruments Corp.* $
6,661,875
328,000 Scientific-Atlanta, Inc.
4,920,000
- ------------------------------------------------------------------------------
- --
11,581,875
- ------------------------------------------------------------------------------
- --
Communications -- 28.2%
184,000 AirTouch Communications Inc.*
5,198,000
101,333 Cellular Communications of Puerto Rico, Inc.*
2,811,992
117,500 Cellular Communications Inc., Class A Shares*
5,845,625
130,000 DSC Communications Corp.*
4,793,750
470,000 Ericsson LM Telephone Co., Class B Shares, ADR
9,165,000
92,000 Grupo Televisa, SA ADR
2,070,000
171,200 MFS Communications Co., Inc.*
9,116,400
114,000 Motorola Inc.
6,498,000
206,000 NEXTEL Communications Inc., Class A Shares*
3,038,500
107,000 Nokia Corp. ADR
4,159,625
81,500 Rogers Cantel Mobile Communications, Inc.,
Class B Shares*
2,159,750
150,000 Tellabs Inc.*
5,550,000
163,500 Vanguard Cellular Systems Inc., Class A Shares*
3,310,875
- ------------------------------------------------------------------------------
- --
63,717,517
- ------------------------------------------------------------------------------
- --
Consumer Services -- 13.5%
200,000 Bell Cablemedia PLC, ADR*
3,200,000
45,000 CMG Information Services Inc.*
4,179,375
218,700 Comcast Corp., Class A Shares
3,854,587
109,350 Comcast Corp., Class A Shares Special
1,988,803
100,000 Comcast UK Cable Partners Ltd.*
1,250,000
16,800 Grupo Iusacell, SA ADR, Series D*
134,400
134,200 Grupo Iusacell, SA ADR, Series L*
1,358,775
50,000 NYNEX Cable Communications Group A*
868,750
28,000 Peoples Choice TV Corp.*
532,000
83,350 Tele-Communications Liberty-Media, Class A Shares*
2,240,031
283,400 Tele-Communications Inc., Class A Shares*
5,632,575
134,500 Time Warner, Inc.
5,094,187
- ------------------------------------------------------------------------------
- --
30,333,483
- ------------------------------------------------------------------------------
- --
Energy -- 7.6%
530,000 Global Marine Inc.*
4,637,500
337,000 Rowan Companies, Inc.*
3,327,875
64,200 Schlumberger, Ltd.
4,445,850
142,000 Varco International, Inc.*
1,704,000
105,000 Weatherford International, Inc.*
3,031,875
- ------------------------------------------------------------------------------
- --
17,147,100
- ------------------------------------------------------------------------------
- --
See Notes to Financial Statements.
7
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Schedule of Investments (continued) December 31,
1995
- ------------------------------------------------------------------------------
- --
SHARES SECURITY VALUE
==============================================================================
==
Technology -- 16.4%
130,000 Alpha Industries Inc.* $
1,836,250
128,000 Anadigics, Inc.*
2,720,000
100,000 Analog Devices Inc.*
3,537,500
67,000 FTP Software Inc.*
1,943,000
53,000 Hewlett-Packard Co.
4,438,750
67,000 Inso Corp.*
2,847,500
60,000 McAfee Asssociates Inc.*
2,632,500
65,000 Newbridge Networks Corp.*
2,689,375
185,000 Softkey International Inc.*
4,278,125
135,000 Symantec Corp.*
3,138,750
111,300 3Com Corp.*
5,189,363
120,000 Triquint Semiconductors Inc.*
1,620,000
- ------------------------------------------------------------------------------
- --
36,871,113
- ------------------------------------------------------------------------------
- --
Telecommunications -- 25.6%
114,000 C-TEC Corp., Class B Shares
3,477,000
302,700 MCI Communications Corp.
7,908,038
100,000 Nera AS ADR*
3,250,000
100,000 Panamsat Corp.*
2,206,250
70,000 Perusahaan Perseroan Indonesian Satellite ADR
2,555,000
158,550 Sprint Corp.
6,322,181
100,000 Tele Danmark A/S, Class B Shares ADR
2,762,500
41,500 Telecom Corporation Argentina Stet-France ADR
1,976,438
52,900 Telecom Corporation New Zealand Ltd. ADR
3,669,937
40,000 TelecomAsia Corporation Pub. Ltd.*+
1,205,000
81,000 Telecommunication Brasileiras ADR*
3,837,375
73,000 Telefonica de Argentina, SA ADR, Class B Shares
1,989,250
62,000 Telefonica de Espana, SA ADR
2,596,250
110,200 Telefonos de Mexico, SA ADR
3,512,625
476,000 Telekom Malaysia
3,712,012
270,000 Thai Telephone & Communication Public Co. Ltd.*
1,468,440
152,000 Vodafone Group PLC ADR
5,358,000
- ------------------------------------------------------------------------------
- --
57,806,296
- ------------------------------------------------------------------------------
- --
TOTAL COMMON STOCKS
(Cost -- $203,132,859)
217,457,384
==============================================================================
==
See Notes to Financial Statements.
8
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Schedule of Investments (continued) December 31,
1995
- ------------------------------------------------------------------------------
- --
SHARES SECURITY VALUE
==============================================================================
==
PREFERRED STOCK -- 1.3%
Telecommunications -- 1.3%
57,000 Philippine Long Distance Telephone Co.
Series III $3.50 (Cost -- $2,850,000) $
2,964,000
==============================================================================
==
FACE
AMOUNT SECURITY VALUE
==============================================================================
==
REPURCHASE AGREEMENT -- 2.3%
$5,231,000 Chemical Securities Inc., 5.80% due 1/2/96
Proceeds at maturity -- $5,234,370;
(Fully collateralized
by U.S. Treasury Notes, 6.125% due 5/31/97;
Market value -- $5,335,758) (Cost -- $5,231,000)
5,231,000
==============================================================================
==
TOTAL INVESTMENTS -- 100%
(Cost -- $211,213,859)++
$225,652,384
==============================================================================
==
* Non-income producing security.
+ Security exempt from registration under Rule 144A of Securities Act of
1933. These securities may be resold in transactions exempt from
registration, generally to qualified institutional buyers.
++ Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
9
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Statement of Assets and Liabilities December 31,
1995
- ------------------------------------------------------------------------------
- --
ASSETS:
Investments, at value (Cost -- $211,213,859)
$225,652,384
Receivable for securities sold
6,486,528
Receivable for Fund shares sold
180,055
Dividend and interest receivable
281,533
- ------------------------------------------------------------------------------
- --
Total Assets
232,600,500
==============================================================================
==
LIABILITIES:
Payable for securities purchased
4,510,777
Payable for Fund shares purchased
315,622
Distribution fees payable
149,504
Payable to bank
146,970
Investment advisory fees payable
107,406
Administration fees payable
39,057
Accrued expenses and other liabilities
95,645
- ------------------------------------------------------------------------------
- --
Total Liabilities
5,364,981
==============================================================================
==
Total Net Assets
$227,235,519
==============================================================================
==
NET ASSETS:
Par value of shares of beneficial interest $
18,074
Capital paid in excess of par value
204,184,916
Accumulated net realized gain from security transactions
8,594,004
Net unrealized appreciation of investments
14,438,525
- ------------------------------------------------------------------------------
- --
Total Net Assets
$227,235,519
==============================================================================
==
Shares Outstanding:
Class A
5,590,074
- ------------------------------------------------------------------------------
- --
Class B
12,409,796
- ------------------------------------------------------------------------------
- --
Class C
75,121
- ------------------------------------------------------------------------------
- --
Net Asset Value:
Class A (and redemption price)
$12.71
- ------------------------------------------------------------------------------
- --
Class B*
$12.51
- ------------------------------------------------------------------------------
- --
Class C**
$12.71
- ------------------------------------------------------------------------------
- --
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net aset value per share)
$13.38
==============================================================================
==
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if
shares
are redeemed less than one year from initial purchase (See Note 2).
* Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if
shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
10
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Statement of Operations For the Year Ended December 31,
1995
- ------------------------------------------------------------------------------
- --
INVESTMENT INCOME:
Dividends $
2,280,672
Interest
551,582
Less:Foreign withholding tax
(190,719)
- ------------------------------------------------------------------------------
- --
Total Investment Income
2,641,535
==============================================================================
==
EXPENSES:
Investment advisory fees (Note 2)
1,393,007
Distribution fees (Note 2)
1,941,865
Administration fees (Note 2)
506,548
Shareholder and system servicing fees
431,493
Registration fees
90,000
Shareholder communications
50,000
Custody
41,096
Audit and legal
39,100
Trustees' fees
18,000
Other
23,915
- ------------------------------------------------------------------------------
- --
Total Expenses
4,535,024
- ------------------------------------------------------------------------------
- --
Net Investment Loss
(1,893,489)
==============================================================================
==
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES (NOTE3):
Realized Gain From:
Security transactions (excluding short-term securities)
21,752,822
Foreign currency transactions
633
- ------------------------------------------------------------------------------
- --
Net Realized Gain
21,753,455
- ------------------------------------------------------------------------------
- --
Change in Net Unrealized Appreciation of Investments:
Beginning of year
15,076,522
End of year
14,438,525
- ------------------------------------------------------------------------------
- --
Decrease in Net Unrealized Appreciation
(637,997)
- ------------------------------------------------------------------------------
- --
Net Gain on Investments and Foreign Currencies
21,115,458
- ------------------------------------------------------------------------------
- --
Increase in Net Assets From Operations
$19,221,969
==============================================================================
==
See Notes to Financial Statements.
11
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Statements of Changes in Net Assets For the Years Ended December
31,
- ------------------------------------------------------------------------------
- --
1995 1994
==============================================================================
==
OPERATIONS:
Net investment loss $ (1,893,489) $
(2,329,471)
Net realized gain (loss) 21,753,455
(5,848,735)
Decrease in net unrealized appreciation (637,997)
(10,566,252)
- ------------------------------------------------------------------------------
- --
Increase (Decrease) in Net Assets
From Operations 19,221,969
(18,744,458)
- ------------------------------------------------------------------------------
- --
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income --
(1,451,297)
Net realized gains (3,980,765)
- --
- ------------------------------------------------------------------------------
- --
Decrease in Net Assets From
Distributions to Shareholders (3,980,765)
(1,451,297)
- ------------------------------------------------------------------------------
- --
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 24,781,672
112,458,875
Net asset value of shares issued for reinvestment
of dividends 3,764,024
1,345,277
Cost of shares reacquired (86,600,793)
(57,903,959)
- ------------------------------------------------------------------------------
- --
Increase (Decrease) in Net Assets From
Fund Share Transactions (58,055,097)
55,900,193
- ------------------------------------------------------------------------------
- --
Increase (Decrease) in Net Assets (42,813,893)
35,704,438
NET ASSETS:
Beginning of year 270,049,412
234,344,974
- ------------------------------------------------------------------------------
- --
End of year $227,235,519
$270,049,412
==============================================================================
==
See Notes to Financial Statements.
12
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Notes to Financial Statements
- ------------------------------------------------------------------------------
- --
1. SIGNIFICANT ACCOUNTING POLICIES
The Smith Barney Telecommunications Growth Fund ("Fund"), a separate
investment fund of the Smith Barney Telecommunications Trust ("Trust"), a
Massachusetts business trust, is registered under the Investment Company Act
of
1940, as amended, as a non-diversified, open-end management investment
company.
The Trust consists of the Fund and one other separate investment fund, the
Smith
Barney Telecommunications Income Fund. The financial statements and financial
highlights for the other fund are presented in a separate annual report.
The significant accounting policies consistently followed by the Fund
are:
(a) securities transactions are accounted for on trade date; (b) securities
traded on national securities markets are valued at the closing prices on such
markets; securities for which no sales price were reported are valued at the
current quoted bid prices; (c) short-term investments that have a maturity of
more than 60 days are valued at prices based on market quotations for
securities
of similar type, yield and maturity; (d) short-term investments and securities
maturing within 60 days are valued at cost plus accreted discount, or minus
amortized premium, as applicable; (e) dividend income is recorded on ex-
dividend
date and interest income is recorded on the accrual basis; (f) gains or losses
on the sale of securities are calculated using the specific identification
method; (g) the accounting records are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars based on the rate of exchange of such currencies against U.S. dollars
on
the date of valuation. Purchases and sales of securities, and income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank; (h) direct expenses are charged to each fund and each class;
management fees and general fund expenses are allocated on the basis of
relative
net assets; (i) the Fund intends to comply with the applicable provisions of
the
Internal Revenue Code of 1986, as amended, pertaining to regulated investment
companies and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes; (j) the character of
income and gains to be distributed are determined in accordance with income
tax
regulations which may differ from generally accepted accounting principles. At
December 31, 1995, reclassifications are made to the Fund's capital accounts
to
reflect premanent book/tax differences and income and gains available for
distributions under income tax regulations. Accordingly, a portion of
accumulated net investment loss amounting to $220,713 has been reclassified to
paid-in capital. Net investment income, net realized gains
13
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------------
- --
and net assets were not affected by this change; and (k) estimates and
assumptions are required to be made regarding assets, liabilities and changes
in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other
parameters
used in determining these estimates could cause actual results to differ from
these amounts.
2. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION AGREEMENT
AND OTHER TRANSACTIONS
Smith Barney Strategy Advisors Inc. ("SBSA"), a wholly owned subsidiary
of
Smith Barney Mutual Funds Management Inc. ("SBMFM") which, in turn, is a
subsidiary of Smith Barney Holdings Inc. ("SBH"), acts as investment adviser
to
the Trust. The Fund pays SBSAan advisory fee calculated at an annual rate of
0.55% of the average daily net assets. This fee is calculated daily and paid
monthly.
SBSA has entered into a sub-advisory agreement with The Boston Company
Advisors, Inc. ("Boston Advisors"). Pursuant to the sub-advisory agreement,
Boston Advisors is responsible for the day-to-day portfolio operations and
investment decisions for the Fund. As a result, SBSA will pay Boston Advisors
a
monthly fee calculated at the annual rate of 0.275% of the average daily net
assets.
SBMFM acts as the administrator of the Trust for which it receives a fee
calculated at an annual rate of 0.20% of the average daily net assets of each
fund. This fee is calculated daily and paid monthly.
The Trust and SBMFM had entered into a sub-administration agreement with
Boston Advisors. Under this agreement, SBMFM paid Boston Advisors a portion of
its administration fee at a rate agreed upon from time to time between SBMFM
and
Boston Advisors. As of July 31, 1995, this relationship was terminated.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor
of
Trust shares and primary broker for its portfolio agency transactions. For
the
year ended December 31, 1995, SB received brokerage commissions of $61,755
and
sales charges of approximately $72,000 on sales of the Fund's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B
shares, which applies if redemption occurs less than one year from initial
purchase and declines thereafter by 1.00% per year until no CDSC is incurred.
Class C shares have a 1.00% CDSC, which applies if redemption occurs within
the
first year of purchase. For the year ended December 31, 1995, CDSCs paid to SB
for Class B shares were approximately $785,000.
14
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------------
- --
Pursuant to a Distribution Plan, the Fund pays a service fee with respect
to Class A, B and C shares calculated at the annual rate of 0.25% of the
average
daily net assets for each respective class. The Fund also pays a distribution
fee with respect to Class B and C shares calculated at the annual rate of
0.75%
of the average daily net assets for each class, respectively. For the year
ended
December 31, 1995, total Distribution Plan fees incurred were:
Class A Class B Class
C
==============================================================================
==
Distribution Plan Fees $197,018 $1,737,952 $6,895
==============================================================================
==
All officers and one Trustee of the Trust are employees of SB.
3. INVESTMENTS
During the year ended December 31, 1995, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
==============================================================================
==
Purchases $
65,391,206
- ------------------------------------------------------------------------------
- --
Sales
120,833,305
==============================================================================
==
At December 31, 1995, the aggregate gross unrealized appreciation
and
depreciation of investments for Federal income tax purposes were as follows:
==============================================================================
==
Gross unrealized appreciation
$32,022,221
Gross unrealized depreciation
(17,583,696)
- ------------------------------------------------------------------------------
- --
Net unrealized appreciation
$14,438,525
==============================================================================
==
4. REPURCHASE AGREEMENTS
The Fund purchases (and its custodian takes possession of) U.S.
Government
securities from banks and securities dealers subject to agreements to resell
the
securities to the sellers at a future date (generally, the next business day)
at
an agreed-upon higher repurchase price. The Fund requires continual
maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
15
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------------
- --
5. SHARES OF BENEFICIAL INTEREST
At December 31, 1995, the Trust had an unlimited number of shares of
beneficial interest authorized with a par value of $0.001 per share. The Fund
has the ability to issue multiple classes of shares. Each share of a class
represents an identical interest and has the same rights, except that each
class
bears certain direct expenses, including those specifically related to the
distribution of its shares.
At December 31, 1995, total paid-in capital amounted to the following for
each class:
Class A Class B Class C
==============================================================================
==
Total Paid-in Capital $49,762,914 $153,494,921
$945,155
==============================================================================
==
Transactions in shares of each class were as follows:
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Year Ended
December 31, 1995 December
31, 1994
--------------------- ---------
- -------------
Shares Amount Shares
Amount
==============================================================================
================
<S> <C> <C> <C>
<C>
Class A
Shares sold 439,191 $5,782,257 2,118,919
$26,465,297
Shares issued on reinvestment 89,091 1,112,742 69,569
828,566
Shares redeemed (1,986,028) (24,990,603) (1,170,354)
(14,398,989)
- ------------------------------------------------------------------------------
- ----------------
Net Increase (Decrease) (1,457,746) $(18,095,604) 1,018,134
$12,894,874
==============================================================================
================
Class B
Shares sold 1,428,073 $18,024,709 6,989,940
$85,839,378
Shares issued on reinvestment 214,141 2,633,929 43,682
516,322
Shares redeemed (4,973,188) (61,409,297) (3,572,347)
(43,504,970)
- ------------------------------------------------------------------------------
- ----------------
Net Increase (Decrease) (3,330,974) $(40,750,659) 3,461,275
$42,850,730
==============================================================================
================
Class C
Shares sold 76,994 $974,706 12,569
$154,200
Shares issued on reinvestment 1,389 17,353 32
389
Shares redeemed (15,863) (200,893) --
- --
- ------------------------------------------------------------------------------
- ----------------
Net Increase 62,520 $791,166 12,601
$154,589
==============================================================================
================
</TABLE>
6. CONCENTRATION OF CREDIT
Because the Fund concentrates its investments in one industry, its
portfolio may be subject to greater risk and market fluctuations than a
portfolio of securities representing a broader range of investment
alternatives.
The economic and business cycle risks associated with the concentration of the
Fund in only one industry could mean that adverse conditions could
substantially
impact the dividends paid by the Fund and the value of the Fund's holdings.
16
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Financial Highlights
- ------------------------------------------------------------------------------
- --
For a share of each class of beneficial interest outstanding throughout
each
year:
<TABLE>
<CAPTION>
Class A Shares 1995 1994(1)
1993(1) 1992 1991
==============================================================================
========================================
<S> <C> <C>
<C> <C> <C>
Net Asset Value, Beginning of Year $11.91 $12.86
$9.63 $8.68 $7.36
- ------------------------------------------------------------------------------
- ----------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.03) (0.04)
(0.04) 0.05 0.06
Net realized and unrealized gain (loss) 1.04 (0.78)
3.44 1.63 1.47
- ------------------------------------------------------------------------------
- ----------------------------------------
Total Income (Loss) From Operations 1.01 (0.82)
3.40 1.68 1.53
- ------------------------------------------------------------------------------
- ----------------------------------------
Less Distributions From:
Net investment income -- (0.13)
- -- (0.02) (0.06)
Net realized gains (0.21) --
(0.17) (0.71) (0.14)
Capital -- --
- -- -- (0.01)
- ------------------------------------------------------------------------------
- ----------------------------------------
Total Distributions (0.21) (0.13)
(0.17) (0.73) (0.21)
- ------------------------------------------------------------------------------
- ----------------------------------------
Net Asset Value, End of Year $12.71 $11.91
$12.86 $9.63 $8.68
- ------------------------------------------------------------------------------
- ----------------------------------------
Total Return 8.54% (6.37)
35.27% 19.41% 20.94%
- ------------------------------------------------------------------------------
- ----------------------------------------
Net Assets, End of Year (000s) $71,059 $83,918
$77,564 $36,947 $34,643
- ------------------------------------------------------------------------------
- ----------------------------------------
Ratios to Average Net Assets:
Expenses 1.27% 1.24%
1.34% 1.31% 1.19%
Net investment income (loss) (0.23) (0.29)
(0.32) 0.55 0.67
- ------------------------------------------------------------------------------
- ----------------------------------------
Portfolio Turnover Rate 27% 19%
25% 64% 111%
==============================================================================
========================================
Average commissions paid on
equity security transactions(2) $0.05 --
- -- -- --
==============================================================================
========================================
</TABLE>
(1) 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
operations.
(2) New SEC disclosure guidelines require that average commissions per share
be
calculated and presented for the current year only.
17
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Financial Highlights (continued)
- ------------------------------------------------------------------------------
- --
For a share of each class of beneficial interest outstanding throughout
each
year:
<TABLE>
<CAPTION>
Class B Shares
Class C Shares
------------------------------
- -------------- -----------------------
1995 1994(1)
1993(1) 1992(2) 1995 1994(1)(3)
==============================================================================
============================================
<S> <C> <C> <C>
<C> <C> <C>
Net Asset Value, Beginning of Year $11.82 $12.77
$9.63 $9.33 $12.00 $12.70
- ------------------------------------------------------------------------------
- --------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.12) (0.14)
(0.14) (0.00)* (0.13) (0.01)
Net realized and unrealized gain (loss) 1.02 (0.78)
3.45 1.02 1.05 (0.66)
- ------------------------------------------------------------------------------
- --------------------------------------------
Total Income (Loss) From Operations 0.90 (0.92)
3.31 1.02 0.92 (0.67)
- ------------------------------------------------------------------------------
- --------------------------------------------
Less Distributions From:
Net investment income -- (0.03) -
- - (0.01) -- (0.03)
Net realized gains (0.21) --
(0.17) (0.71) (0.21) --
- ------------------------------------------------------------------------------
- --------------------------------------------
Total Distributions (0.21) (0.03)
(0.17) (0.72) (0.21) (0.03)
- ------------------------------------------------------------------------------
- --------------------------------------------
Net Asset Value, End of Year $12.51 $11.82
$12.77 $9.63 $12.71 $12.00
- ------------------------------------------------------------------------------
- --------------------------------------------
Total Return 7.67% (7.17)%
34.34% 10.98%++ 7.73% (5.24)%++
- ------------------------------------------------------------------------------
- --------------------------------------------
Net Assets, End of Year (000s) $155,222 $185,980
$156,781 $586 $955 $151
- ------------------------------------------------------------------------------
- --------------------------------------------
Ratios to Average Net Assets:
Expenses 2.02% 2.07%
2.18% 2.21%+ 2.02% 2.08%+
Net investment loss (0.98) (1.11)
(1.16) (0.38)+ (0.98) (1.13)+
- ------------------------------------------------------------------------------
- --------------------------------------------
Portfolio Turnover Rate .27% .19%
.25% .64% .27% .19%
==============================================================================
============================================
Average commissions paid on
equity security transactions(4) $0.05 -- -
- - -- $0.05 --
==============================================================================
============================================
</TABLE>
(1) 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
operations.
(2) For the period from November 6, 1992 (inception date) to December 31,
1992.
(3) For the period from November 7, 1994 (inception date) to December 31,
1994.
(4) New SEC disclosure guidelines require that average commissions per share
be
calculated and presented for the current year only.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
18
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Independent Auditors' Report
- ------------------------------------------------------------------------------
- --
The Shareholders and Board of Trustees of
Smith Barney Telecommunications Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Smith Barney Telecommunications
Growth Fund of Smith Barney Telecommunications Trust as of December 31, 1995,
and the related statements of operations, changes in net assets, and financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights
based on our audit. The statement of changes in net assets for the year ended
December 31, 1994 and the financial highlights for each of the years in the
four-year period then ended were audited by other auditors whose report
thereon,
dated February 3, 1995, expressed an unqualified opinion on that statement of
changes in net assets and those financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. As to securities
purchased and sold but not received or delivered, we performed other
appropriate
auditing procedures. An audit also includes assessing the accounting
principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly,
in all material respects, the financial position of the Smith Barney
Telecommunications Growth Fund of Smith Barney Telecommunications Trust as of
December 31, 1995, and the results of its operations, changes in its net
assets
and its financial highlights for the year then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
New York, New York
February 22, 1996
19
<PAGE>
Smith Barney Telecommunications Growth Fund
- ------------------------------------------------------------------------------
- --
Additional Information
- ------------------------------------------------------------------------------
- --
Change in Independent Auditor: On October 20, 1994, based upon the
recommendation of the Audit Committee of the Fund, the Board of Trustees
determined not to retain Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as the
Fund's independent auditor and voted to appoint KPMG Peat Marwick LLP. During
the Fund's two most recent fiscal years, Coopers & Lybrand's audit reports
contained no adverse opinion or disclaimer of opinion; nor were the reports
qualified or modified as to uncertainty, audit scope, or accounting
principles.
Further, during this same period there were no disagreements with Coopers &
Lybrand on any matter of accounting principles or practices, financial
statement
disclosure, or auditing scope or procedure, which disagreements, if not
resolved
to the satisfaction of Coopers & Lybrand, would have caused it to make
reference
to the subject matter of such disagreements in connection with its audit
reports. The Fund has requested Coopers & Lybrand to provide a letter to the
Securities and Exchange Commission stating whether Coopers & Lybrand agrees
with
the foregoing statements, and to provide the Fund with a copy of such letter.
A
copy of this letter is available upon request by calling the Fund at (212)
723-9218.
- ------------------------------------------------------------------------------
- --
Tax Information (unaudited)
- ------------------------------------------------------------------------------
- --
The amount of long-term capital gains paid by the Fund to its
shareholders
for the fiscal year ended December 31, 1995, was $3,980,765.
20
<PAGE>
Smith Barney SMITH
BARNEY
Telecommunications ----------
- --
Growth Fund A Member of Travelers Group
[LOGO]
Trustees
Paul R. Ades
Herbert Barg
Alger B. Chapman
Dwight B. Crane
Frank G. Hubbard
Allan R. Johnson
Heath B. McLendon, Chairman
Ken Miller
John F. White
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser
Smith Barney Strategy
Advisers Inc.
Administrator
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNCBank
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Telecommunications Growth Fund. It is not authorized for
distribution to prospective investors unless accompanied or preceded by a
current Prospectus for the Fund, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent
information.
Smith Barney
Telecommunications
Growth Fund
388 Greenwich Street
New York, New York 10013
FD0320 2/96
SEMI-ANNUAL REPORT
OF
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1996
[TO BE FILED BY AMENDMENT]
STATEMENT OF ADDITIONAL INFORMATION OF
SMITH BARNEY SPECIAL EQUITIES FUND
DATED APRIL 29, 1996 IS INCORPORATED BY REFERENCE TO
POST EFFECTIVE AMENDMENT NO. 43 TO THE INVESTMENT FUNDS REGISTRATION
STATEMENT ON FORM N-1A FILED ON APRIL 29, 1996. REFERENCE NOS 2-74288 AND
811-
3275
SEMI-ANNUAL REPORT
OF
SMITH BARNEY SPECIAL EQUITIES FUND
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1996
[ TO BE FILED BY AMENDMENT ]
ANNUAL REPORT
OF
SMITH BARNEY SPECIAL EQUITIES FUND
FOR THE FISCAL YEAR ENDEDED DECEMBER 31, 1995
-------------
ANNUAL REPORT
-------------
1995
1995
1995
1995
1995
Smith Barney
Special
Equities Fund
-------------------------
December 31, 1995
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
- ----------------------------------
Smith Barney Special Equities Fund
- ----------------------------------
Dear Shareholder:
We are pleased to provide you with the annual report and audited financial
statements for Smith Barney Special Equities Fund for the year ended December
31, 1995. In this report, we outline our investment strategy and discuss stock
market conditions in 1995. A more detailed summary of performance and current
holdings can be found in the appropriate sections that follow in the annual
report.
The year 1995 began slowly, rose to a loud crescendo, tapered off a bit and
ended strongly. Coming into 1995, analyst expectations about both the equity
markets and the economy were less than spectacular. Many investment
professionals had expected a difficult year for the stock market. Yet what
unfolded in 1995 has to be considered one of the "great" years for the
markets,
much like a classic "great" wine.
In the early part of the year, when investor concerns about economic growth,
inflation and the direction of interest rates prevailed, the equity markets
were
essentially calm. Then, as the economy slowed down, interest rates declined
and
inflation concerns subsided, the equity markets began to hit new highs with
such
frequency it soon became the norm. All of the major stock market indices
participated: The Dow Jones Industrial Average and the Standard & Poor's
500-Stock Price Index finished the year up 36.94% and 37.53%, respectively.
The
NASDAQ Composite Index and the Russell 2000 Index rose 39.92% and 28.45%,
respectively.
The stock market rally, led by a huge concentration of investors in technology
stocks, began to falter in August with the announcement of a slight
disappointment in earnings from Intel. This earnings report from Intel raised
a
red flag to investors about other technology stocks which began a sharp
decline
from their highs. This sell-off in technology stocks affected the markets,
especially the universe of small-capitalization stocks. Small-capitalization
stocks underperformed large-capitalization stocks over the full year. Then, in
mid-December, technology stocks rebounded, causing a strong finish for all the
major stock market averages. Because Smith Barney Special Equities invests in
small, emerging growth companies, its holdings are generally not affected by
broad economic and market conditions. For the one-year period ended December
31,
1995, Smith Barney Special Equities Fund posted a cumulative total return
(which
excludes the effects of all sales charges) of 63.48% for Class A shares.
1
<PAGE>
Fund's Investment Strategy
In the past year, Smith Barney Special Equities Fund continued to buy stocks
of
companies with strong fundamentals and above-average growth prospects with the
intention of holding them. We do not focus on short-term price fluctuations as
long as the Fund believes a company's fundamentals remain viable and growth
can
be sustained over a full market cycle. At year end, the Fund's top-five
holdings
were:
- -- Ascend Communications Inc.
- -- Macromedia Inc.
- -- Baby Superstore Inc.
- -- Starbucks Corp.
- -- Callaway Golf Co.
For 1996, we expect the early part of the year to be challenging for
small-capitalization stocks. However, we believe the relative performance of
small-capitalization stocks may improve as the year progresses.
At this time, we would like to thank you for your investment in Smith Barney
Special Equities Fund.
Sincerely,
/s/ Heath B. McLendon /s/ George V. Novello
Heath B. McLendon George V. Novello
Chairman and Investment Officer
Chief Executive Officer
January 30, 1996
2
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Historical Performance -- Class A Shares
- ------------------------------------------------------------------------------
- --
<TABLE>
<CAPTION>
Net Asset Value
------------------
Beginning End Income Capital Gain Return
Total
Year Ended of Year of Year Dividends Distributions of Capital
Returns(1)
==============================================================================
==========
<C> <C> <C> <C> <C> <C>
<C>
12/31/95 $19.10 $30.44 $0.00 $0.76 $0.00
63.48%
- ------------------------------------------------------------------------------
- ----------
12/31/94 20.23 19.10 0.00 0.00 0.00
(5.59)
- ------------------------------------------------------------------------------
- ----------
12/31/93 15.47 20.23 0.00 0.33 0.00
32.90
- ------------------------------------------------------------------------------
- ----------
Inception* - 12/31/92 14.13 15.47 0.00 0.00 0.00
9.48+
==============================================================================
==========
Total $0.00 $1.09 $0.00
==============================================================================
==========
- ------------------------------------------------------------------------------
- --
Historical Performance -- Class B Shares
- ------------------------------------------------------------------------------
- --
<CAPTION>
Net Asset Value
------------------
Beginning End Income Capital Gain Return
Total
Year Ended of Year of Year Dividends Distributions of Capital
Returns(1)
==============================================================================
==========
<C> <C> <C> <C> <C> <C>
<C>
12/31/95 $18.82 $29.76 $0.00 $0.76 $0.00
62.30%
- ------------------------------------------------------------------------------
- ----------
12/31/94 20.08 18.82 0.00 0.00 0.00
(6.27)
- ------------------------------------------------------------------------------
- ----------
12/31/93 15.47 20.08 0.00 0.33 0.00
31.93
- ------------------------------------------------------------------------------
- ----------
12/31/92 14.18 15.47 0.00 0.00 0.00
9.10
- ------------------------------------------------------------------------------
- ----------
12/31/91 9.82 14.18 0.00 0.00 0.03
44.76
- ------------------------------------------------------------------------------
- ----------
12/31/90 13.77 9.82 0.29 0.23 0.02
(24.71)
- ------------------------------------------------------------------------------
- ----------
12/31/89 12.04 13.77 0.27 0.00 0.24
18.60
- ------------------------------------------------------------------------------
- ----------
12/31/88 11.48 12.04 0.55 0.30 0.00
12.60
- ------------------------------------------------------------------------------
- ----------
12/31/87 13.02 11.48 0.00 0.14 0.00
(10.91)
- ------------------------------------------------------------------------------
- ----------
12/31/86 13.15 13.02 0.05 1.00 0.00
7.05
==============================================================================
==========
Total $1.16 $2.76 $0.29
==============================================================================
==========
- ------------------------------------------------------------------------------
- --
Historical Performance -- Class C Shares
- ------------------------------------------------------------------------------
- --
<CAPTION>
Net Asset Value
------------------
Beginning End Income Capital Gain Return
Total
Year Ended of Year of Year Dividends Distributions of Capital
Returns(1)
==============================================================================
============
<C> <C> <C> <C> <C> <C>
<C>
12/31/95 $18.82 $29.77 $0.00 $0.76 $0.00
62.35%
- ------------------------------------------------------------------------------
- ------------
12/31/94 20.08 18.82 0.00 0.00 0.00
(6.27)
- ------------------------------------------------------------------------------
- ------------
Inception* - 12/31/93 22.62 20.08 0.00 0.33 0.00
(9.77)+
==============================================================================
============
Total $0.00 $1.09 * $0.00
==============================================================================
============
</TABLE>
3
<PAGE>
<TABLE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Historical Performance -- Class Z Shares
- ------------------------------------------------------------------------------
- --
Net Asset Value
------------------
Beginning End Income Capital Gain Return
Total
Year Ended of Year of Year Dividends Distributions of Capital
Returns(1)
==============================================================================
============
<S> <C> <C> <C> <C> <C>
<C>
Inception* - 12/31/95 $26.49 $30.46 $0.00 $0.76 $0.00
17.95%+
==============================================================================
============
</TABLE>
It is the Funds' policy to distribute dividends and capital gains, if any,
annually.
- ------------------------------------------------------------------------------
- --
Average Annual Return
- ------------------------------------------------------------------------------
- --
Without Sales Charge(1)
--------------------------------------
- --
Class A Class B Class C Class
Z
==============================================================================
==
Year Ended 12/31/95 63.48% 62.30% 62.35% N/A
- ------------------------------------------------------------------------------
- --
Five Years Ended 12/31/95 N/A 25.95 N/A N/A
- ------------------------------------------------------------------------------
- --
Ten Years Ended 12/31/95 N/A 11.76 N/A N/A
- ------------------------------------------------------------------------------
- --
Inception* through 12/31/95 29.39 11.98 15.48
17.95%+
==============================================================================
==
With Sales Charge(2)
-------------------------------------
- --
Class A Class B Class C Class
Z
==============================================================================
==
Year Ended 12/31/95 55.31% 57.30% 61.35% N/A
- ------------------------------------------------------------------------------
- --
Five Years Ended 12/31/95 N/A 25.87 N/A N/A
- ------------------------------------------------------------------------------
- --
Ten Years Ended 12/31/95 N/A 11.76 N/A N/A
- ------------------------------------------------------------------------------
- --
Inception* through 12/31/95 27.30 11.98 15.48
17.95%+
==============================================================================
==
- ------------------------------------------------------------------------------
- --
Cumulative Total Return
- ------------------------------------------------------------------------------
- --
Without Sales
Charge(1)
==============================================================================
==
Class A (Inception* through 12/31/95) 124.59%
- ------------------------------------------------------------------------------
- --
Class B (12/31/85 through 12/31/95) 203.96
- ------------------------------------------------------------------------------
- --
Class C (Inception* through 12/31/95) 37.29
- ------------------------------------------------------------------------------
- --
Class Z (Inception* through 12/31/95) 17.95+
==============================================================================
==
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charge with respect to Class A shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00%; Class B shares reflect the
deduction of a 5.00% CDSC, which applies if shares are redeemed less than
one year from initial purchase and declines thereafter by 1.00% per year
until no CDSCis incurred. Class C shares reflect the deduction of a 1.00%
CDSC, which applies if shares are redeemed within the first year of
purchase.
* Inception dates for Class A, B, C and Z shares are November 6, 1992,
December 13, 1982, October 18, 1993 and October 2, 1995, respectively.
+ Total return is not annualized, as it may not be representative of the
total
return for the year.
4
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Historical Performance (unaudited)
- ------------------------------------------------------------------------------
- --
Growthof $10,000 Invested in Class B Shares
of the Smith Barney Special Equities
Fund vs.
Standard & Poor's 500 Index+
- ------------------------------------------------------------------------------
- --
December 1985 -- December 1995
[The following table was represented by a line chart in the printed
material.]
Smith Barney Special Equities Fund S&P 500 Index
---------------------------------- -------------
12/85 10,000 10,000
12/86 10,705 11,687
12/87 9,538 12,490
12/88 10,740 14,559
12/89 12,738 19,165
12/90 9,591 18,569
12/91 13,883 24,216
12/92 15,146 26,059
12/93 19,983 28,678
12/94 18,729 29,056
12/95 30,396 39,961
+ Hypothetical illustration of $10,000 invested in Class B shares on
December
31, 1985, assuming reinvestment of dividends and capital gains, if any, at
net asset value through December 31, 1995. The Standard & Poor's 500 Index
is composed of widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and the over-the-counter market. Figures
for the index include reinvestment of dividends. The index is unmanaged
and
is not subject to the same management and trading expenses as a mutual
fund.
The performance of the Fund's other classes may be greater or less than
the
Class B shares' performance indicated on this chart, depending on whether
greater or lesser sales charges and fees were incurred by shareholders
investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
5
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Portfolio Highlights (unaudited) December 31,
1995
- ------------------------------------------------------------------------------
- --
Portfolio Breakdown
[The following table was represented by a pie chart in the printed
material.]
Retail 17.2%
Communications 14.8%
Software 12.1%
Restaurant 9.3%
Healthcare 8.2%
Semi-conductor and Electronics 7.7%
Technology 6.8%
Office Products 6.6%
Other Common Stocks 7.5%
Repurchase Agreements 9.8%
Top Ten Common Stock Holdings
Percentage of
Total
Investments
==============================================================================
==
Ascend Communications Inc. 7.1%
Macromedia Inc. 5.7
Baby Superstore Inc. 5.0
Starbucks Corp. 4.5
Callaway Golf Co. 4.0
Boston Chicken Inc. 3.9
PETsMart Inc. 3.6
Adtran Inc. 3.5
Sunglass Hut International Inc. 3.5
C-Cube Microsystems Inc. 3.4
==============================================================================
==
6
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Schedule of Investments December 31,
1995
- ------------------------------------------------------------------------------
- --
SHARES SECURITY VALUE
==============================================================================
==
COMMON STOCKS -- 90.2%
Advertising -- 0.7%
65,000 CKS Group Inc.* $
2,535,000
- ------------------------------------------------------------------------------
- --
Brewers -- 0.9%
80,000 Boston Beer Co. Inc.*
1,900,000
50,000 Redhook Ale Brewery Inc.*
1,300,000
- ------------------------------------------------------------------------------
- --
3,200,000
- ------------------------------------------------------------------------------
- --
Business Services -- 0.5%
50,000 Corestaff Inc.*
1,825,000
- ------------------------------------------------------------------------------
- --
Communications -- 14.8%
220,000 Adtran Inc.*
11,948,750
150,000 America Online Inc.*
5,625,000
100,000 Arch Communications Group Inc.*
2,400,000
300,000 Ascend Communications Inc.*
24,337,152
200,000 Aspect Telecommunications Corp.*
6,700,000
- ------------------------------------------------------------------------------
- --
51,010,902
- ------------------------------------------------------------------------------
- --
Entertainment and Leisure -- 4.0%
600,000 Callaway Golf Co.
13,575,000
- ------------------------------------------------------------------------------
- --
Healthcare -- 8.2%
35,000 HCIA Inc.*
1,636,250
45,000 Henry Schein Inc.*
1,327,500
50,000 IDX Systems Corp.*
1,737,500
80,000 Occusystems Inc.*
1,600,000
150,000 Phycor Inc.*
7,584,375
60,000 Physicians Sales & Service Inc.*
1,710,000
100,000 Steris Corp.*
3,225,000
220,000 Target Therapeutics Inc.*
9,405,000
- ------------------------------------------------------------------------------
- --
28,225,625
- ------------------------------------------------------------------------------
- --
Office Products -- 6.6%
200,000 Corporate Express Inc.*
6,025,000
200,000 Micro Warehouse Inc.*
8,650,000
150,000 Officemax Inc.*
3,356,250
100,000 Viking Office Products Inc.*
4,650,000
- ------------------------------------------------------------------------------
- --
22,681,250
- ------------------------------------------------------------------------------
- --
Pharmaceuticals -- 1.2%
85,000 Biochem Pharma Inc.*
3,410,625
25,000 Centocor Inc.*
771,875
- ------------------------------------------------------------------------------
- --
4,182,500
- ------------------------------------------------------------------------------
- --
See Notes to Financial Statements.
7
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Schedule of Investments (continued) December 31,
1995
- ------------------------------------------------------------------------------
- --
SHARES SECURITY VALUE
==============================================================================
==
Restaurant -- 9.3%
420,000 Boston Chicken Inc.*
$13,492,500
164,000 Manhattan Bagel Co.*
2,952,000
740,000 Starbucks Corp.*
15,540,000
- ------------------------------------------------------------------------------
- --
31,984,500
- ------------------------------------------------------------------------------
- --
Retail -- 17.2%
300,000 Baby Superstore Inc.*
17,100,000
60,000 De Rigo S.p.A. ADR*
1,365,000
100,000 Global DirectMail Corp.*
2,750,000
285,000 The Mens Wearhouse Inc.*
7,338,750
60,000 MSC Industrial Direct Co.*
1,635,000
130,000 Oakley Inc.*
4,420,000
405,000 PETsMART Inc.*
12,555,000
500,000 Sunglass Hut International Inc.*
11,875,000
- ------------------------------------------------------------------------------
- --
59,038,750
- ------------------------------------------------------------------------------
- --
Semi-Conductor and Electronics -- 7.7%
185,000 C-Cube Microsystems Inc.*
11,562,500
170,000 Discreet Logic Inc.*
4,250,000
105,000 Gemstar International Group Ltd.*
2,979,375
175,000 LSI Logic Corp.*
5,731,250
90,000 Zoran Corp.*
1,867,500
- ------------------------------------------------------------------------------
- --
26,390,625
- ------------------------------------------------------------------------------
- --
Software -- 12.1%
100,000 Baan Co. NV*
4,525,000
100,000 Datalogix International Inc.*
1,262,500
50,000 Davidson & Associates Inc.*
1,100,000
375,000 Macromedia Inc.*
19,593,750
100,000 Maxis Inc.*
3,800,000
265,000 Peoplesoft Inc.*
11,395,000
- ------------------------------------------------------------------------------
- --
41,676,250
- ------------------------------------------------------------------------------
- --
Technology -- 6.8%
120,000 Avant Corp.*
2,310,000
70,000 Harbinger Corp.*
1,610,000
80,000 Metatools Inc.*
2,080,000
30,000 Objective Systems Integrators Inc.*
1,642,500
75,000 Premenos Technology Corp.*
1,978,125
130,000 Shiva Corp.*
9,457,500
100,000 Verity Inc.*
4,425,000
- ------------------------------------------------------------------------------
- --
23,503,125
- ------------------------------------------------------------------------------
- --
See Notes to Financial Statements.
8
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Schedule of Investments (continued) December 31,
1995
- ------------------------------------------------------------------------------
- --
SHARES SECURITY VALUE
==============================================================================
==
Transportation -- 0.2%
20,000 Eagle USA Airfreight Inc.* $
525,000
- ------------------------------------------------------------------------------
- --
TOTAL COMMON STOCKS
(Cost -- $180,428,567)
310,353,527
==============================================================================
==
WARRANT -- 0.0%
696 Jan Bell Marketing Inc., Expires 12/16/98 348
==============================================================================
==
FACE
AMOUNT SECURITY VALUE
==============================================================================
==
REPURCHASE AGREEMENTS -- 9.8%
$33,762,000 Morgan Stanley Group, Inc., 5.844% due 1/2/96;
Proceeds at maturity -- $33,783,924; (Fully
collateralized by U.S. Treasury Notes,
5.125% due 4/30/98; Market value -- $34,446,971)
33,762,000
76,000 Goldman Sachs & Co., 5.649% due 1/2/96; Proceeds
at maturity -- $76,048; (Fully collateralized by
U.S. Treasury Notes,
5.375% due 11/30/97; Market value -- $77,555)
76,000
- ------------------------------------------------------------------------------
- --
TOTAL REPURCHASE AGREEMENTS
(Cost -- $33,838,000)
33,838,000
==============================================================================
==
TOTAL INVESTMENTS -- 100%
(Cost -- $214,266,567)++
$344,191,875
==============================================================================
==
* Non-income producing security.
++ Aggregate cost for Federal income tax purposes is $214,745,389.
See Notes to Financial Statements.
9
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Statement of Assets and Liabilities December 31,
1995
- ------------------------------------------------------------------------------
- --
ASSETS:
Investments, at value (Cost -- $214,266,567) $
344,191,875
Cash
1,067
Receivable for securities sold
308,750
Receivable for Fund shares sold
5,004,240
Interest receivable
16,479
- ------------------------------------------------------------------------------
- --
Total Assets
349,522,411
- ------------------------------------------------------------------------------
- --
LIABILITIES:
Payable for securities purchased
2,871,875
Payable for Fund shares purchased
614,072
Investment advisory fees payable
151,195
Distribution fees payable
107,420
Administration fees payable
54,980
Accrued expenses
544,664
- ------------------------------------------------------------------------------
- --
Total Liabilities
4,344,206
- ------------------------------------------------------------------------------
- --
Total Net Assets
$345,178,205
==============================================================================
==
NET ASSETS:
Par value of capital shares $
11,476
Capital paid in excess of par value
209,932,095
Accumulated net realized gain on security transactions
5,309,326
Net unrealized appreciation of investments
129,925,308
- ------------------------------------------------------------------------------
- --
Total Net Assets
$345,178,205
==============================================================================
==
Shares Outstanding:
Class A
5,234,499
- ------------------------------------------------------------------------------
- --
Class B
5,748,436
- ------------------------------------------------------------------------------
- --
Class C
316,409
- ------------------------------------------------------------------------------
- --
Class Z
176,117
- ------------------------------------------------------------------------------
- --
Net Asset Value:
Class A (and redemption price)
$30.44
- ------------------------------------------------------------------------------
- --
Class B*
$29.76
- ------------------------------------------------------------------------------
- --
Class C**
$29.77
- ------------------------------------------------------------------------------
- --
Class Z (and redemption price)
$30.46
- ------------------------------------------------------------------------------
- --
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net asset value per share)
$32.04
==============================================================================
==
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if
shares
are redeemed less than one year from initial purchase (See Note 2).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if
shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
10
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Statement of Operations For the Year Ended December 31,
1995
- ------------------------------------------------------------------------------
- --
INVESTMENT INCOME:
Interest $
810,146
Dividends
165,805
- ------------------------------------------------------------------------------
- --
Total Investment Income
975,951
- ------------------------------------------------------------------------------
- --
EXPENSES:
Distribution fees (Note 2)
1,457,522
Investment advisory fees (Note 2)
1,276,355
Administration fees (Note 2)
464,129
Shareholder and system servicing fees
449,230
Registration fees
90,000
Shareholder communications
72,000
Audit and legal
50,400
Directors' fees
50,000
Custody
40,000
Other
221,944
- ------------------------------------------------------------------------------
- --
Total Expenses
4,171,580
- ------------------------------------------------------------------------------
- --
Net Investment Loss
(3,195,629)
- ------------------------------------------------------------------------------
- --
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales
252,991,730
Cost of securities sold
231,031,531
- ------------------------------------------------------------------------------
- --
Net Realized Gain
21,960,199
- ------------------------------------------------------------------------------
- --
Change in Net Unrealized Appreciation of Investments:
Beginning of year
31,895,265
End of year
129,925,308
- ------------------------------------------------------------------------------
- --
Increase in Net Unrealized Appreciation
98,030,043
- ------------------------------------------------------------------------------
- --
Net Gain on Investments
119,990,242
- ------------------------------------------------------------------------------
- --
Increase in Net Assets From Operations
$116,794,613
==============================================================================
==
See Notes to Financial Statements.
11
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Statement of Changes in Net Assets For the Years Ended December
31,
- ------------------------------------------------------------------------------
- --
<TABLE>
<CAPTION>
1995
1994
==============================================================================
=====
<S> <C> <C>
OPERATIONS:
Net investment loss $ (3,195,629) $
(2,749,410)
Net realized gain (loss) 21,960,199
(5,296,726)
Increase in net unrealized appreciation
(depreciation) 98,030,043
(3,369,494)
- ------------------------------------------------------------------------------
- -----
Increase (Decrease) in Net Assets From Operations 116,794,613
(11,415,630)
- ------------------------------------------------------------------------------
- -----
DISTRIBUTION TO
SHAREHOLDERS FROM:
Net realized gains (7,592,812)
- --
- ------------------------------------------------------------------------------
- -----
Decrease in Net Assets From
Distributions To Shareholders (7,592,812)
- --
- ------------------------------------------------------------------------------
- -----
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 237,931,179
228,288,055
Net asset value of shares issued for
reinvestment of dividends 7,348,955
- --
Cost of shares reacquired (205,804,360)
(209,078,842)
- ------------------------------------------------------------------------------
- -----
Increase in Net Assets From
Fund Share Transactions 39,475,774
19,209,213
- ------------------------------------------------------------------------------
- -----
Increase in Net Assets 148,677,575
7,793,583
NET ASSETS:
Beginning of year 196,500,630
188,707,047
- ------------------------------------------------------------------------------
- -----
End of year $345,178,205
$196,500,630
==============================================================================
=====
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Notes to Financial Statements
- ------------------------------------------------------------------------------
- --
1. SIGNIFICANT ACCOUNTING POLICIES
The Smith Barney Special Equities Fund ("Portfolio"), a separate
investment
fund of the Smith Barney Investment Funds Inc. ("Fund"), a Maryland
corporation,
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund consists of the
Portfolio and four other separate investment portfolios: Smith Barney
Government
Securities Fund, Smith Barney Managed Growth Fund, Smith Barney Investment
Grade
Bond Fund and Smith Barney Growth Opportunity Fund. The financial statements
and
financial highlights for the other portfolios are presented in separate annual
reports.
The significant accounting policies consistently followed by the
Portfolio
are: (a) securities transactions are accounted for on trade date; (b)
securities
traded on national securities markets are valued at the closing price on such
markets; securities traded in the over-the-counter market and listed
securities
for which no sales price were reported are valued at the bid price, or in the
absence of a recent bid price, at the bid equivalent obtained from one or more
of the major market makers; (c) short-term securities that have a maturity of
more than 60 days are valued at prices based on market quotations for
securities
of similar type, yield and maturity; (d) short-term investments and securities
maturing within 60 days are valued at cost plus accreted discount, or minus
amortized premium, which approximates market value; (e) dividend income is
recorded on ex-dividend date and interest income is recorded on the accrual
basis; (f) gains or losses on the sale of securities are calculated using the
specific identification method; (g) direct expenses are charged to each
portfolio and each class; management fees and general portfolio expenses are
allocated on the basis of relative net assets; (h) the Portfolio intends to
comply with the applicable provisions of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make
distributions
of taxable income sufficient to relieve it from substantially all Federal
income
and excise taxes; (i) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At December 31, 1995,
reclassifications were made to the Portfolio's capital accounts to reflect
permanent book/tax differences and income and gains available for
distributions
under income tax regulations. Net investment income, net realized gains and
net
assets were not affected by this change; and (j) estimates and assumptions are
required to be made regarding assets, liabilities and changes in net assets
resulting from operations when financial statements are prepared. Changes in
economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ from these
amounts.
13
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------------
- --
2. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION AGREEMENT
AND OTHER TRANSACTIONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of
Smith
Barney Holdings Inc. ("SBH"), acts as investment advisor to the Fund. The
Portfolio pays SBMFM an investment advisory fee calculated at an annual rate
of
0.55% of the average daily net assets. This fee is calculated daily and paid
monthly.
SBMFM also acts as the Fund's administrator for which the Portfolio pays
a
fee calculated at an annual rate of 0.20% of the average daily net assets.
This
fee is calculated daily and paid monthly.
In addition, The Boston Company Advisors, Inc. ("Boston Advisors"), an
indirect wholly owned subsidiary of Mellon Bank Corporation, had entered into
a
sub-administration agreement with the Fund and SBMFM. SBMFM paid Boston
Advisors
a portion of its administration fee at a rate agreed upon from time to time
between SBMFM and Boston Advisors. As of August 18, 1995, this relationship
was
terminated.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor
of
Fund shares and primary broker for its portfolio agency transactions. For the
year ended December 31, 1995, SB received brokerage commissions of $11,052 and
sales charges of approximately $347,000 on sales of the Portfolio's Class A
shares.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B
shares, which applies if redemption occurs less than one year from initial
purchase and declines thereafter by 1.00% per year until no CDSC is incurred.
Class C shares have a 1.00% CDSC, which applies if redemption occurs within
the
first year of purchase. For the year ended December 31, 1995, CDSCs paid to SB
were approximately:
Class B Class
C
==============================================================================
==
CDSCs $379,000 $1,000
==============================================================================
==
14
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------------
- --
Pursuant to a Distribution Plan, the Portfolio pays a service fee with
respect to its Class A, B and C shares calculated at an annual rate of 0.25%
of
the average daily net assets of each respective class. The Portfolio also pays
a
distribution fee with respect to its Class B and C shares calculated at an
annual rate of 0.75% of the average daily net assets for each class,
respectively. For the year ended December 31, 1995, total Distribution Plan
fees
incurred by the Portfolio were:
Class A Class B Class
C
==============================================================================
==
Distribution Plan Fees $286,910 $1,135,911
$34,701
==============================================================================
==
All officers and one Director of the Fund are employees of SB.
3. INVESTMENTS
During the year ended December 31, 1995, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
==============================================================================
==
Purchases
$261,742,233
- ------------------------------------------------------------------------------
- --
Sales
252,991,730
==============================================================================
==
At December 31, 1995, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were as follows:
==============================================================================
==
Gross unrealized appreciation
$134,056,607
Gross unrealized depreciation
(4,610,121)
- ------------------------------------------------------------------------------
- --
Net unrealized appreciation
$129,446,486
==============================================================================
==
4. REPURCHASE AGREEMENTS
The Portfolio purchases (and its custodian takes possession of) U.S.
Government securities from banks and securities dealers subject to agreements
to
resell the securities to the sellers at a future date (generally, the next
business day), at an agreed-upon higher repurchase price. The Portfolio
requires
continual maintenance of the market value of the collateral in amounts at
least
equal to the repurchase price.
5. CAPITAL SHARES
At December 31, 1995, the Fund had ten billion shares of capital stock
authorized with a par value of $0.001 per share. The Portfolio has the ability
to issue multiple classes of shares. Each share of a class represents an
identical interest
15
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------------
- --
and has the same rights, except that each class bears certain
direct expenses, including those specifically related to the distribution of
its
shares.
At December 31, 1995, total paid-in capital amounted to the following for
each class:
Class A Class B Class C Class
Z
==============================================================================
==
Total Paid-in Capital $98,872,747 $98,223,631 $7,872,898
$4,974,295
==============================================================================
==
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended
Year Ended
December 31, 1995*
December 31, 1994
---------------------- --------
- --------------
Shares Amount Shares
Amount
==============================================================================
==================
<S> <C> <C> <C>
<C>
Class A
Shares sold 6,906,656 $158,758,785
6,100,691 $113,645,641
Shares issued on reinvestment 116,734 3,420,305 -
- - --
Shares redeemed (7,078,890) (159,234,258)
(3,288,861) (62,287,789)
- ------------------------------------------------------------------------------
- ------------------
Net Increase (Decrease) (55,500) $2,944,832
2,811,830 $51,357,852
==============================================================================
==================
Class B
Shares sold 2,715,135 $66,677,618
6,054,365 $113,219,270
Shares issued on reinvestment 128,647 3,689,606 -
- - --
Shares redeemed (2,085,066) (45,134,660)
(7,958,837) (146,720,375)
- ------------------------------------------------------------------------------
- ------------------
Net Increase (Decrease) 758,716 $25,232,564
(1,904,472) $(33,501,105)
==============================================================================
==================
Class C
Shares sold 296,498 $7,602,541
75,807 $1,423,144
Shares issued on reinvestment 5,282 151,484 -
- - --
Shares redeemed (66,546) (1,429,942)
(3,844) (70,678)
- ------------------------------------------------------------------------------
- ------------------
Net Increase 235,234 $6,324,083
71,963 $1,352,466
==============================================================================
==================
Class Z
Shares sold 173,310 $4,892,235 -
- - --
Shares issued on reinvestment 2,986 87,560 -
- - --
Shares redeemed (179) (5,500) -
- - --
- ------------------------------------------------------------------------------
- ------------------
Net Increase 176,117 $4,974,295 -
- - --
==============================================================================
==================
</TABLE>
* For Class Z shares, transactions are for the period from October 2, 1995
(inception date) to December 31, 1995.
16
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Financial Highlights
- ------------------------------------------------------------------------------
- --
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Shares 1995 1994(1)
1993(1) 1992(2)
==============================================================================
==========================
<S> <C> <C>
<C> <C>
Net Asset Value, Beginning of Year $19.10 $20.23
$15.47 $14.13
- ------------------------------------------------------------------------------
- --------------------------
Income (Loss) From Operations:
Net investment loss (0.27) (0.13)
(0.08) (0.01)
Net realized and unrealized gain (loss) 12.37 (1.00)
5.17 1.35
- ------------------------------------------------------------------------------
- --------------------------
Total Income (Loss) From Operations 12.10 (1.13)
5.09 1.34
- ------------------------------------------------------------------------------
- --------------------------
Less Distributions From:
Net realized gains (0.76) --
(0.33) --
- ------------------------------------------------------------------------------
- --------------------------
Total Distributions (0.76) --
(0.33) --
- ------------------------------------------------------------------------------
- --------------------------
Net Asset Value, End of Year $30.44 $19.10
$20.23 $15.47
- ------------------------------------------------------------------------------
- --------------------------
Total Return 63.48% (5.59)%
32.90% 9.48%++
- ------------------------------------------------------------------------------
- --------------------------
Net Assets, End of Year (000s) $159,316 $101,052
$50,121 $195
- ------------------------------------------------------------------------------
- --------------------------
Ratios to Average Net Assets:
Expenses 1.43% 1.49%
1.67% 1.51%+
Net investment loss (1.05) (0.94)
(0.46) (0.97)+
- ------------------------------------------------------------------------------
- --------------------------
Portfolio Turnover Rate 113% 123%
112% 211%
==============================================================================
==========================
Average commissions paid on
equity security transactions (3) $0.06 --
- -- --
==============================================================================
=============================================
<CAPTION>
Class B Shares 1995 1994(1)
1993(1) 1992 1991
==============================================================================
==========================================
<S> <C> <C>
<C> <C> <C>
Net Asset Value, Beginning of Year $18.82 $20.08
$15.47 $14.18 $9.82
- ------------------------------------------------------------------------------
- ------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.37) (0.27)
(0.20) (0.26) (0.07)
Net realized and unrealized gain (loss) 12.07 (0.99)
5.14 1.55 4.46
- ------------------------------------------------------------------------------
- ------------------------------------------
Total Income (Loss) From Operations 11.70 (1.26)
4.94 1.29 4.39
- ------------------------------------------------------------------------------
- ------------------------------------------
Less Distributions From:
Net realized gains (0.76) --
(0.33) -- --
Capital -- --
- -- -- (0.03)
- ------------------------------------------------------------------------------
- ------------------------------------------
Total Distributions (0.76) --
(0.33) -- (0.03)
- ------------------------------------------------------------------------------
- ------------------------------------------
Net Asset Value, End of Year $29.76 $18.82
$20.08 $15.47 $14.18
- ------------------------------------------------------------------------------
- ------------------------------------------
Total Return 62.30% (6.27)%
31.93% 9.10% 44.76%
- ------------------------------------------------------------------------------
- ------------------------------------------
Net Assets, End of Year (000s) $171,081 $93,920
$138,401 $78,130 $81,618
- ------------------------------------------------------------------------------
- ------------------------------------------
Ratios to Average Net Assets:
Expenses 2.04% 2.21%
2.34% 2.32% 2.31%
Net investment loss (1.61) (1.66)
(1.13) (1.77) (0.74)
- ------------------------------------------------------------------------------
- ------------------------------------------
Portfolio Turnover Rate 113% 123%
112% 211% 379%
==============================================================================
==========================================
Average commissions paid on
equity security transactions (3) $0.06 --
- -- -- --
==============================================================================
==========================================
</TABLE>
(1) The per share amounts have been calculated using the monthly average
shares
method, which more appropriately presents per share data for this year
since
use of the undistributed method did not accord with results of operations.
(2) For the period from November 6, 1992 (inception date) to December 31,
1992.
(3) New SEC disclosure guidelines require that average commissions per share
be
calculated and presented for the current year only. ++Total return is not
annualized, as it may not be representative of the total return for the
year.
+ Annualized.
17
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Financial Highlights (continued)
- ------------------------------------------------------------------------------
- --
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class C Shares
Class Z Shares
---------------------------
- --- --------------
1995 1994(1)
1993(1)(2) 1995(3)
==============================================================================
========================
<S> <C> <C>
<C> <C>
Net Asset Value, Beginning of Year $18.82 $20.08
$22.62 $26.49
- ------------------------------------------------------------------------------
- -----------------------
Income (Loss) From Operations:
Net investment loss (0.42) (0.25)
(0.16) (0.06)
Net realized and unrealized gain (loss) 12.13 (1.01)
(2.05) 4.79
- ------------------------------------------------------------------------------
- -----------------------
Total Income (Loss) From Operations 11.71 (1.26)
(2.21) 4.73
- ------------------------------------------------------------------------------
- -----------------------
Less Distributions From:
Net realized gains (0.76) --
(0.33) (0.76)
- ------------------------------------------------------------------------------
- -----------------------
Total Distributions (0.76) --
(0.33) (0.76)
- ------------------------------------------------------------------------------
- -----------------------
Net Asset Value, End of Year $29.77 $18.82
$20.08 $30.46
- ------------------------------------------------------------------------------
- -----------------------
Total Return 62.35% (6.27)%
(9.77)%++ 17.95++
- ------------------------------------------------------------------------------
- -----------------------
Net Assets, End of Year (000s) $9,417 $1,528
$185 $5,364
- ------------------------------------------------------------------------------
- -----------------------
Ratios to Average Net Assets:
Expenses 2.25% 2.15%
2.19%+ 1.10%+
Net investment loss (1.79) (1.60)
(0.98)+ (0.86)+
- ------------------------------------------------------------------------------
- -----------------------
Portfolio Turnover Rate 113% 123%
112% 113%
==============================================================================
=======================
Average commissions paid on
equity security transactions (4) $0.06 --
- -- $0.06
==============================================================================
=======================
</TABLE>
(1) The per share amounts have been calculated using the monthly average
shares
method, which more appropriately presents per share data for this year
since
use of the undistributed method did not accord with results of operations.
(2) For the period from October 18, 1993 (inception date) to December 31,
1993.
(3) For the period from October 2, 1995 (inception date) to December 31, 1995.
(4) New SEC disclosure guidelines require that average commissions per share
be
calculated and presented for the current year only. ++Total return is not
annualized, as it may not be representative of the total return for the
year.
+ Annualized.
18
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Independent Auditors' Report
- ------------------------------------------------------------------------------
- --
The Shareholders and Board of Trustees of
Smith Barney Investment Funds Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Smith Barney statement of
Special
Equities Fund of Smith Barney Investment Funds Inc. as of December 31, 1995,
and
the related statement of operations, statement of changes in net assets, and
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net
assets
for the year ended December 31, 1994 and the financial highlights for each of
the years in the four-year period then ended were audited by other auditors
whose report thereon, dated February 10, 1995, expressed an unqualified
opinion
on that statement of changes in net assets and those financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. As to securities
purchased and sold but not received or delivered, we performed other
appropriate
auditing procedures. An audit also includes assessing the accounting
principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly,
in all material respects, the financial position of the Smith Barney Special
Equities Fund of Smith Barney Investment Funds as of December 31, 1995, and
the
results of its operations, changes in its net assets and its financial
highlights for the year then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
New York, New York
February 16, 1996
19
<PAGE>
Smith Barney Special Equities Fund
- ------------------------------------------------------------------------------
- --
Additional Information
- ------------------------------------------------------------------------------
- --
Change in Independent Auditor: On October 20, 1995, based upon the
recommendation of the Audit Committee of the Fund, the Board of Directors
determined not to retain Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as the
Fund's independent auditor and voted to appoint KPMG Peat Marwick LLP. During
the Fund's two most recent fiscal years, Coopers & Lybrand's audit reports
contained no adverse opinion or disclaimer of opinion; nor were the reports
qualified or modified as to uncertainty, audit scope, or accounting
principles.
Further, during this same period there were no disagreements with Coopers &
Lybrand on any matter of accounting principles or practices, financial
statement
disclosure, or auditing scope or procedure, which disagreements, if not
resolved
to the satisfaction of Coopers & Lybrand, would have caused it to make
reference
to the subject matter of such disagreements in connection with its audit
reports. The Fund has requested Coopers & Lybrand to provide a letter to the
Securities and Exchange Commission stating whether Coopers & Lybrand agrees
with
the foregoing statements, and to provide the Fund with a copy of such letter.
A
copy of this letter is available upon request by calling the Fund at (212)
723-9218.
- ------------------------------------------------------------------------------
- --
Tax Information (unaudited)
- ------------------------------------------------------------------------------
- --
The amount of long-term capital gains paid by the Fund to its
shareholders
for the fiscal year ended December 31, 1995, was $7,592,812.
20
<PAGE>
Smith Barney SMITH
BARNEY
Special Equities ----------
- --
Fund A Member of Travelers Group
[LOGO]
Directors
Paul R. Ades
Herbert Barg
Alger B. Chapman
Dwight B. Crane
Frank G. Hubbard
Allan R. Johnson
Heath B. McLendon, Chairman
Ken Miller
John F. White
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
George V. Novello
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Special Equities Fund. It is not authorized for distribution to
prospective investors unless accompanied or preceded by a current Prospectus
for
the Fund, which contains information concerning the Fund's investment policies
and expenses as well as other pertinent information.
Smith Barney
Special Equities Fund
388 Greenwich Street
New York, New York 10013
FD0313 2/96
SMITH BARNEY INVESTMENT FUNDS PART C
Part C: OTHER INFORMATION
Item 15. Indemnification*
The response to this item is incorporated by reference to
"Liability of
Directors" under the caption "Comparative Information On Shareholders'
Rights" in Part A of this Registration Statement.
Item 16. Exhibits
(1) Articles of Incorporation and all amendments*
(2) Bylaws*
(3) Not Applicable
(4) Agreement and Plan of Reorganization (filed herewith)
(5) Not Applicable
(6) Management Agreements*
(7) Distribution Agreement*
(8) Not applicable
(9) Custodian Agreement*
(10) Rule 12b-1 Plan*
(11) Opinion and consent of Willkie Farr & Gallagher**
(12) Opinion and consent of Willkie Farr & Gallagher**
(13) Not Applicable
(14) Consent of KPMG Peat Marwick**
(15) Not Applicable
(16) Not Applicable
(17) Form of Proxy Card (filed herewith)
* Incorporated herein by reference to Registration Statement of Smith
Barney Investment
Funds Inc. on Form N-1A, file numbers 2-74288 and 811-3275.
** To be filed by amendment
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the
securities registered through the use of a prospectus which is a part of this
Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the
applicable form.
(2) The undersigned Registrant agrees that every propectus that is
filed under
paragraph (1) above will be filed as apart of an amendment to the Registration
Statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-
effective
amendment shall be deemed to be a new registration statement for the
securities
offered therein, and the offering of the securities at that time shall be
deemed to
be the initial bona fide offering of them.
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 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 4th day of June 1996.
SMITH BARNEY INVESTMENT FUNDS INC.
By: /s/ Heath B. McLendon
Heath B. McLendon
Chief Executive Officer
KNOW ALL MEN BY THESE PRRESENTS, that each person whose signature
appears below
constitutes and appoints Heath B. McLendon, Jessica M. Bibliowicz, Christina
T. Sydor and Robert A.
Vegliante and each and any one of them, his true and lawfuf attorneys-in-fact
and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all caapacities, to
sign any or all amendments (including post-effective amendments) to his
Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and
authority to do and perform each and every act and thin requisite and
necessary to be done about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
As required by the Securities Act of 1933, this Registration has been signed
by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Heath B. McLendon Chairman of the Board 06/04/96
Heath B. McLendon (Chief Executive Officer)
/s/ Lewis E. Daidone Senior Vice President
Lewis E. Daidone and Treasurer 06/04/96
/s/ Paul R. Ades Director 06/04/96
Paul R. Ades
/s/ Herbert Barg Director 06/04/96
Herbert Barg
/s/ Alger B. Chapman Director 06/04/96
Alger B. Chapman
/s/ Dwight B. Crane Director 06/04/96
Dwight B. Crane
/s/ Frank Hubbard Director 06/04/96
Frank Hubbard
/s/ Allan R. Johnson Director 06/04/96
Allan R. Johnson
/s/ Ken Miller Director 06/04/96
Ken Miller
/s/ John F. White Director 06/04/96
John F. White
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE
(4) Agreement and Plan of Reorganization *
(included as Exhibit A to Registrant's Prospectus/
Proxy Statement contained in Part A of this Registration
Statement).
(11) Opinion and Consent of Willkie Farr & Gallagher
**
with respect to validity of shares.
(12) Opinion and Consent of Willkie Farr & Gallagher
**
with respect to tax matters.
(14) Consent of KPMG Peat Marwick LLP **
(17) Form of Proxy Card. *
____________________
* Filed herewith.
** To be filed by amendment.
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please detach at perforation before mailing)
..............................................................................
..............................................
........................................................................
..................................................
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
PROXY SOLICITED BY THE BOARD OF TRUSTEES
The undersigned holder of shares of Smith Barney of Telecommunications Growth
Fund , hereby apppoints
Heath B. McLendon, Jessica M. Bibliowicz, Christina T. Sydor and Robert A.
Vegliante attorneys and
proxies for the undersigned with full powers of substitution and revocation,
to represent the undersigned
and to vote on behalf of the undersigned all shares of the Telecommunications
Growth Fund that the
undersigned is entitled to vote at the Special Meeting of Shareholders of the
Telecommunications Growth
Fund to be held at the offices of the Telecommunications Growth Fund, 388
treenwich Street, 26th Floor,
New York, New York on ______________, 1996 at ____ .m., and any adjournment or
adjournments
thereof. The undersigned hereby acknowledges receipt of the Notice of Special
Meeting and
Prospectus/Proxy Statement dated __________, 1996 and hereby instructs said
attorneys and proxies to
vote said shares as indicated herein. In their discretion, the
proxies are authorized to vote upon such other
business as may properly come before the Special Meeting. A majority of
the proxies present and acting
at the Special Meeting in person or by substitute (or, if only one shall
be so present, then that one) shall
have and may exercise all of the power and authority of said proxies
hereunder. The undersigned hereby
revokes any proxy previously given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on this Proxy. If
joint owners,
EITHER may sign this Proxy. When signing as attorney, executor,
administrator,
trustee, guardian or corporate officer, please give your
full title.
Date: ______________________________________________
______________________________________________
Signature(s) Title(s), if applicable)
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RRESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
..............................................................................
......................................
..............................................................................
......................................
Please indicate your vote by an "X" in the appropriate box below. This proxy,
if properly executed, will be
voted in the manner directed by the undersigned shareholder. IF NO
DIRECTIONIS MADE, THIS
PROXY WILL BE VOTED FOR APPROVAL OF THE PROPOSAL.
1. To approve or dissapprove the FOR [ ] AGAINST [ ]
ABSTAIN [ ]
Agreement and Plan of Reorganization
dated as of ____________, 1996 providing for (I) the acquisition of all or
substantially all of the
assets of Smith Barney Telecommunications Growth Fund in exchange for shares
of Smith Barney
Special Equities Fund and the assumption by Smith Barney Telecommunications
Trust on behalf of the
Telecommunications Growth Fund of certain scheduled liabilities of the
Telelcommunications Growth
Fund, (ii) the distribution to shareholders of Telecommunications Growth Fund
of such shares of the
Telecommunications Trust in liquidation of Telecommunications Growth Fund and
(iii) the subsequent
termination of the Telecommunications Growth Fund
STATEMENT OF ADDITIONAL INFORMATION DATED ____________, 1996
Acquisition Of The Assets Of
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
a separate series of
SMITH BARNEY TELECOMMUNICATIONS TRUST
388 Greenwich Street
New York, New York 10013
(800) 244-7523
By And In Exchange For Shares Of
SMITH BARNEY SPECIAL EQUITIES FUND
a separate series of
SMITH BARNEY INVESTMENT FUNDS
388 Greenwich Street
New York, New York 10013
(800) 244-7523
This Statement of Additional Information, relating specifically to the
proposed transfer of all or
substantially all of the assets of Smith Barney Telecommunications Growth Fund
of Smith Barney
Telecommunications Trust to Smith Barney Investment Funds on behalf of Smith
Barney Special Equities
Fund in exchange for shares of the Smith Barney Special Equities Fund and the
assumption by Smith
Barney Investment Funds on behalf of Smith Barney Special Equities Fund of
certain scheduled liabilities
of the Telecommunications Growth Fund, consists of this cover page and the
following described
documents, each of which accompanies this Statement of Additional Information
and is incorporated herein
by reference.
1. Statement of Additional Information of Smith Barney Special Equities
Fund dated April
29, 1996.
2. Annual Report of Smith Barney Special Equities Fund for the fiscal year
December 31,
1995.
3. Semi-Annual Report of Smith Barney Special Equities Fund for the six-
month period
ended June 30, 1995.
4. Annual Report of Smith Barney Telecommunications Growth Fund for the
fiscal
yearended December 31, 1995.
5. Semi-Annual Report of Smith Barney Telecommunications Growth Fund for
the six-month
period ended June 30, 1995.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy
Statement, dated ___________, 1996, relating to the above-referenced matter
may be obtained without
charge by calling or writing either Smith Barney Special Equities Fund or
Smith Barney
Telecommunications Growth Fund at the telephone numbers or addresses set forth
above or by contacting
any Smith Barney Financial Consultant or by calling toll-free (800) 244-7523.
This Statement of
Additional Information should be read in cunjunction with the Prospectus/Proxy
Statement dated
__________, 1996.
The date of this Statement of Additional Information is
____________, 1996.
PROSPECTUS OF SMITH BARNEY SPECIAL EQUITIES FUND DATED
APRIL 29, 1996 IS INCORPORATED BY REFERENCE TO POST EFFECTIVE
AMENDMENT NO. 43 TO THE INVESTMENT FUNDS REGISTRATION STATEMENT ON FORM
N-1A FILED ON APRIL 29, 1996. REFERENCE NOS 2-74288 811-3275
STATEMENT OF ADDDITIONAL INFORMATION
OF
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
DATED April 29, 1996
is incorporated by reference to Post Effective Amendment No.20 to the
Telecommunications Trust Registration Statement on Form N-1A filed on April
29, 1996. Reference
Numbers 2-86519 and 811-3763
ANNUAL REPORT
OF
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
SEMI-ANNUAL REPORT
OF
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1996
[TO BE FILED BY AMENDMENT]
STATEMENT OF ADDITIONAL INFORMATION OF
SMITH BARNEY SPECIAL EQUITIES FUND
DATED APRIL 29, 1996 IS INCORPORATED BY REFERENCE TO
POST EFFECTIVE AMENDMENT NO. 43 TO THE INVESTMENT FUNDS REGISTRATION
STATEMENT ON FORM N-1A FILED ON APRIL 29, 1996. REFERENCE NOS 2-74288 AND
811-
3275
SEMI-ANNUAL REPORT
OF
SMITH BARNEY SPECIAL EQUITIES FUND
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1996
[ TO BE FILED BY AMENDMENT ]
ANNUAL REPORT
OF
SMITH BARNEY SPECIAL EQUITIES FUND
FOR THE FISCAL YEAR ENDEDED DECEMBER 31, 1995
SMITH BARNEY INVESTMENT FUNDS PART C
Part C: OTHER INFORMATION
Item 15. Indemnification*
The response to this item is incorporated by reference to
"Liability of
Directors" under the caption "Comparative Information On Shareholders'
Rights" in Part A of this Registration Statement.
Item 16. Exhibits
(1) Articles of Incorporation and all amendments*
(2) Bylaws*
(3) Not Applicable
(4) Agreement and Plan of Reorganization (filed herewith)
(5) Not Applicable
(6) Management Agreements*
(7) Distribution Agreement*
(8) Not applicable
(9) Custodian Agreement*
(10) Rule 12b-1 Plan*
(11) Opinion and consent of Willkie Farr & Gallagher**
(12) Opinion and consent of Willkie Farr & Gallagher**
(13) Not Applicable
(14) Consent of KPMG Peat Marwick**
(15) Not Applicable
(16) Not Applicable
(17) Form of Proxy Card (filed herewith)
* Incorporated herein by reference to Registration Statement of Smith
Barney Investment
Funds Inc. on Form N-1A, file numbers 2-74288 and 811-3275.
** To be filed by amendment
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the
securities registered through the use of a prospectus which is a part of this
Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the
applicable form.
(2) The undersigned Registrant agrees that every propectus that is
filed under
paragraph (1) above will be filed as apart of an amendment to the Registration
Statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-
effective
amendment shall be deemed to be a new registration statement for the
securities
offered therein, and the offering of the securities at that time shall be
deemed to
be the initial bona fide offering of them.
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 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 4th day of June 1996.
SMITH BARNEY INVESTMENT FUNDS INC.
By: /s/ Heath B. McLendon
Heath B. McLendon
Chief Executive Officer
KNOW ALL MEN BY THESE PRRESENTS, that each person whose signature
appears below
constitutes and appoints Heath B. McLendon, Jessica M. Bibliowicz, Christina
T. Sydor and Robert A.
Vegliante and each and any one of them, his true and lawfuf attorneys-in-fact
and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all caapacities, to
sign any or all amendments (including post-effective amendments) to his
Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and
authority to do and perform each and every act and thin requisite and
necessary to be done about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
As required by the Securities Act of 1933, this Registration has been signed
by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Heath B. McLendon Chairman of the Board 06/04/96
Heath B. McLendon (Chief Executive Officer)
/s/ Lewis E. Daidone Senior Vice President
Lewis E. Daidone and Treasurer 06/04/96
/s/ Paul R. Ades Director 06/04/96
Paul R. Ades
/s/ Herbert Barg Director 06/04/96
Herbert Barg
/s/ Alger B. Chapman Director 06/04/96
Alger B. Chapman
/s/ Dwight B. Crane Director 06/04/96
Dwight B. Crane
/s/ Frank Hubbard Director 06/04/96
Frank Hubbard
/s/ Allan R. Johnson Director 06/04/96
Allan R. Johnson
/s/ Ken Miller Director 06/04/96
Ken Miller
/s/ John F. White Director 06/04/96
John F. White
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE
(4) Agreement and Plan of Reorganization *
(included as Exhibit A to Registrant's Prospectus/
Proxy Statement contained in Part A of this Registration
Statement).
(11) Opinion and Consent of Willkie Farr & Gallagher
**
with respect to validity of shares.
(12) Opinion and Consent of Willkie Farr & Gallagher
**
with respect to tax matters.
(14) Consent of KPMG Peat Marwick LLP **
(17) Form of Proxy Card. *
____________________
* Filed herewith.
** To be filed by amendment.
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please detach at perforation before mailing)
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SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
PROXY SOLICITED BY THE BOARD OF TRUSTEES
The undersigned holder of shares of Smith Barney of Telecommunications Growth
Fund , hereby apppoints
Heath B. McLendon, Jessica M. Bibliowicz, Christina T. Sydor and Robert A.
Vegliante attorneys and
proxies for the undersigned with full powers of substitution and revocation,
to represent the undersigned
and to vote on behalf of the undersigned all shares of the Telecommunications
Growth Fund that the
undersigned is entitled to vote at the Special Meeting of Shareholders of the
Telecommunications Growth
Fund to be held at the offices of the Telecommunications Growth Fund, 388
treenwich Street, 26th Floor,
New York, New York on ______________, 1996 at ____ .m., and any adjournment or
adjournments
thereof. The undersigned hereby acknowledges receipt of the Notice of Special
Meeting and
Prospectus/Proxy Statement dated __________, 1996 and hereby instructs said
attorneys and proxies to
vote said shares as indicated herein. In their discretion, the
proxies are authorized to vote upon such other
business as may properly come before the Special Meeting. A majority of
the proxies present and acting
at the Special Meeting in person or by substitute (or, if only one shall
be so present, then that one) shall
have and may exercise all of the power and authority of said proxies
hereunder. The undersigned hereby
revokes any proxy previously given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on this Proxy. If
joint owners,
EITHER may sign this Proxy. When signing as attorney, executor,
administrator,
trustee, guardian or corporate officer, please give your
full title.
Date: ______________________________________________
______________________________________________
Signature(s) Title(s), if applicable)
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RRESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
..............................................................................
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Please indicate your vote by an "X" in the appropriate box below. This proxy,
if properly executed, will be
voted in the manner directed by the undersigned shareholder. IF NO
DIRECTIONIS MADE, THIS
PROXY WILL BE VOTED FOR APPROVAL OF THE PROPOSAL.
1. To approve or dissapprove the FOR [ ] AGAINST [ ]
ABSTAIN [ ]
Agreement and Plan of Reorganization
dated as of ____________, 1996 providing for (I) the acquisition of all or
substantially all of the
assets of Smith Barney Telecommunications Growth Fund in exchange for shares
of Smith Barney
Special Equities Fund and the assumption by Smith Barney Telecommunications
Trust on behalf of the
Telecommunications Growth Fund of certain scheduled liabilities of the
Telelcommunications Growth
Fund, (ii) the distribution to shareholders of Telecommunications Growth Fund
of such shares of the
Telecommunications Trust in liquidation of Telecommunications Growth Fund and
(iii) the subsequent
termination of the Telecommunications Growth Fund
