- ------------------------------------------------------
- -----------------------
Registration No. 2-74288
811-3275
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
[ ] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 65
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940,
Amendment No. 67
SMITH BARNEY INVESTMENT FUNDS INC.
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(800)-451-2010
(Registrant's Telephone Number, including Area Code:)
Christina T. Sydor
388 Greenwich Street, New York, New York 10013(22nd
Floor)
(Name and Address of Agent For Service)
Continuous
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective:
immediately upon filing pursuant to Paragraph (b) of Rule 485
On (date) pursuant to paragraph (b) of Rule 485
XXX 60 days after filing pursuant to paragraph (a)(1) of Rule 485
On (date) pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule 485
On (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
XXX This post-effective amendment designates a new
effective date for a previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Common
Stock
SMITH BARNEY INVESTMENT FUNDS
PART A
<PAGE>
[LOGO] Smith Barney
Mutual Funds
PROSPECTUS
Small Cap Growth Fund
Class A, B, L and Y Shares
- -------------------------------------------------------
October , 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
Small Cap Growth Fund
Contents
<TABLE>
<S> <C>
Investments, risks and performance.......................................... 2
More on the fund's investments.............................................. 5
Management.................................................................. 6
Choosing a class of shares to buy........................................... 7
Comparing the fund's classes................................................ 9
Sales charges............................................................... 10
More about deferred sales charges........................................... 13
Buying shares............................................................... 14
Exchanging shares........................................................... 15
Redeeming shares............................................................ 16
Other things to know
about share transactions.................................................... 19
Smith Barney 401(k) and ExecChoice(TM) programs............................. 21
Dividends, distributions and taxes.......................................... 22
Share price................................................................. 23
</TABLE>
You should know: An investment in the fund is not a bank deposit and is not
insured or guaranteed by the FDIC or any other government agency.
Smith Barney Mutual Funds
1
<PAGE>
Investments, risks and performance
Investment objective
The fund seeks long-term growth of capital.
Principal investment strategies
Key investments The fund invests primarily in equity securities of high growth
companies. These companies possess a market capitalization within the
market capitalization range of companies in the Russell 2000 Growth Index (the
"Index") at the time of the fund's investment. The size of the companies in the
Index changes with market conditions and the composition of the Index. As of
September 30, 1999, the largest market capitalization of a company in the Index
was $[ ] billion and the smallest market capitalization was $[ ] billion.
Equity securities include exchange traded and over-the-counter common stocks,
preferred stocks, debt securities convertible into equity securities and war-
rants and rights relating to equity securities. The fund may invest up to 35%
of its assets in equity securities of companies with market capitalizations
outside the range of companies in the Index. The fund may also invest up to
10% of its assets in securities of foreign issuers both directly and through
depositary receipts for those securities.
Selection process The manager focuses on small capitalization companies that
exhibit attractive growth characteristics. The manager selects individual
stocks for investment by identifying those companies which exhibit the
most favorable growth prospects. In selecting individual companies for invest-
ment, the manager considers:
.Growth characteristics, including high historic growth rates and high fore-
casted growth of sales, profits and return on equity
.Innovative companies at the cutting edge of positive and dynamic demographic,
economic trends
.Products and services that give them a competitive advantage
.Skilled management committed to long-term growth
.Potential for a long-term investment by the fund
The manager uses a disciplined investment process to identify small financially
sound companies that exhibit the potential to become
much larger and more successful. Elements of this process include fundamental
research, evaluation of key management and screening techniques.
Small Cap Growth Fund
2
<PAGE>
Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or the fund may not
perform as well as other investments, if:
.Key economic trends become materially unfavorable, such as rising interest
rates and levels of inflation or a slowdown of economic growth
.U.S. stock markets decline, or perform poorly relative to other types of
investments
.An adverse company specific event, such as an unfavorable earnings report,
negatively affects the stock price of a company in which the fund invests
.Small capitalization stocks underperform mid capitalization and large
capitalization stocks
.The manager's judgment about the attractiveness, growth prospects, value or
potential appreciation of a particular stock proves to be incorrect
Because the fund invests primarily in small capitalization growth companies, an
investment in the fund may be more volatile and more susceptible to loss than
an investment in a fund which invests primarily in large capitalization compa-
nies. Small capitalization companies may have more limited product lines, mar-
kets and financial resources than large capitalization companies. They may have
shorter operating histories and more erratic businesses. The prices of small
capitalization company stocks tend to be more volatile than the prices of large
capitalization company stocks. In addition, small capitalization company stocks
may be less liquid than large capitalization company stocks.
Who may want to invest The fund may be an appropriate investment if you:
.Are seeking to participate in the long term potential of small capital-
ization growth companies
.Are looking for an investment with potentially greater return but higher risk
than a fund that invests primarily in large cap companies
.Are willing to accept the risks of the stock market and the special risks and
potential long-term rewards of investing in smaller companies with limited
track records
.Are seeking diversification
Performance
Because this fund was added as a series to Smith Barney Investment Funds Inc.
this year, the fund does not yet have a sufficient operating history to gener-
ate the performance information which other Smith Barney funds show in bar and
table form in this location of the prospectus.
Smith Barney Mutual Funds
3
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment) Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on purchases
(as a % of offering price) 5.00% None 1.00% None
Maximum deferred sales charge (load) (as a %
of the lower of net asset value at purchase or
redemption) None* 5.00% 1.00% None
Annual fund operating expenses
<CAPTION>
(expenses deducted from fund assets) Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Management fee 0.75% 0.75% 0.75% 0.75%
Distribution and service (12b-1) fees 0.25% 1.00% 1.00% None
Other expenses** 0.25% 0.25% 0.25% 0.25%
----- ----- ----- -----
Total annual fund operating expenses 1.25% 2.00% 2.00% 1.00%
</TABLE>
*You may buy Class A shares in amounts of $500,000 or more at net asset value
(without an initial sales charge) but if you redeem those shares within 12
months of their purchase, you will pay a deferred sales charge of 1.00%.
**"Other expenses" have been estimated based on expenses the fund expects to
incur during its fiscal year ending September 30, 2000.
Example
This example helps you compare the costs of investing in the fund with the
costs of investing in other mutual funds. Your actual costs may be higher or
lower. The example assumes:
.You invest $10,000 in the fund for the period shown
.Your investment has a 5% return each year
.You reinvest all distributions and dividends without a sales charge
.The fund's operating expenses remain the same
Number of years you own your shares
<TABLE>
<CAPTION>
1 year 3 years
<S> <C> <C>
Class A (with or without redemption) $621 $877
Class B (redemption at end of period) $703 $927
Class B (no redemption) $203 $627
Class L (redemption at end of period) $401 $721
Class L (no redemption) $301 $721
Class Y (with or without redemption) $102 $318
</TABLE>
Small Cap Growth Fund
4
<PAGE>
More on the fund's investments
Foreign investments The fund's investments in securities of foreign issuers
involve greater risk than investments in securities of U.S. issuers. Many for-
eign countries the fund invests in have markets that are less liquid and more
volatile than markets in the U.S. In some foreign countries, less information
is available about foreign issuers and markets because of less rigorous
accounting and regulatory standards than in the U.S. Currency fluctuations
could erase investment gains or add to investment losses. The risks of invest-
ing in foreign securities are greater for securities of emerging market issuers
because political or economic instability, lack of market liquidity, and nega-
tive government actions like currency controls or seizure of private businesses
or property are more likely.
Other investments
Short-term debt securities While the fund intends to be substantially fully
invested in equity securities, the fund may maintain a portion of its assets
(normally not more than 10%) in money market instruments and/or cash to pay
expenses and meet redemption requests. Generally, the value of these fixed
income obligations will decline if interest rates rise, the credit rating of
the security is downgraded or the issuer defaults on its obligation to pay
principal or interest.
Derivatives and hedging techniques The fund may, but need not, use derivative
contracts, such as futures and options on securities, securities indices or
currencies; options on these futures; forward currency contracts; and interest
rate or currency swaps for any of the following purposes:
.To hedge against the economic impact of adverse changes in the market value of
its securities, because of changes in stock market prices, currency exchange
rates or interest rates.
.As a substitute for buying or selling securities
. As a cash flow management technique
A derivative contract will obligate or entitle the fund to deliver or receive
an asset or cash payment based on the change in value of one or more securi-
ties, currencies or indices. Even a small investment in derivative contracts
can have a big impact on the fund's stock market, currency and interest rate
exposure. Therefore, using derivatives can disproportionately increase losses
and reduce opportunities for gains when stock prices, currency rates or inter-
est rates are changing. The fund may not fully benefit from or may lose money
on derivatives if changes in their value do not correspond accurately to
changes in the value of the fund's holdings.
The other parties to certain derivative contracts present the same types of
credit risk as issuers of fixed income securities. Derivatives can also make
the fund less liquid and harder to value, especially in declining markets.
Smith Barney Mutual Funds
5
<PAGE>
Defensive investing The fund may depart from its principal investment strate-
gies in response to adverse market, economic or political conditions by taking
temporary defensive positions in all types of money market instruments. If the
fund takes a temporary defensive position, it may be unable to achieve its
investment goal.
Management
Manager The fund's investment manager is SSBC Fund Management Inc., an affili-
ate of Salomon Smith Barney Inc. The manager's address is 388 Greenwich Street,
New York, New York 10013. The manager selects the fund's investments and
oversees its operations. The manager and Salomon Smith Barney are subsidiaries
of Citigroup Inc. Citigroup businesses produce a broad range of financial serv-
ices--asset management, banking and consumer finance, credit and charge cards,
insurance, investments, investment banking and trading--and use diverse chan-
nels to make them available to consumer and corporate customers around the
world.
Timothy Woods, CFA, investment officer of the manager and managing director of
Salomon Smith Barney, is responsible for the day-to-day management of the
fund's portfolio. Mr. Woods has more than 15 years of securities business expe-
rience. Prior to July 1999, he was a Principal at Bankers Trust Company and
manager of the Small-Mid Cap Growth Team.
Management fee For its services, the manager will receive a fee on an annual
basis of 0.75% of the fund's average daily net assets.
Distributor The fund has entered into an agreement with CFBDS, Inc. to distrib-
ute the fund's shares. A selling group consisting of Salomon Smith Barney and
other broker dealers sells fund shares to the public.
Distribution plans The fund has adopted Rule 12b-1 distribution plans for its
Class A, B and L shares. Under each plan, the fund pays distribution and serv-
ice fees. These fees are an ongoing expense and, over time, may cost you more
than other types of sales charges.
Year 2000 issue Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the fund. The cost of addressing the Year 2000 issue, if sub-
stantial, could adversely affect companies and govern-
Small Cap Growth Fund
6
<PAGE>
ments that issue securities held by the fund. The manager and Salomon Smith
Barney are addressing the Year 2000 issue for their systems. The fund has been
informed by other service providers that they are taking similar measures.
Although the fund does not expect the Year 2000 issue to adversely affect it,
the fund cannot guarantee the efforts of the fund, which are limited to
requesting and receiving reports from its service providers, or the efforts of
its service providers to correct the problem will be successful.
Subscription offering period
Salomon Smith Barney and other broker-dealers in the selling group will solicit
subscriptions for shares of the fund during the initial offering period, which
is scheduled to end on November 29, 1999. On the third business day after ter-
mination of the intial offering period, subscriptions for the shares will be
payable, shares will be issued and the fund will commence investment opera-
tions.
Choosing a class of shares to buy
You can choose among four classes of shares: Classes A, B, L and Y. Each class
has different sales charges and expenses, allowing you to choose the class that
best meets your needs. Which class is more beneficial to an investor depends on
the amount and intended length of the investment.
.If you plan to invest regularly or in large amounts, buying Class A shares may
help you reduce sales charges and ongoing expenses.
.For Class B shares, all of your purchase amount and, for Class L shares, more
of your purchase amount (compared to Class A shares) will be immediately
invested. This may help offset the higher expenses of Class B and Class L
shares, but only if the fund performs well.
.Class L shares have a shorter deferred sales charge period than Class B
shares. However, because Class B shares convert to Class A shares, and
Class L shares do not, Class B shares may be more attractive to long-term
investors.
You may buy shares from:
.A Salomon Smith Barney Financial Consultant
.An investment dealer in the selling group or a broker that clears through Sal-
omon Smith Barney--a dealer representative
.The fund, but only if you are investing through certain qualified plans or
certain dealer representatives
Smith Barney Mutual Funds
7
<PAGE>
Investment minimums Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.
<TABLE>
<CAPTION>
Initial Additional
Classes A, B, L Class Y All Classes
<S> <C> <C> <C>
General $1,000 $15 million $50
IRAs, Self Employed Retirement Plans,
Uniform Gift to Minor Accounts $ 250 $15 million $50
Qualified Retirement Plans* $ 25 $15 million $25
Simple IRAs $ 1 n/a $ 1
Monthly Systematic Investment Plans $ 25 n/a $25
Quarterly Systematic Investment Plans $ 50 n/a $50
</TABLE>
* Qualified Retirement Plans are retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, including 401(k)
plans
Small Cap Growth Fund
8
<PAGE>
Comparing the fund's classes
Your Salomon Smith Barney Financial Consultant or dealer representative can
help you decide which class meets your goals. They may receive different com-
pensation depending upon which class you choose.
<TABLE>
<CAPTION>
Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Key features .Initial .No initial .Initial .No initial
sales sales sales or
charge charge charge is deferred
.You may .Deferred lower than sales
qualify sales Class A charge
for reduc- charge .Deferred .Must
tion or declines sales invest at
waiver of over time charge for least $15
initial .Converts only 1 million
sales to Class A year .Lower
charge after 8 .Does not annual
.Lower years convert to expenses
annual .Higher Class A than the
expenses annual .Higher other
than Class expenses annual classes
B and than Class expenses
Class L A than Class
A
- ------------------------------------------------------------------------
Initial sales charge Up to None 1.00% None
5.00%;
reduced for
large pur-
chases and
waived for
certain
investors.
No charge
for pur-
chases of
$500,000 or
more
- ------------------------------------------------------------------------
Deferred sales charge 1.00% on Up to 5.00% 1.00% if None
purchases charged you redeem
of $500,000 when you within 1
or more if redeem year of
you redeem shares. The purchase
within 1 charge is
year of reduced
purchase over time
and there
is no
deferred
sales
charge
after 6
years
- ------------------------------------------------------------------------
Annual Distribution and 0.25% of 1.00% of 1.00% of None
service fees average average average
daily net daily net daily net
assets assets assets
- ------------------------------------------------------------------------
Exchange Privilege* Class A Class B Class L Class Y
shares shares shares shares
of most of most of most of most
Smith Smith Smith Smith
Barney Barney Barney Barney
funds funds funds funds
- ------------------------------------------------------------------------
</TABLE>
* Ask your Salomon Smith Barney Financial Consultant or dealer representative
or visit the web site for the Smith Barney funds available for exchange.
Smith Barney Mutual Funds
9
<PAGE>
Sales charges
Class A shares
You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge
on the fund's distributions or dividends you reinvest in additional Class A
shares.
<TABLE>
<CAPTION>
Sales charge as a % of
Offering Net amount
Amount of purchase Price (%) Invested (%)
<S> <C> <C>
Less than $25,000 5.00 5.26
$25,000 but less than $50,000 4.00 4.17
$50,000 but less than $100,000 3.50 3.63
$100,000 but less than $250,000 3.00 3.09
$250,000 but less than $500,000 2.00 2.04
$500,000 or more -0- -0-
</TABLE>
Investments of $500,000 or more You do not pay an initial sales charge when you
buy $500,000 or more of Class A shares. However, if you redeem these Class A
shares within one year of purchase, you will pay a deferred sales charge of 1%.
Qualifying for a reduced Class A sales charge There are several ways you can
combine multiple purchases of Class A shares of Smith Barney funds to take
advantage of the breakpoints in the sales charge schedule.
.Accumulation privilege - lets you combine the current value of Class A shares
owned
.by you, or
.by members of your immediate family,
and for which a sales charge was paid, with the amount of your next purchase
of Class A shares for purposes of calculating the initial sales charge. Cer-
tain trustees and fiduciaries may be entitled to combine accounts in deter-
mining their sales charge.
.Letter of intent - lets you purchase Class A shares of the fund and other
Smith Barney funds over a 13-month period and pay the same sales charge, if
any, as if all shares had been purchased at once. You may include purchases
on which you paid a sales charge within 90 days before you sign the letter.
Small Cap Growth Fund
10
<PAGE>
Waivers for certain Class A investors Class A initial sales charges are waived
for certain types of investors, including:
.Employees of members of the NASD
.403(b) or 401(k) retirement plans, if certain conditions are met
.Clients of newly employed Salomon Smith Barney Financial Consultants if cer-
tain conditions are met
.Investors who redeemed Class A shares of a Smith Barney fund in the past 60
days, if the investor's Salomon Smith Barney Financial Consultant or dealer
representative is notified
If you want to learn about additional waivers of Class A initial sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the Statement of Additional Information ("SAI").
Class B shares
You buy Class B shares at net asset value without paying an initial sales
charge. However, if you redeem your Class B shares within six years of pur-
chase, you will pay a deferred sales charge. The deferred sales charge
decreases as the number of years since your purchase increases.
<TABLE>
<CAPTION>
Year after purchase 1st 2nd 3rd 4th 5th 6th through 8th
<S> <C> <C> <C> <C> <C> <C>
Deferred sales charge 5% 4% 3% 2% 1% 0%
</TABLE>
Class B conversion After 8 years, Class B shares automatically convert into
Class A shares. This helps you because Class A shares have lower annual
expenses. Your Class B shares will convert to Class A shares as follows:
<TABLE>
<CAPTION>
Shares issued:
Shares issued: Upon exchange from
On reinvestment of another Smith
Shares issued: dividends and Barney
At initial purchase distributions fund
<S> <C> <C>
Eight years after the date of purchase In same proportion On the date the
as the number of shares originally
Class B shares acquired would
converting is to have converted
total Class B into Class A
shares you own shares
(excluding shares
issued as a
dividend)
</TABLE>
Smith Barney Mutual Funds
11
<PAGE>
Class L shares
You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1% (1.01% of the net amount invested). In addition, if you
redeem your Class L shares within one year of purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the fund and/or other Smith
Barney Mutual Funds on June 12, 1998, you will not pay an initial sales charge
on Class L shares you buy before June 22, 2001.
Class Y shares
You buy Class Y shares at net asset value with no initial sales charge and no
deferred sales charge when you redeem. You must meet the $15,000,000 initial
investment requirement. You can use a letter of intent to meet this requirement
by buying Class Y shares of the fund over a 13-month period. To qualify, you
must initially invest $5,000,000.
Small Cap Growth Fund
12
<PAGE>
More about deferred sales charges
The deferred sales charge is based on the net asset value at the time of pur-
chase or redemption, whichever is less, and therefore you do not pay a sales
charge on amounts representing appreciation or depreciation.
In addition, you do not pay a deferred sales charge on:
.Shares exchanged for shares of another Smith Barney fund
.Shares representing reinvested distributions and dividends
.Shares no longer subject to the deferred sales charge
If you redeemed shares of a Smith Barney fund in the past 60 days and paid a
deferred sales charge, you may buy shares of the fund at the current net asset
value and be credited with the amount of the deferred sales charge, if you
notify your Salomon Smith Barney Financial Consultant or dealer representative.
Salomon Smith Barney receives deferred sales charges as partial compensation
for its expenses in selling shares, including the payment of compensation to
your Salomon Smith Barney Financial Consultant or dealer representative.
Deferred sales charge waivers
The deferred sales charge for each share class will generally be waived:
.On payments made through certain systematic withdrawal plans
.On certain distributions from a retirement plan
.For involuntary redemptions of small account balances
.For 12 months following the death or disability of a shareholder
If you want to learn more about additional waivers of deferred sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the SAI.
Smith Barney Mutual Funds
13
<PAGE>
Buying shares
Through a You should contact your Salomon Smith Barney Financial Con-
Salomon Smith sultant or dealer representative to open a brokerage account
Barney and make arrangements to buy shares.
Financial
Consultant or If you do not provide the following information, your order
dealer will be rejected:
representative
.Class of shares being bought
.Dollar amount or number of shares being bought
You should pay for your shares through your brokerage account
no later than the third business day after you place your
order. Salomon Smith Barney or your dealer representative may
charge an annual account maintenance fee.
- --------------------------------------------------------------------------------
Through the Qualified retirement plans and certain other investors who
fund's are clients of the selling group are eligible to buy shares
transfer directly from the fund.
agent
.Write the transfer agent at the following address:
Smith Barney Investment Funds Inc. Small Cap Growth Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
[P.O. Box 5128]
Westborough, Massachusetts 01581-5128
.Enclose a check to pay for the shares. For initial pur-
chases, complete and send an account application
.For more information, call the transfer agent at 1-800-451-
2010
Through a You may authorize Salomon Smith Barney, your dealer represen-
systematic tative or the transfer agent to transfer funds automatically
Investment from a regular bank account, cash held in a Salomon Smith
Plan Barney brokerage account or Smith Barney money market fund to
buy shares on a regular basis.
.Amounts transferred should be at least: $25 monthly or $50
quarterly.
Small Cap Growth Fund
14
<PAGE>
.If you do not have sufficient funds in your account on a
transfer date, Salomon Smith Barney, your dealer represen-
tative or the transfer agent may charge you a fee.
For more information, contact your Salomon Smith Barney
Financial Consultant, dealer representative or the transfer
agent or consult the SAI.
Exchanging shares
Smith Barney You should contact Salomon Smith Barney or your dealer rep-
offers a resentative to exchange into other Smith Barney mutual
distinctive funds. Be sure to read the prospectus of the Smith Barney
family of mutual fund you are exchanging into. An exchange is a tax-
mutual funds able transaction.
tailored to
help meet the .You may exchange shares only for shares of the same class
varying needs of another Smith Barney mutual fund. Not all Smith Barney
of both large funds offer all classes.
and small .Not all Smith Barney funds may be offered in your state of
investors residence. Contact Salomon Smith Barney, your dealer rep-
resentative or the transfer agent for further information.
.You must meet the minimum investment amount for each fund
.If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with
signed stock powers (documents transferring ownership of
certificates) before the exchange is effective.
.The fund may suspend or terminate your exchange privilege
if you engage in an excessive pattern of exchanges
- --------------------------------------------------------------------------------
Waiver of Your shares will not be subject to an initial sales charge
additional at the time of the exchange.
sales charges
Your deferred sales charge (if any) will continue to be mea-
sured from the date of your original purchase. If the fund
you exchange into has a higher deferred sales charge, you
will be subject to that charge. If you exchange at any time
into a fund with a lower charge, the sales charge will not
be reduced.
Smith Barney Mutual Funds
15
<PAGE>
- --------------------------------------------------------------------------------
By telephone If you do not have a brokerage account, you may be eligible
to exchange shares through the transfer agent. You must com-
plete an authorization form to authorize telephone transfers.
If eligible, you may make telephone exchanges on any day the
New York Stock Exchange is open. Call the transfer agent at
1-800- 451-2010 between 9:00 a.m. and 5:00 p.m. (Eastern
time). Requests received after the close of regular trading
on the Exchange are priced at the net asset value next deter-
mined.
You can make telephone exchanges only between accounts that
have identical registrations.
- --------------------------------------------------------------------------------
By mail If you do not have a Salomon Smith Barney brokerage account,
contact your dealer representative or write to the transfer
agent at the address on the next page.
Redeeming shares
Generally Contact your Salomon Smith Barney Financial Consultant or
dealer representative to redeem shares of the fund.
If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with signed
stock powers before the redemption is effective.
If the shares are held by a fiduciary or corporation, other
documents may be required.
Your redemption proceeds will be sent within three business
days after your request is received in good order. However,
if you recently purchased your shares by check, your redemp-
tion proceeds will not be sent to you until your original
check clears which may take up to 15 days.
If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account and not
reinvested without your specific instruction. In other cases,
unless you direct otherwise, your redemption proceeds will be
paid by check mailed to your address of record.
Small Cap Growth Fund
16
<PAGE>
- --------------------------------------------------------------------------------
By mail For accounts held directly at the fund, send written requests
to the transfer agent at the following address:
Smith Barney Investment Funds Inc. Small Cap Growth Fund
(Specify class of shares)
First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
Your written request must provide the following:
.Your account number
.The class of shares and the dollar amount or number of
shares to be redeemed
.Signatures of each owner exactly as the account is regis-
tered
By telephone If you do not have a brokerage account, you may be eligible
to redeem shares (except those held in retirement plans) in
amounts up to $10,000 per day through the transfer agent. You
must complete an authorization form to authorize telephone
redemptions. If eligible, you may request redemptions by tel-
ephone on any day the New York Stock Exchange is open. Call
the transfer agent at 1-800-451-2010 between 9:00 a.m. and
5:00 p.m. (Eastern time). Requests received after the close
of regular trading on the Exchange are priced at the net
asset value next determined.
Your redemption proceeds can be sent by check to your address
of record or by wire transfer to a bank account designated on
your authorization form. You must submit a new authorization
form to change the bank account designated to receive wire
transfers and you may be asked to provide certain other docu-
ments.
- --------------------------------------------------------------------------------
Automatic You can arrange for the automatic redemption of a portion of
cash your shares on a monthly or quarterly basis. To qualify you
withdrawal must own shares of the fund with a value of at least $10,000
plans ($5,000 for retirement plan accounts) and each automatic
redemption must be at least $50. If your shares are subject
to a deferred sales charge, the sales charge will be waived
if your automatic payments do not exceed 1% per month of the
value of your shares subject to a deferred sales charge.
Smith Barney Mutual Funds
17
<PAGE>
The following conditions apply:
.Your shares must not be represented by certificates
.All dividends and distributions must be reinvested
For more information, contact your Salomon Smith Barney
Financial Consultant or dealer representative or consult the
SAI.
Small Cap Growth Fund
18
<PAGE>
Other things to know about share transactions
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information without which your
request will not be processed.
.Name of the fund
.Account number
.Class of shares being bought, exchanged or redeemed
.Dollar amount or number of shares being bought, exchanged or redeemed
.Signature of each owner exactly as the account is registered
The transfer agent will try to confirm that any telephone exchange or redemp-
tion request is genuine by recording calls, asking the caller to provide a per-
sonal identification number for the account, sending you a written confirmation
or requiring other confirmation procedures from time to time.
Signature guarantees To be in good order, your redemption request must include
a signature guarantee if you:
.Are redeeming over $10,000 of shares
.Are sending signed share certificates or stock powers to the transfer agent
.Instruct the transfer agent to mail the check to an address different from the
one on your account
.Changed your account registration
.Want the check paid to someone other than the account owner(s)
.Are transferring the redemption proceeds to an account with a different regis-
tration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
The fund has the right to:
.Suspend the offering of shares
.Waive or change minimum and additional investment amounts
.Reject any purchase or exchange order
.Change, revoke or suspend the exchange privilege
.Suspend telephone transactions
Smith Barney Mutual Funds
19
<PAGE>
.Suspend or postpone redemptions of shares on any day when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the Securi-
ties and Exchange Commission
.Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities.
Small account balances If your account falls below $500 because of a redemption
of fund shares, the fund may ask you to bring your account up to $500. If your
account is still below $500 after 60 days, the fund may close your account and
send you the redemption proceeds.
Excessive exchange transactions The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other share-
holders. If so, the fund may limit additional purchases and/or exchanges by the
shareholder.
Share certificates The fund does not issue share certificates unless a written
request is made to the transfer agent. If you hold share certificates it will
take longer to exchange or redeem shares.
Small Cap Growth Fund
20
<PAGE>
Smith Barney 401(k) and ExecChoice TM programs
You may be eligible to participate in the Smith Barney 401(k) program or the
Smith Barney ExecChoice(TM) program. The fund offers Class A and Class L shares
to participating plans as investment alternatives under the programs. You can
meet minimum investment and exchange amounts by combining the plan's invest-
ments in any of the Smith Barney funds.
There are no sales charges when you buy or sell shares and the class of shares
you may purchase depends on the amount of your initial investment. Once a class
of shares is chosen, all additional purchases must be of the same class.
.Class A shares may be purchased by plans investing at least $1 million.
.Class L shares may be purchased by plans investing less than $1 million. Class
L shares are eligible for exchange into Class A shares not later than 8 years
after the plan joined the program. They are eligible for exchange sooner in
the following circumstances:
If the account was opened on or after June 21, 1996 and a total of $1 mil-
lion is invested in Smith Barney Funds, Class L shares (other than money
market funds), all Class L shares are eligible for exchange after the plan
is in the program 5 years.
If the account was opened before June 21, 1996 and a total of $500,000 is
invested in Smith Barney Funds, Class L shares (other than money market
funds) on December 31 in any year, all Class L shares are eligible for
exchange on or about March 31 of the following year.
For more information, call your Salomon Smith Barney Financial Consultant or
the transfer agent, or consult the SAI.
Smith Barney Mutual Funds
21
<PAGE>
Dividends, distributions and taxes
Dividends The fund generally makes capital gain distributions and pays divi-
dends, if any, once a year, typically in December. The fund may pay additional
distributions and dividends at other times if necessary for the fund to avoid a
federal tax. Capital gain distributions and dividends are reinvested in addi-
tional fund shares of the same class you hold. The fund expects distributions
to be primarily from capital gains. You do not pay a sales charge on reinvested
distributions or dividends. Alternatively, you can instruct your Salomon Smith
Barney Financial Consultant, dealer representative or the transfer agent to
have your distributions and/or dividends paid in cash. You can change your
choice at any time to be effective as of the next distribution or dividend,
except that any change given to the transfer agent less than five days before
the payment date will not be effective until the next distribution or dividend
is paid.
Taxes In general, redeeming shares, exchanging shares and receiving distribu-
tions (whether in cash or additional shares) are all taxable events.
<TABLE>
<CAPTION>
Transaction Federal tax status
<S> <C>
Redemption or exchange of shares Usually capital gain or
loss; long-term only if
shares owned more than
one year
Long-term capital gain distributions Long-term capital gain
Short-term capital gain distributions Ordinary income
Dividends Ordinary income
</TABLE>
Long-term capital gain distributions are taxable to you as long-term capital
gain regardless of how long you have owned your shares. You may want to avoid
buying shares when the fund is about to declare a long-term capital gain dis-
tribution or a dividend, because it will be taxable to you even though it may
actually be a return of a portion of your investment.
After the end of each year, the fund will provide you with information about
the distributions and dividends you received and any redemptions of shares dur-
ing the previous year. If you do not provide the fund with your correct tax-
payer identification number and any required certifications, you may be subject
to back-up withholding of 31% of your distributions, dividends, and redemption
proceeds. Because each shareholder's circumstances are different and special
tax rules may apply, you should consult your tax adviser about your investment
in the fund.
Small Cap Growth Fund
22
<PAGE>
Share price
You may buy, exchange or redeem shares at their net asset value, plus any
applicable sales charge, next determined after receipt of your request in good
order. The fund's net asset value is the value of its assets minus its liabili-
ties. Net asset value is calculated separately for each class of shares. The
fund calculates its net asset value every day the New York Stock Exchange is
open. The Exchange is closed on certain holidays listed in the SAI. This calcu-
lation is done when regular trading closes on the Exchange (normally 4:00 p.m.,
Eastern time).
The fund generally values its fund securities based on market prices or quota-
tions. The fund's currency conversions are done when the London stock exchange
closes, which is 12 noon Eastern time. When reliable market prices or quota-
tions are not readily available, or when the value of a security has been mate-
rially affected by events occurring after a foreign exchange closes, the fund
may price those securities at fair value. Fair value is determined in accor-
dance with procedures approved by the fund's board. A fund that uses fair value
to price securities may value those securities higher or lower than another
fund using market quotations to price the same securities.
International markets may be open on days when U.S. markets are closed and the
value of foreign securities owned by the fund could change on days when you
cannot buy or redeem shares.
In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer repre-
sentative before the New York Stock Exchange closes. If the Exchange closes
early, you must place your order prior to the actual closing time. Otherwise,
you will receive the next business day's price.
Salomon Smith Barney or members of the selling group must transmit all orders
to buy, exchange or redeem shares to the fund's agent before the agent's close
of business.
Smith Barney Mutual Funds
23
<PAGE>
(This page is intentionally left blank.)
<PAGE>
SalomonSmithBarney
----------------------------
A member of citigroup [LOGO]
Small Cap Growth Fund
An investment portfolio of Smith Barney Investment Funds Inc.
Shareholder reports Annual and semiannual reports to shareholders provide addi-
tional information about the fund's investments. These reports discuss the mar-
ket conditions and investment strategies that affected the fund's performance.
The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply to
you.
Statement of additional information The statement of additional information
provides more detailed information about the fund and is incorporated by refer-
ence into (is legally a part of) this prospectus.
You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salomon
Smith Barney Financial Consultant or dealer representative, by calling the fund
at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual Funds, 388
Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com
You can also review the fund's shareholder reports, prospectus and statement of
additional information at the Securities and Exchange Commission's Public Ref-
erence Room in Washington, D.C. You can get copies of these materials for a fee
by writing to the Public Reference Section of the Commission, Washington, D.C.
20549-6009. Information about the public reference room may be obtained by
calling 1-800-SEC-0330. You can get the same reports and information free from
the Commission's Internet web site--www.sec.gov
If someone makes a statement about the fund that is not in this prospectus, you
should not rely upon that information. Neither the fund nor the distributor is
offering to sell shares of the fund to any person to whom the fund may not law-
fully sell its shares.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act file no. 811-03275)
FD0 10/99
PART B
Smith Barney
Small Cap Growth Fund
388 Greenwich Street
New York, New York 10013
1-800-451-2010
Statement of Additional
Information
October ___, 1999
This Statement of Additional Information ("SAI") expands upon and
supplements the information contained in the current Prospectus of Smith
Barney Small Cap Growth Fund (the "Fund") dated October ___, 1999, as
amended or supplemented from time to time, and should be read in
conjunction with the Fund's Prospectus. The Fund is a series of Smith
Barney Investment Funds Inc. (the "Company"). The Fund's Prospectus may be
obtained from a Salomon Smith Barney Financial Consultant or by writing or
calling the Fund at the address or telephone number set forth above. This
SAI, although not in itself a prospectus, is incorporated by reference
into the Prospectus in its entirety.
CONTENTS
For ease of reference, the same section headings are used in both the
Prospectus and this SAI, except where shown below:
Management of the Company and the Fund 1
Investment Objective and Management Policies 4
Purchase of Shares 14
Redemption of Shares 15
Distributor 16
Valuation of Shares 17
Exchange Privilege 17
Performance Data (See in the Prospectus "Performance") 18
Taxes (See in the Prospectus "Dividends, Distributions and Taxes") 19
Additional Information 20
MANAGEMENT OF THE COMPANY AND THE FUND
The executive officers of the Company are employees of certain of the
organizations that provide services to the Company and the Fund. These
organizations are the following:
CFBDS, Inc. ("CFBDS" or the "Distributor") Distributor
SSBC Fund Management Inc. (formerly Mutual Management Corp.)
("SSBC" or the "Manager") Investment Manager
PNC Bank, National Association ("PNC" or the "Custodian") Custodian
First Data Investor Services Group, Inc.,
("First Data" or the "Transfer Agent") Transfer Agent
These organizations and the functions they perform for the Company and the
Fund are discussed in the Prospectus and in this
SAI.
Directors and Executive Officers of the Company
The Directors and executive officers of the Company, together with
information as to their principal business occupations during the past
five years, are shown below. Each Director who is an "interested person"
of the Fund, as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), is indicated by an asterisk.
Paul R. Ades, Director (Age 59). Partner in the law firm of Murov & Ades.
Director of 5 investment companies associated with Citigroup Inc. His
address is 272 South Wellwood Avenue, P.O. Box 504, Lindenhurst, New York
11757.
Herbert Barg, Director (Age 76). Private investor. Director of 16
investment companies associated with Citigroup Inc. His address is 273
Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.
Dwight B. Crane, Director (Age 61). Professor, Graduate School of Business
Administration, Harvard University; Director of 22 investment companies
associated with Citigroup Inc. His address is Graduate School of Business
Administration, Harvard University, Boston, Massachusetts 02163.
Frank G. Hubbard, Director (Age 61). Vice President, S&S Industries;
Former Corporate Vice President, Materials Management and Marketing
Services of Huls America, Inc.; Director of 5 investment companies
associated with Citigroup Inc. His address is 80 Centennial Avenue P.O.
Box 456, Piscataway, New Jersey 08855-0456.
*Heath B. McLendon, Chairman of the Board, President and Chief Executive
Officer (Age 66). Managing Director of Salomon Smith Barney Inc. ("Salomon
Smith Barney"); Director and President of SSBC and Travelers Investment
Adviser, Inc. ("TIA"); and formerly Chairman of the Board of Smith Barney
Strategy Advisers Inc. Mr. McLendon is a director of 64 investment
companies associated with Citigroup Inc. His address is 388 Greenwich
Street, New York, New York 10013.
Jerome Miller, Director (Age 60). Retired, Former President, Asset
Management Group of Shearson Lehman Brothers. Director of 5 investment
companies associated with Citigroup Inc. His address is 27 Hemlock Road,
Manhasset, New York, NY 11030.
Ken Miller, Director (Age 57). President of Young Stuff Apparel Group,
Inc. Director of 5 investment companies associated with Citigroup Inc. His
address is 1411 Broadway, New York, New York 10018.
Lewis E. Daidone, Senior Vice President and Treasurer (Age 42). Managing
Director of Salomon Smith Barney, Director and Senior Vice President of
SSBC and TIA. Treasurer of 59 investment companies associated with
Citigroup. His address is 388 Greenwich Street, New York, New York 10013.
Timothy Woods, CFA, Vice President and Investment Officer (Age 38).
Managing Director of Salomon Smith Barney. Prior to July 1999, Principal
at Bankers Trust Company and manager of the Small-Mid Cap Growth Team. His
address is 388 Greenwich Street, New York, New York 10013.
Paul Brook, Controller (Age 45). Director of Salomon Smith Barney;
Controller or Assistant Treasurer of 43 investment companies associated
with Citigroup; from 1997-1998 Managing Director of AMT Capital Services
Inc.; prior to 1997 Partner with Ernst & Young LLP; His address is 388
Greenwich Street, New York, New York 10013.
Christina T. Sydor, Secretary (Age 48). Managing Director of Salomon Smith
Barney; General Counsel and Secretary of SSBC and TIA. Secretary of 59
investment companies associated with Citigroup. Her address is 388
Greenwich Street, New York, New York 10013.
No officer, director or employee of Salomon Smith Barney or any parent or
subsidiary receives any compensation from the Company for serving as an
officer or Director of the Company. The Company pays each Director who is
not an officer, director or employee of Salomon Smith Barney or any of its
affiliates a fee of $22,500 per annum plus $2,900 per meeting attended and
reimburses travel and out-of-pocket expenses. During the fiscal year
ended [December 31, or September 30,] 1998 such expenses totaled $10,097.
For the fiscal year ended [December 31, 1998 or September 30, 1998], the
Directors of the Company were paid the following compensation:
Name of Person
Aggregate
Compensation
from Fund
Total Pension
or Retirement
Benefits
Accrued as
part of Fund
Expenses
Compensation
from Fund and
Fund Complex
Paid to
Directors
Number of
Funds for
Which
Director
Serves Within
Fund Complex
Paul R. Ades
$0
$0
$49,000
5
Herbert Barg
0
0
101,600
16
Dwight B. Crane
0
0
133,850
22
Frank G. Hubbard
0
0
52,000
5
Heath B. McLendon
0
0
0
64
Jerome Miller
0
0
12,400
5
Ken Miller
0
0
52,000
5
Upon attainment of age 80, Directors are required to change to emeritus
status. Directors Emeritus are entitled to serve in emeritus status for a
maximum of 10 years during which time they are paid 50% of the annual
retainer fee and meeting fees otherwise applicable to the Fund Directors
together with reasonable out-of-pocket expenses for each meeting attended.
Investment Manager - SSBC
SSBC serves as investment manager to the Fund pursuant to an investment
management agreement (the "Investment Management Agreement") with the
Company which was approved by the Board of Directors, including a majority
of Directors who are not "interested persons" of the Company or the
Manager. The Manager is a wholly owned subsidiary of Salomon Smith Barney
Holdings Inc. ("Holdings"), which in turn, is a wholly owned subsidiary of
Citigroup Inc. ("Citigroup"). The services provided by the Manager under
the Investment Management Agreement are described in the prospectus under
"Management of the Company and the Fund." The Manager pays the salary of
any officer and employee who is employed by both it and the Company. The
Manager bears all expenses in connection with the performance of its
services.
As compensation for investment management services, the Fund pays the
Manager a fee computed daily and paid monthly at the annual rate of 0.75%
of the Fund's average daily net assets.
Auditors
KPMG LLP, independent accountants, 757 Third Avenue, New York, New York
10017, serve as auditors of the Fund and will render an opinion on the
Fund's financial statements annually beginning with the fiscal period
ending September 30, 1999.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the Fund's investment objective and the policies
it employs to achieve its objective. This section contains supplemental
information concerning the types of securities and other instruments in
which the Fund may invest, the investment policies and portfolio
strategies the Fund may utilize and certain risks attendant to such
investments, policies and strategies.
Foreign Securities and American Depository Receipts
The Fund has the authority to invest up to 10% of its assets in foreign
securities (including European Depository Receipts ("EDRs") and Global
Depository Receipts ("GDRs")) and American Depository Receipts ("ADRs") or
other securities representing underlying shares of foreign companies. EDRs
are receipts issued in Europe which evidence ownership of underlying
securities issued by a foreign corporations. ADRs are receipts typically
issued by an American bank or trust company which evidence a similar
ownership arrangement. Generally, ADRs which are issued in registered
form, are designed for use in the United States securities markets and
EDRs, which are issued in bearer form, are designed for use in European
securities markets. GDRs are tradeable both in the U.S. and Europe and are
designed for use throughout the world.
Investing in the securities of foreign companies involves special risks
and considerations not typically associated with investing in U.S.
companies. These include differences in accounting, auditing and financial
reporting standards, generally higher commission rates on foreign
portfolio transactions, the possibility of expropriation or confiscatory
taxation, adverse changes in investment or exchange control regulations,
political instability which could affect U.S. investments in foreign
countries, and potential restrictions on the flow of international
capital. Additionally, foreign securities often trade with less frequency
and volume than domestic securities and therefore may exhibit greater
price volatility. Many of the foreign securities held by the Fund will not
be registered with, nor will the issuers thereof be subject to the
reporting requirements of, the SEC. Accordingly, there may be less
publicly available information about the securities and about the foreign
company issuing them than is available about a domestic company and its
securities. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross
domestic product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions. The Fund may invest in
securities of foreign governments (or agencies or subdivisions thereof),
and therefore many, if not all, of the foregoing considerations apply to
such investments as well.
Lending of Portfolio Securities
Consistent with applicable regulatory requirements and for cash management
purposes, the Fund may lend securities from its portfolio to brokers,
dealers and other financial organizations. The Fund may not lend its
Portfolio securities to the Manager or its affiliates unless it has
applied for and received specific authority from the Securities and
Exchange Commission ("SEC"). Loans of portfolio securities by the Fund
will be collateralized by cash, letters of credit or U.S. government
securities that are maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities.
In lending its portfolio securities, the Fund can increase its income by
continuing to receive interest on the loaned securities as well as by
either investing the cash collateral in short-term instruments or
obtaining yield in the form of interest paid by the borrower when U.S.
government securities are used as collateral. Requirements of the SEC,
which may be subject to future modifications, currently provide that the
following conditions must be met whenever the Fund's portfolio securities
are loaned: (a) the Fund must receive at least 100% cash collateral or
equivalent securities from the borrower; (b) the borrower must increase
such collateral
whenever the market value of the securities rises above the level of such
collateral; (c) the Fund must be able to terminate the loan at any time;
(d) the Fund must receive reasonable interest on the loan, as well as an
amount equal to any dividends, interest or other distributions on the
loaned securities, and any increase in market value; (e) the Fund may pay
only reasonable custodian fees in connection with the loan; and (f) voting
rights on the loaned securities may pass to the borrower; however, if a
material event adversely affecting the investment occurs, the Company's
Board of Directors must terminate the loan and regain the right to vote
the securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities or possible
loss of rights in the collateral should the borrower fail financially.
Loans will be made to firms deemed by the Manager to be of good standing
and will not be made unless, in the judgment of the Manager, the
consideration to be earned from such loans would justify the risk. From
time to time, the Fund may return a part of the interest earned from the
investment of collateral received for securities loaned to: (a) the
borrower; and/or (b) a third party, which is unaffiliated with the Fund,
the Manager and which is acting as a "finder."
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements. A reverse
repurchase agreement involves the sale of a money market instrument by the
Fund and its agreement to repurchase the instrument at a specified time
and price. The Fund will maintain a segregated account consisting of U.S.
government securities or cash or cash equivalents to cover its obligations
under reverse repurchase agreements with broker-dealers and other
financial institutions. The Fund will invest the proceeds in other money
market instruments or repurchase agreements maturing not later than the
expiration of the reverse repurchase agreement. Under the Investment
Company Act of 1940, as amended, reverse repurchase agreements may be
considered borrowing by the seller.
Reverse repurchase agreements create opportunities for increased returns
to the shareholders of the Fund but, at the same time, create special risk
considerations. Although the principal or stated value of such borrowings
will be fixed, the Fund's assets may change in value during the time the
borrowing is outstanding. To the extent the income or other gain derived
from securities purchased with borrowed funds exceeds the interest or
dividends the Fund will have to pay in respect thereof, the Fund's net
income or other gain will be greater than if this type of investment
technique had not been used. Conversely, if the income or other gain from
the incremental assets is not sufficient to cover this cost, the net
income or other gain of the Fund will be less than if the reverse
repurchase agreement had not been used.
The Fund currently intends to invest not more than 33% of its net assets
in reverse repurchase agreements.
When-Issued Securities and Delayed Delivery Transactions
In order to secure what the Manager considers to be an advantageous price
or yield, the Fund may purchase U.S. government securities on a
when-issued basis or purchase or sell U.S. government securities for
delayed delivery. The Fund will enter into such purchase transactions for
the purpose of acquiring portfolio securities and not for the purpose of
leverage. Delivery of the securities in such cases occurs beyond the
normal settlement periods, but no payment or delivery is made by the Fund
prior to the reciprocal delivery or payment by the other party to the
transaction. In entering into a when-issued or delayed-delivery
transaction, the Fund relies on the other party to consummate the
transaction and may be disadvantaged if the other party fails to do so.
U.S. government securities normally are subject to changes in value based
upon changes, real or anticipated, in the level of interest rates and, to
a lesser extent, the public's perception of the creditworthiness of the
issuers. In general, U.S. government securities tend to appreciate when
interest rates decline and depreciate when interest rates rise. Purchasing
U.S. government securities on a when-issued basis or delayed-delivery
basis, therefore, can involve the risk that the yields available in the
market when the delivery takes place may actually be higher than those
obtained in the transaction itself. Similarly, the sale of U.S.
government securities for delayed delivery can involve the risk that the
prices available in the market when the delivery is made may actually be
higher than those obtained in the transaction itself.
The Fund will at times maintain in a segregated account cash or liquid
securities equal to the amount of the Fund's when-issued or
delayed-delivery commitments. For the purpose of determining the adequacy
of the securities in the account, the deposited securities will be valued
at market or fair value. If the market or fair value of such securities
declines, additional cash or securities will be placed in the account on a
daily basis so the value of the account will equal the amount of such
commitments by the Fund. Placing securities rather than cash in the
account may have a leveraging effect on the Fund's assets. That is, to the
extent the Fund remains substantially fully invested in securities at the
time that it has committed to purchase securities on a when-issued basis,
there will be greater fluctuation in its net asset value than if it had
set aside cash to satisfy its purchase commitments. On the settlement
date, the Fund will meet its obligations from then available cash flow,
the sale of securities held in the separate account, the sale of other
securities or, although it normally would not expect to do so, from the
sale of the when-issued or delayed-delivery securities themselves (which
may have a greater or lesser value than the Fund's payment obligations).
Money Market Instruments
As stated in the Prospectus, the Fund may invest for temporary defensive
purposes in corporate and government bonds and notes and money market
instruments. Money market instruments in which the Fund may invest
include: U.S. government securities; certificates of deposit, time
deposits and bankers' acceptances issued by domestic banks (including
their branches located outside the United States and subsidiaries located
in Canada), domestic branches of foreign banks, savings and loan
associations and similar institutions; high grade commercial paper; and
repurchase agreements with respect to the foregoing types of instruments.
The following is a more detailed description of such money market
instruments.
Certificates of deposit ("CDs") are short-term negotiable obligations of
commercial banks. Time deposits ("TDs") are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated
interest rates. Bankers' acceptances are time drafts drawn on commercial
banks by borrowers usually in connection with international transactions.
Domestic commercial banks organized under Federal law are supervised and
examined by the Comptroller of the Currency and are required to be members
of the Federal Reserve System and to be insured by the Federal Deposit
Insurance Corporation (the "FDIC"). Domestic banks organized under state
law are supervised and examined by state banking authorities but are
members of the Federal Reserve System only if they elect to join. Most
state banks are insured by the FDIC (although such insurance may not be of
material benefit to the Fund, depending upon the principal amounts of CDs
of each bank held by the Fund) and are subject to Federal examination and
to a substantial body of Federal law and regulation. As a result of
governmental regulations, domestic branches of domestic banks are
generally required to, among other things, maintain specified levels of
reserves, and are subject to other supervision and regulation designed to
promote financial soundness.
Obligations of foreign branches of domestic banks, such as CDs and TDs,
may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and
government regulation. Such obligations are subject to different risks
than are those of domestic banks or domestic branches of foreign banks.
These risks include foreign economic and political developments, foreign
governmental restrictions that may adversely affect payment of principal
and interest on the obligations, foreign exchange controls and foreign
withholding and other taxes on interest income. Foreign branches of
domestic banks are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks, such as mandatory
reserve requirements, loan limitations, and accounting, auditing and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank than about a
domestic bank. CDs issued by wholly owned Canadian subsidiaries of
domestic banks are guaranteed as to repayment of principal and interest
(but not as to sovereign risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may
be limited by the terms of a specific obligation and by governmental
regulation as well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a foreign bank with
assets in excess of $1 billion may or may not be subject to reserve
requirements imposed by the Federal Reserve System or by the state in
which the branch is located if the branch is licensed in that state. In
addition, branches licensed by the Comptroller of the Currency and
branches licensed by certain states ("State Branches") may or may not be
required to: (a) pledge to the regulator by depositing assets with a
designated bank within the state, an amount of its assets equal to 5% of
its total liabilities; and (b) maintain assets within the state in an
amount equal to a specified percentage of the aggregate amount of
liabilities of the foreign bank payable at or through all of its agencies
or branches within the state. The deposits of State Branches may not
necessarily be insured by the FDIC.
In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign branches of domestic banks or by domestic branches
of foreign banks, SSBC will carefully evaluate such investments on a
case-by-case basis.
Savings and loan associations whose CDs may be purchased by the Fund are
supervised by the Office of Thrift Supervision and are insured by the
Savings Association Insurance Fund, which is administered by the FDIC and
is backed by the full faith and credit of the U.S. government. As a
result, such savings and loan associations are subject to regulation and
examination.
Options, Futures and Currency Strategies
The Fund may use forward currency contracts and certain options and
futures strategies to attempt to hedge its portfolio, i.e., reduce the
overall level of investment risk normally associated with the Fund. There
can be no assurance that such efforts will succeed.
In order to assure that the Fund will not be deemed to be a "commodity
pool" for purposes of the Commodity Exchange Act, regulations of the
Commodity Futures Trading Commission ("CFTC") require that the Fund enter
into transactions in futures contracts and options on futures only (i) for
bona fide hedging purposes (as defined in CFTC regulations), or (ii) for
non-hedging purposes, provided that the aggregate initial margin and
premiums on such non-hedging positions do not exceed 5% of the liquidation
value of the Fund's assets. To attempt to hedge against adverse movements
in exchange rates between currencies, the Fund may enter into forward
currency contracts for the purchase or sale of a specified currency at a
specified future date. Such contracts may involve the purchase or sale of
a foreign currency against the U.S. dollar or may involve two foreign
currencies. The Fund may enter into forward currency contracts either with
respect to specific transactions or with respect to its portfolio
positions. For example, when the investment adviser anticipates making a
purchase or sale of a security, it may enter into a forward currency
contract in order to set the rate (either relative to the U.S. dollar or
another currency) at which the currency exchange transaction related to
the purchase or sale will be made ("transaction hedging"). Further, when
the investment adviser believes that a particular currency may decline
compared to the U.S. dollar or another currency, the Fund may enter into a
forward contract to sell the currency the Manager expects to decline in an
amount approximating the value of some or all of the Fund's securities
denominated in that currency, or when the Manager believes that one
currency may decline against a currency in which some or all of the
portfolio securities held by the Fund are denominated, it may enter into a
forward contract to buy the currency expected to decline for a fixed
amount ("position hedging"). In this situation, the Fund may, in the
alternative, enter into a forward contract to sell a different currency
for a fixed amount of the currency expected to decline where the Manager
believes that the value of the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the value of the
currency in which portfolio securities of the Fund are denominated ("cross
hedging"). The Fund's custodian places (i) cash, (ii) U.S. Government
securities or (iii) equity securities or debt securities (of any grade) in
certain currencies provided such assets are liquid, unencumbered and
marked to market daily, or other high-quality debt securities denominated
in certain currencies in a separate account of the Fund having a value
equal to the aggregate account of the Fund's commitments under forward
contracts entered into with respect to position hedges and cross-hedges.
If the value of the securities placed in a separate account declines,
additional cash or securities are placed in the account on a daily basis
so that the value of the amount will equal the amount of the Fund's
commitments with respect to such contracts.
For hedging purposes, the Fund may write covered call options and purchase
put and call options on currencies to hedge against movements in exchange
rates and on debt securities to hedge against the risk of fluctuations in
the prices of securities held by the Fund or which the Manager intends to
include in its portfolio. The Fund also may use interest rates futures
contracts and options thereon to hedge against changes in the general
level in interest rates.
The Fund may write call options on securities and currencies only if they
are covered, and such options must remain covered so long as the Fund is
obligated as a writer. A call option written by the Fund is "covered" if
the Fund owns the securities or currency underlying the option or has an
absolute and immediate right to acquire that security or currency without
additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of
other securities or currencies held in its portfolio. A call option is
also covered if the Fund holds on a share-for-share basis a call on the
same security or holds a call on the same currency as the call written
where the exercise price of the call held is equal to less than the
exercise price of the call written or greater than the exercise price of
the call written if the difference is maintained by the Fund in cash,
Treasury bills or other high-grade, short-term obligations in a segregated
account with its custodian.
Although the portfolio might not employ the use of forward currency
contracts, options and futures, the use of any of these strategies would
involve certain investment risks and transaction costs to which it might
not otherwise be subject. These risks include: dependence on the
investment adviser's ability to predict movements in the prices of
individual debt securities, fluctuations in the general fixed-income
markets and movements in interest rates and currency markets, imperfect
correlation between movements in the price of currency, options, futures
contracts or options thereon and movements in the price of the currency or
security hedged or used for cover; the fact that skills and techniques
needed to trade options, futures contracts and options thereon or to use
forward currency contracts are different from those needed to select the
securities in which the Fund invests; lack of assurance that a liquid
market will exist for any particular option, futures contract or options
thereon at any particular time and possible need to defer or accelerate
closing out certain options, futures contracts and options thereon in
order to continue to qualify for the beneficial tax treatment afforded
"regulated investment companies" under the Internal Revenue Code of 1986,
as amended (the "Code"). See "Dividends, Distributions and Taxes."
Options on Securities
As discussed more generally above, the Fund may engage in the writing of
covered call options. The Fund may also purchase put options and enter
into closing transactions.
The principal reason for writing covered call options on securities is to
attempt to realize, through the receipt of premiums, a greater return than
would be realized on the securities alone. In return for a premium, the
writer of a covered call option forgoes the right to any appreciation in
the value of the underlying security above the strike price for the life
of the option (or until a closing purchase transaction can be effected).
Nevertheless, the call writer retains the risk of a decline in the price
of the underlying security. Similarly, the principal reason for writing
covered put options is to realize income in the form of premiums. The
writer of a covered put option accepts the risk of a decline in the price
of the underlying security. The size of the premiums the Fund may receive
may be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing
activities.
Options written by the Fund will normally have expiration dates between
one and six months from the date written. The exercise price of the
options may be below, equal to, or above the current market values of the
underlying securities at the times the options are written. In the case of
call options, these exercise prices are referred to as "in-the-money,"
"at-the-money" and "out-of-the-money," respectively.
The Fund may write (a) in-the-money call options when SSBC expects the
price of the underlying security to remain flat or decline moderately
during the option period, (b) at-the-money call options when SSBC expects
the price of the underlying security to remain flat or advance moderately
during the option period and (c) out-of-the-money call options when SSBC
expects that the price of the security may increase but not above a price
equal to the sum of the exercise price plus the premiums received from
writing the call option. In any of the preceding situations, if the market
price of the underlying security declines and the security is sold at this
lower price, the amount of any realized loss will be offset wholly or in
part by the premium received. Out-of-the-money, at-the-money and
in-the-money put options (the reverse of call options as to the relation
of exercise price to market price) may be utilized in the same market
environments as such call options are used in equivalent transactions.
So long as the obligation of the Fund as the writer of an option
continues, the Fund may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring it to deliver,
in the case of a call, or take delivery of, in the case of a put, the
underlying security against payment of the exercise price. This obligation
terminates when the option expires or the Fund effects a closing purchase
transaction. The Fund can no longer effect a closing purchase transaction
with respect to an option once it has been assigned an exercise notice. To
secure its obligation to deliver the underlying security when it writes a
call option, or to pay for the underlying security when it writes a put
option, the Fund will be required to deposit in escrow the underlying
security or other assets in accordance with the rules of the Options
Clearing Corporation ("Clearing Corporation") or similar clearing
corporation and the securities exchange on which the option is written.
An option position may be closed out only where there exists a secondary
market for an option of the same series on a recognized securities
exchange or in the over-the-counter market. The Fund expects to write
options only on national securities exchanges or in the over-the-counter
market. The Fund may purchase put options issued by the Clearing
Corporation or in the over-the-counter market.
The Fund may realize a profit or loss upon entering into a closing
transaction. In cases in which a Fund has written an option, it will
realize a profit if the cost of the closing purchase transaction is less
than the premium received upon writing the original option and will incur
a loss if the cost of the closing purchase transaction exceeds the premium
received upon writing the original option. Similarly, when the Fund has
purchased an option and engages in a closing sale transaction, whether it
recognizes a profit or loss will depend upon whether the amount received
in the closing sale transaction is more or less than the premium the Fund
initially paid for the original option plus the related transaction costs.
Although the Fund generally will purchase or write only those options for
which SSBC believes there is an active secondary market so as to
facilitate closing transactions, there is no assurance that sufficient
trading interest to create a liquid secondary market on a securities
exchange will exist for any particular option or at any particular time,
and for some options no such secondary market may exist. A liquid
secondary market in an option may cease to exist for a variety of reasons.
In the past, for example, higher than anticipated trading activity or
order flow, or other unforeseen events, have at times rendered certain of
the facilities of the Clearing Corporation and national securities
exchanges inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There can
be no assurance that similar events, or events that may otherwise
interfere with the timely execution of customers' orders, will not recur.
In such event, it might not be possible to effect closing transactions in
particular options. If, as a covered call option writer, the Fund is
unable to effect a closing purchase transaction in a secondary market, it
will not be able to sell the underlying security until the option expires
or it delivers the underlying security upon exercise.
Securities exchanges generally have established limitations governing the
maximum number of calls and puts of each class which may be held or
written, or exercised within certain periods, by an investor or group of
investors acting in concert (regardless of whether the options are written
on the same or different securities exchanges or are held, written or
exercised in one or more accounts or through one or more brokers). It is
possible that the Fund and other clients of SSBC and certain of their
affiliates may be considered to be such a group. A securities exchange may
order the liquidation of positions found to be in violation of these
limits, and it may impose certain other sanctions.
In the case of options written by the Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock
or debt securities, the time required to convert or exchange and obtain
physical delivery of the underlying common stocks with respect to which
the Fund has written options may exceed the time within which the Fund
must make delivery in accordance with an exercise notice. In these
instances, the Fund may purchase or temporarily borrow the underlying
securities for purposes of physical delivery. By so doing, the Fund will
not bear any market risk because a Fund will have the absolute right to
receive from the issuer of the underlying security an equal number of
shares to replace the borrowed stock, but the Fund may incur additional
transaction costs or interest expenses in connection with any such
purchase or borrowing.
Although SSBC will attempt to take appropriate measures to minimize the
risks relating to the Fund's writing of call options and purchasing of put
and call options, there can be no assurance that the Fund will succeed in
its option-writing program.
Stock Index Options
As described generally above, the Fund may purchase put and call options
and write call options on domestic stock indexes listed on domestic
exchanges in order to realize its investment objective of capital
appreciation or for the purpose of hedging its portfolio. A stock index
fluctuates with changes in the market values of the stocks included in the
index. Some stock index options are based on a broad market index such as
the New York Stock Exchange Composite Index or the Canadian Market
Portfolio Index, or a narrower market index such as the Standard & Poor's
100. Indexes also are based on an industry or market segment such as the
American Stock Exchange Oil and Gas Index or the Computer and Business
Equipment Index.
Options on stock indexes are generally similar to options on stock except
that the delivery requirements are different. Instead of giving the right
to take or make delivery of stock at a specified price, an option on a
stock index gives the holder the right to receive a cash "exercise
settlement amount" equal to (a) the amount, if any, by which the fixed
exercise price of the option exceeds (in the case of a put) or is less
than (in the case of a call) the closing value of the underlying index on
the date of exercise, multiplied by (b) a fixed "index multiplier."
Receipt of this cash amount will depend upon the closing level of the
stock index upon which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the
option. The amount of cash received will be equal to such difference
between the closing price of the index and the exercise price of the
option expressed in dollars or a foreign currency, as the case may be,
times a specified multiple. The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. The
writer may offset its position in stock index options prior to expiration
by entering into a closing transaction on an exchange or it may let the
option expire unexercised.
The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in
the portion of the securities portfolio of the Fund correlate with price
movements of the stock index selected. Because the value of an index
option depends upon movements in the level of the index rather than the
price of a particular stock, whether the Fund will realize a gain or loss
from the purchase or writing of options on an index depends upon movements
in the level of stock prices in the stock market generally or, in the case
of certain indexes, in an industry or market segment, rather than
movements in the price of a particular stock. Accordingly, successful use
by the Fund of options on stock indexes will be subject to SSBC's ability
to predict correctly movements in the direction of the stock market
generally or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual stocks.
Futures Contracts and Options on Futures Contracts
As described generally above, the Fund may invest in stock index futures
contracts and options on futures contracts that are traded on a domestic
exchange or board of trade.
The purpose of entering into a futures contract by the Fund is to protect
the Fund from fluctuations in the value of securities without actually
buying or selling the securities. For example, in the case of stock index
futures contracts, if the Fund anticipates an increase in the price of
stocks that it intends to purchase at a later time, the Fund could enter
into contracts to purchase the stock index (known as taking a "long"
position) as a temporary substitute for the purchase of stocks. If an
increase in the market occurs that influences the stock index as
anticipated, the value of the futures contracts increases and thereby
serves as a hedge against the Fund's not participating in a market
advance. The Fund then may close out the futures contracts by entering
into offsetting futures contracts to sell the stock index (known as taking
a "short" position) as it purchases individual stocks. The Fund can
accomplish similar results by buying securities with long maturities and
selling securities with short maturities. But by using futures contracts
as an investment tool to reduce risk, given the greater liquidity in the
futures market, it may be possible to accomplish the same result more
easily and more quickly.
No consideration will be paid or received by the Fund upon the purchase or
sale of a futures contract. Initially, the Fund will be required to
deposit with the broker an amount of cash or cash equivalents equal to
approximately 1% to 10% of the contract amount (this amount is subject to
change by the exchange or board of trade on which the contract is traded
and brokers or members of such board of trade may charge a higher amount).
This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract which is returned
to the Fund, upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker, will be made daily as the
price of the index or securities underlying the futures contract
fluctuates, making the long and short positions in the futures contract
more or less valuable, a process known as "marking-to-market." In
addition, when the Fund enters into a long position in a futures contract
or an option on a futures contract, it must deposit into a segregated
account with the Fund's custodian an amount of cash or cash equivalents
equal to the total market value of the underlying futures contract, less
amounts held in the Fund's commodity brokerage account at its broker. At
any time prior to the expiration of a futures contract, the Fund may elect
to close the position by taking an opposite position, which will operate
to terminate the Fund's existing position in the contract.
There are several risks in connection with the use of futures contracts as
a hedging device. Successful use of futures contracts by the Fund is
subject to the ability of SSBC to predict correctly movements in the stock
market or in the direction of interest rates. These predictions involve
skills and techniques that may be different from those involved in the
management of investments in securities. In addition, there can be no
assurance there will be a perfect correlation between movements in the
price of the securities underlying the futures contract and movements in
the price of the securities that are the subject of the hedge. A decision
of whether, when and how to hedge involves the exercise of skill and
judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of market behavior or unexpected trends in market behavior
or interest rates.
Positions in futures contracts may be closed out only on the exchange on
which they were entered into (or through a linked exchange) and no
secondary market exists for those contracts. In addition, although the
Fund intends to enter into futures contracts only if there is an active
market for the contracts, there is no assurance that an active market will
exist for the contracts at any particular time. Most futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a
price beyond that limit. It is possible that futures contract prices could
move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses. In such event,
and in the event of adverse price movements, the Fund would be required to
make daily cash payments of variation margin; in such circumstances, an
increase in the value of the portion of the portfolio being hedged, if
any, may partially or completely offset losses on the futures contract. As
described above, however, no assurance can be given that the price of the
securities being hedged will correlate with the price movements in a
futures contract and thus provide an offset to losses on the futures
contract.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions for the
protection of shareholders. Restrictions 1 through 7 below cannot be
changed without approval by the holders of a majority of the outstanding
shares of a Fund, defined as the lesser of (a) 67% or more of a Fund's
shares present at a meeting, if the holders of more than 50% of the
outstanding shares are present in person or by proxy or (b) more than 50%
of a Fund's outstanding shares. The remaining restrictions may be changed
by the Fund's Board of Directors at any time. In accordance with these
restrictions, the Fund will not:
1. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules, regulations and
orders thereunder.
2. Issue "senior securities" as defined in the 1940 Act, and the
rules, regulations and orders thereunder, except as permitted under the
1940 Act and the rules, regulations and orders thereunder.
3. Invest more than 25% of its total assets in securities, the
issuers of which conduct their principal business activities in the same
industry. For purposes of this limitation, securities of the U.S.
government (including its agencies and instumentalities) and securities of
state or municipal governments and their political subdivisions are not
considered to be issued by members of any industry.
4. Borrow money, except that (a) the Fund may borrow from banks for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests which might otherwise require the untimely disposition
of securities, and (b) the Fund may, to the extent consistent with its
investment policies, enter into reverse repurchase agreements, forward
roll transactions and similar investment strategies and techniques. To the
extent that it engages in transactions described in (a) and (b), the Fund
will be limited so that no more than 33 1/3% of the value of its total
assets (including the amount borrowed), valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) valued at the
time the borrowing is made, is derived from such transactions.
5. Make loans. This restriction does not apply to: (a) the purchase
of debt obligations in which the Fund may invest consistent with its
investment objective and policies; (b) repurchase agreements; and (c)
loans of its portfolio securities, to the fullest extent permitted under
the 1940 Act.
6. Engage in the business of underwriting securities issued by other
persons, except to the extent that the Fund may technically be deemed to
be an underwriter under the Securities Act of 1933, as amended, in
disposing of portfolio securities.
7. Purchase or sell real estate, real estate mortgages, commodities
or commodity contracts, but this restriction shall not prevent the Fund
from: (a) investing in securities of issuers engaged in the real estate
business or the business of investing in real estate (including interests
in limited partnerships owning or otherwise engaging in the real estate
business or the business of investing in real estate) and securities which
are secured by real estate or interests therein; (b) holding or selling
real estate received in connection with securities it holds or held; (c)
trading in futures contracts and options on futures contracts (including
options on currencies to the extent consistent with the Fund's investment
objective and policies); or (d) investing in real estate investment trust
securities.
8. Purchase any securities on margin (except for such short-term
credits as are necessary for the clearance of purchases and sales of
portfolio securities) or sell any securities short (except "against the
box"). For purposes of this restriction, the deposit or payment by the
Fund of underlying securities and other assets in escrow and collateral
agreements with respect to initial or maintenance margin in connection
with futures contracts and related options and options on securities,
indexes or similar items is not considered to be the purchase of a
security on margin.
9. Invest in oil, gas or other mineral exploration or development
programs.
10. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
11. Invest for the purpose of exercising control over or management
of the issuer.
12. Invest in securities of an issuer which, together with any
predecessor, has been in operation for less than three years if, as a
result, more than 5% of the total assets of the Fund would then be
invested in such securities (for purposes of this restriction, issuers
include predecessors, sponsors, controlling persons, general guarantors
and originators of underlying assets).
If any percentage restriction described above is complied with at the time
of an investment, a later increase or decrease in percentage resulting
from a change in values or assets will not constitute a violation of such
restriction.
Portfolio Turnover
The Fund's portfolio turnover rate (the lesser of purchases or sales of
portfolio securities during the year, excluding purchases or sales of
short-term securities, divided by the monthly average value of portfolio
securities) is generally not expected to exceed 150%. The rate of turnover
will not be a limiting factor, however, when the Fund deems it desirable
to sell or purchase securities. This policy should not result in higher
brokerage commissions to the Fund, as purchases and sales of portfolio
securities are usually effected as principal transactions. Securities may
be sold in anticipation of a rise in interest rates (market decline) or
purchased in anticipation of a decline in interest rates (market rise) and
later sold. In addition, a security may be sold and another security of
comparable quality purchased at approximately the same time to take
advantage of what the Fund believes to be a temporary disparity in the
normal yield relationship between the two securities. These yield
disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates,
such as changes in the overall demand for, or supply of, various types of
tax-exempt securities.
Portfolio Transactions
Decisions to buy and sell securities for the Fund are made by the Manager,
subject to the overall review of the Company's Board of Directors.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Manager, investments of the
type the Fund may make also may be made by those other accounts. When the
Fund and one or more other accounts managed by the Manager are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Manager to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
Allocation of transactions on behalf of the Fund, including their
frequency, to various dealers is determined by the Manager in its best
judgment and in a manner deemed fair and reasonable to the Fund's
shareholders. The primary considerations of the Manager in allocating
transactions are availability of the desired security and the prompt
execution of orders in an effective manner at the most favorable prices.
Subject to these considerations, dealers that provide supplemental
investment research and statistical or other services to the Manager may
receive orders for portfolio transactions by the Fund. Information so
received is in addition to, and not in lieu of, services required to be
performed by the Manager, and the fees of the Manager are not reduced as a
consequence of their receipt of the supplemental information. The
information may be useful to the Manager in serving both the Fund and
other clients, and conversely, supplemental information obtained by the
placement of business of other clients may be useful to the Manager in
carrying out its obligations to the Fund.
The Fund will not purchase securities during the existence of any
underwriting or selling group relating to the securities, of which the
Manager is a member, except to the extent permitted by the SEC. Under
certain circumstances, the Fund may be at a disadvantage because of this
limitation in comparison with other funds that have similar investment
objectives but that are not subject to a similar limitation.
Even though investment decisions for the Fund are made independently from
those of the other accounts managed by the SSBC, investments of the kind
made by the Fund also may be made by those other accounts. When the Fund
and one or more accounts managed by SSBC are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by SSBC to
be equitable. In some cases, this procedure may adversely affect the price
paid or received by the Fund or the size of the position obtained for or
disposed of by the Fund.
PURCHASE OF SHARES
Volume Discounts
The schedules of sales charges described in the Prospectus apply to
purchases of shares of the Fund made by any "purchaser," which term is
defined to include the following: (a) an individual; (b) an individual's
spouse and his or her children purchasing shares for his or her own
account; (c) a trustee or other fiduciary purchasing shares for a single
trust estate or single fiduciary account; (d) a pension, profit-sharing or
other employee benefit plan qualified under Section 401(a) of the Code and
qualified employee benefit plans of employers who are "affiliated persons"
of each other within the meaning of the 1940 Act; (e) tax-exempt
organizations enumerated in Section 501(c)(3) or (13) of the Code; or (f)
any other organized group of persons, provided that the organization has
been in existence for at least six months and was organized for a purpose
other than the purchase of investment company securities at a discount.
Purchasers who wish to combine purchase orders to take advantage of volume
discounts should contact a Salomon Smith Barney Financial Consultant.
Combined Right of Accumulation
Reduced sales charges, in accordance with the schedules in the Prospectus,
apply to any purchase of shares of the Fund by any "purchaser" (as defined
above). The reduced sales charge is subject to confirmation of the
shareholder's holdings through a check of appropriate records. The Company
reserves the right to terminate or amend the combined right of
accumulation at any time after written notice to shareholders. For further
information regarding the right of accumulation, shareholders should
contact a Salomon Smith Barney Financial Consultant.
Determination of Public Offering Price
The Fund offers its shares to the public on a continuous basis. The public
offering price for a Class A and Class Y share of the Fund is equal to the
net asset value per share at the time of purchase, plus for Class A shares
an initial sales charge based on the aggregate amount of the investment.
The public offering price for a Class L share includes a 1.00% initial
sales charge. Class A share purchases, including applicable rights of
accumulation, equaling or exceeding $500,000 is equal to the net asset
value per share at the time of purchase and no sales charge is imposed at
the time of purchase. A contingent deferred sales charge ("CDSC") is
imposed on certain redemptions of Class L shares, and Class A shares when
purchased in amounts exceeding $500,000. The method of computation of the
public offering price is shown in the Fund's financial statements,
incorporated by reference in their entirety into this SAI.
REDEMPTION OF SHARES
Detailed information on how to redeem shares of the Fund is included in
the Prospectus. The right of redemption of shares of the Fund may be
suspended or the date of payment postponed (a) for any periods during
which the New York Stock Exchange, Inc. (the "NYSE") is closed (other than
for customary weekend and holiday closings), (b) when trading in the
markets the Fund normally utilizes is restricted, or an emergency exists,
as determined by the SEC, so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable or (c)
for any other periods as the SEC by order may permit for the protection of
the Fund's shareholders.
Distributions in Kind
If the Board of Directors of the Company determines that it would be
detrimental to the best interests of the remaining shareholders to make a
redemption payment wholly in cash, the Fund may pay, in accordance with
SEC rules, any portion of a redemption in excess of the lesser of $250,000
or 1.00% of the Fund's net assets by a distribution in kind of portfolio
securities in lieu of cash. Securities issued as a distribution in kind
may incur brokerage commissions when shareholders subsequently sell those
securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the "Withdrawal Plan") is available to
shareholders who own shares with a value of at least $10,000 ($5,000 for
retirement plan accounts) and who wish to receive specific amounts of cash
monthly or quarterly. Withdrawals of at least $50 may be made under the
Withdrawal Plan by redeeming as many shares of the Fund as may be
necessary to cover the stipulated withdrawal payment. To the extent
withdrawals exceed dividends, distributions and appreciation of a
shareholder's investment in the Fund, there will be a reduction in the
value of the shareholder's investment and continued withdrawal payments
will reduce the shareholder's investment and ultimately may exhaust it.
Withdrawal payments should not be considered as income from investment in
the Fund. Furthermore, as it generally would not be advantageous to a
shareholder to make additional investments in the Fund at the same time he
or she is participating in the Withdrawal Plan, purchases by such
shareholders in amounts of less than $5,000 ordinarily will not be
permitted.
Shareholders who wish to participate in the Withdrawal Plan and who hold
their shares in certificate form must deposit their share certificates
with First Data as agent for Withdrawal Plan members. All dividends and
distributions on shares in the Withdrawal Plan are reinvested
automatically at net asset value in additional shares of the Fund.
Withdrawal Plans should be set up with a Salomon Smith Barney Financial
Consultant. Applications for participation in the Withdrawal Plan must be
received by First Data no later than the eighth day of the month to be
eligible for participation beginning with that month's withdrawal. For
additional information, shareholders should contact a Salomon Smith Barney
Financial Consultant.
DISTRIBUTOR
CFBDS serves as the Fund's distributor on a best efforts basis pursuant to
a written agreement (the Distribution Agreement"), which was approved by
the Company's Board of Directors.
Distribution Arrangements
To compensate Salomon Smith Barney for the services it provides and for
the expense it bears under the Distribution Agreement, the Fund has
adopted a services and distribution plan (the "Plan") pursuant to Rule
l2b-1 under the 1940 Act. Under the Plan, the Fund pays Salomon Smith
Barney a service fee, accrued daily and paid monthly, calculated at the
annual rate of 0.25% of the value of the Fund's average daily net assets
attributable to the Class A, Class B and Class L shares. In addition, the
Fund pays Salomon Smith Barney a distribution fee with respect to the
Class B and Class L shares primarily intended to compensateSalomon Smith
Barney for its initial expense of paying Financial Consultants a
commission upon sales of those shares. The Class B and Class L
distribution fee is calculated at the annual rate of 0.75% of the value of
the Fund's average daily net assets attributable to the shares of the
respective Class.
VALUATION OF SHARES
The net asset value per share of the Fund's Classes is calculated on each
day, Monday through Friday, except days on which the NYSE is closed. The
NYSE currently is scheduled to be closed on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas, and on the preceding Friday or
subsequent Monday when one of these holidays falls on a Saturday or
Sunday, respectively. Because of the differences in distribution fees and
Class-specific expenses, the per share net asset value of each Class may
differ. The following is a description of the procedures used by the Fund
in valuing its assets.
Securities listed on a national securities exchange will be valued on the
basis of the last sale on the date on which the valuation is made or, in
the absence of sales, at the mean between the closing bid and asked
prices. Over-the-counter securities will be valued at the mean between the
closing bid and asked prices on each day, or, if market quotations for
those securities are not readily available, at fair value, as determined
in good faith by the Company's Board of Directors. Short-term obligations
with maturities of 60 days or less are valued at amortized cost, which
constitutes fair value as determined by the Fund's Board of Directors.
Amortized cost involves valuing an instrument at its original cost to the
Fund and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the effect of fluctuating interest
rates on the market value of the instrument. All other securities and
other assets of the Fund will be valued at fair value as determined in
good faith by the Company's Board of Directors.
EXCHANGE PRIVILEGE
Except as noted below and in the Prospectus, shareholders of any of the
Smith Barney Mutual Funds may exchange all or part of their shares for
shares of the same class of other Smith Barney Mutual Funds, to the extent
such shares are offered for sale in the shareholder's state of residence,
on the basis of relative net asset value per share at the time of exchange
as follows:
A. Class A and Class Y shares of the Fund may be exchanged without a
sales charge for the respective shares of any of the Smith Barney
Mutual Funds.
B. Class B shares of any fund may be exchanged without a sales
charge. Class B shares of the Fund exchanged for Class B shares of
another Smith Barney Mutual Fund will be subject to the higher
applicable CDSC of the two funds and, for purposes of calculating
CDSC rates and conversion periods, will be deemed to have been held
since the date the shares being exchanged were deemed to be
purchased.
C. Class L shares of any fund may be exchanged without a sales
charge. For purposes of CDSC applicability, Class L shares of the
Fund exchanged for Class L shares of another Smith Barney Mutual
Fund will be deemed to have been owned since the date the shares
being exchanged were deemed to be purchased.
The exchange privilege enables shareholders to acquire shares of the same
Class in a fund with different investment objectives when they believe
that a shift between funds is an appropriate investment decision. This
privilege is available to shareholders residing in any state in which fund
shares being acquired may legally be sold. Prior to any exchange, the
shareholder should obtain and review a copy of the current prospectus of
each fund into which an exchange is being considered. Prospectuses may be
obtained from a Salomon Smith Barney Financial Consultant.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current
net asset value and the proceeds are immediately invested, at a price as
described
above, in shares of the fund being acquired. Salomon Smith Barney reserves
the right to reject any exchange request. The exchange privilege may be
modified or terminated at any time after written notice to shareholders.
PERFORMANCE DATA
From time to time, the Company may quote the Fund's yield or total return
in advertisements or in reports and other communications to shareholders.
The Company may include comparative performance information in advertising
or marketing the Fund's shares. Such performance information may include
the following industry and financial publications- Barron's, Business
Week, CDA Investment Technologies, Inc., Changing Times, Forbes, Fortune,
Institutional Investor, Investors Daily, Money, Morningstar Mutual Fund
Values, The New York Times, USA Today and The Wall Street Journal. To the
extent any advertisement or sales literature of the Fund describes the
expenses or performance of any Class it will also disclose such
information for the other Classes.
Average Annual Total Return
"Average annual total return" figures are computed according to a formula
prescribed by the SEC. The formula can be expressed as follows:
P (1 + T)n = ERV
Where: P = a hypothetical initial payment of $ 1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical
$1,000 investment made
at the beginning of a 1-, 5- or 10-year
period at the end of the 1-, 5- or
10-year period (or fractional portion
thereof), assuming reinvestment
of all dividends and distributions.
Performance will vary from time to time depending on market conditions,
the composition of the Fund's portfolio and operating expenses.
Consequently, any given performance quotation should not be considered
representative of the Fund's performance for any specified period in the
future. Because performance will vary, it may not provide a basis for
comparing an investment in the Fund with certain bank deposits or other
investments that pay a fixed yield for a stated period of time.
TAXES
The following is a summary of certain Federal income tax considerations
that may affect the Fund and its shareholders. The summary is not intended
as a substitute for individual tax advice and investors are urged to
consult their own tax advisors as to the tax consequences of an investment
in the Fund.
The Company intends to qualify each year as a regulated investment company
under the Code. If the Fund (a) qualifies as a regulated investment
company and (b) distributes to its shareholders at least 90% of its net
investment income (including, for this purpose, its net realized
short-term capital gains), the Fund will not be liable for Federal income
taxes to the extent that its net investment income and its net realized
long- and short term capital gains, if any, are distributed to its
shareholders.
As described above, the Fund may invest in futures contracts and options
on futures contracts that are traded on a U.S. exchange or board of trade.
As a general rule, these investment activities will increase or decrease
the amount of long-term and short-term capital gains or losses realized by
the Fund and, thus, will affect the amount of capital gains distributed to
the Fund's shareholders.
For federal income tax purposes, gain or loss on the futures and options
described above (collectively referred to as "Section 1256 Contracts")
would, as a general rule, be taxed pursuant to a special "mark-to-market
system." Under the mark-to-market system", the Fund may be treated as
realizing a greater or lesser amount of gains or losses than actually
realized. As a general rule, gain or loss on Section 1256 Contracts is
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss, and as a result, the mark-to market will generally affect
the amount of capital gains or losses taxable to the Fund and the amount
of distributions taxable to a shareholder. Moreover, if the Fund invests
in both Section 1256 and offsetting positions in those contracts, then the
Fund may not be able to receive the benefit of certain realized losses for
an indeterminate period of time. The Fund expects that its activities with
respect to Section 1256 Contracts and offsetting position in those
Contracts (1) will not cause it or its shareholders to be treated as
receiving a materially greater amount of capital gains or distributions
than actually realized or received and (2) will permit it to use
substantially all of its losses for the fiscal years in which the losses
actually occur.
Gains or losses on the sales of stock or securities by the Fund generally
will be long-term capital gains or losses if a Fund has held the stock or
securities for more than one year. Gains or losses on sales of stock or
securities held for not more than one year generally will be short-term
capital gains or losses.
Foreign countries may impose withholding and other taxes on dividends and
interest paid to the Fund with respect to investments in foreign
securities. However, certain foreign countries have entered into tax
conventions with the United States to reduce or eliminate such taxes.
Distributions of long-term capital gains will be taxable to shareholders
as such, whether paid in cash or reinvested in additional shares and
regardless of the length of time that the shareholder has held his or her
interest in the Fund. If a shareholder receives a distribution taxable as
long-term capital gain with respect to his or her investment in the Fund
and redeems or exchanges the shares before he or she has held them for
more than six months, any loss on the redemption or exchange that is less
than or equal to the amount of the distribution will be treated as a
long-term capital loss.
Any net long-term capital gains realized by the Fund will be distributed
annually as described in the Prospectus. Such distributions ("capital gain
dividends") will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares, and will be
designated as capital gain dividends in a written notice mailed by the
Fund to shareholders after the close of the Fund's prior taxable year. If
a shareholder receives a capital gain dividend with respect to any share
and if the share has been held by the shareholder for six months or less,
then any loss on the sale or exchange of such share will be treated as a
long-term capital loss to the extent of the capital gain dividend.
Investors considering buying shares of the Fund on or just prior to a
record date for a taxable dividend or capital gain distribution should be
aware that, regardless of whether the price of the Fund shares to be
purchased reflects the amount of the forthcoming dividend or distribution
payment, any such payment will be a taxable dividend or distribution
payment.
If a shareholder fails to furnish a correct taxpayer identification
number, fails fully to report dividend and interest income, or fails to
certify that he or she has provided a correct taxpayer identification
number and that he or she is not subject to "backup withholding," then the
shareholder may be subject to a 31% backup withholding tax with respect to
(a) any taxable dividends and distributions and (b) the proceeds of any
redemptions of Fund shares. An individual's taxpayer identification number
is his or her social security number. The backup withholding tax is not an
additional tax and may be credited against a shareholder's regular Federal
income tax liability.
The foregoing is only a summary of certain tax considerations generally
affecting the Fund and its shareholders and is not intended as a
substitute for careful tax planning. Shareholders are urged to consult
their tax advisors with specific reference to their own tax situations,
including their state and local tax liabilities.
ADDITIONAL INFORMATION
The Company was incorporated on September 29, 1981 under the name Hutton
Investment Series Inc. The Company's corporate name was changed on
December 29, 1988, July 30, 1993 and October 28, 1994,
to SLH Investment Portfolios Inc., Smith Barney Shearson Investment Funds
Inc., and Smith Barney Investment Funds Inc., respectively.
PNC Bank, located at 17th and Chestnut Streets, Philadelphia, Pennsylvania
19103, serves as the custodian of the Fund. Under its agreement with the
Company on behalf of the Fund, PNC Bank holds the Fund's portfolio
securities and keeps all necessary accounts and records. For its services,
PNC Bank receives a monthly fee based upon the month-end market value of
securities held in custody and also receives securities transaction
charges. The assets of the Fund are held under bank custodianship in
compliance with the 1940 Act.
First Data, located at Exchange Place, Boston, Massachusetts 02109, serves
as the Fund's transfer agent. Under the transfer agency agreement, First
Data maintains the shareholder account records for the Fund, handles
certain communications between shareholders and the Fund and distributes
dividends and distributions payable by the Fund. For these services, First
Data receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month and is
reimbursed for out-of-pocket expenses.
Smith Barney
Small Cap Growth Fund
Statement of
Additional Information
October ___, 1999
Smith Barney
Small Cap Growth Fund
388 Greenwich Street
New York, New York 100 13
SALOMON SMITH BARNEY
A Member of Citigroup
PART C - OTHER INFORMATION
Item 23. Exhibits
All references are to the Registrant's registration
statement on Form N-1A (the "Registration Statement")
as filed with the SEC on October 2, 1981(File Nos. 2-
74288 and 811-3275).
(a) Articles of Restatement dated September 17, 1993
to Registrant's Articles of Incorporation dated
September 28, 1981, Articles of Amendment dated
October 14, 1994, Articles Supplementary, Articles of
Amendment dated October 14, 1994, Articles
Supplementary, Articles of Amendments and Certificates
of Correction dated November 7, 1994, are incorporated
by reference to Post-Effective Amendment No. 37 to the
Registration Statement filed on November 7, 1994.
Articles of Amendment dated October 23, 1997 are
incorporated by reference to Post-Effective Amendment
No. 46 dated October 23, 1997("Post-Effective
Amendment No.46"). Articles of Amendment dated
February 27, 1998 are incorporated by reference
to Post-Effective Amendment No. 48 dated April 29, 1998.
Articles of Amendment dated June 1, 1998 are incorporated
by reference to Post-Effective Amendment No. 49.
(b) Registrant's By-Laws, as amended on September 30,
1992 are incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement filed
on April 30, 1993.
(c) Registrant's form of stock certificate for Smith
Barney Hansberger Global Value Fund ("Global Value
Fund") and Smith Barney Hansberger Global Value Small
Cap Fund ("Small Cap Fund") is incorporated by
reference to Post Effective Amendment 46.
(d)(1) Investment Advisory Agreement dated July 30,
1993, between the Registrant on behalf of Smith Barney
Investment Grade Bond Fund, Smith Barney Government
Securities Fund and Smith Barney Special Equities
Fund and Greenwich Street Advisors is incorporated by
reference to the Registration Statement filed on Form
N-14 on September 2, 1993, File No. 33-50153.
(d)(2) Investment Advisory Agreements on behalf of
Smith Barney Growth Opportunity Fund and Smith Barney
Managed Growth Fund is incorporated by reference to
Post-Effective Amendment No. 40 filed on June 27,
1995.
(d)(3) Investment Management Agreements on behalf of
Global Value Fund and Global Small Cap Fund between
Registrant and Smith Barney Mutual Funds Management
Inc. is incorporated by reference to Post-Effective
Amendment No. 46.
(d)(4) Sub-Advisory Agreement on behalf of Global
Value Fund and Global Small Cap Fund between MMC and
Hansberger Global Investors Inc. is
incorporated by reference to Post-Effective
Amendment No. 46.
(d)(5)Investment Management Agreements on behalf of
Smith Barney Small Cap Growth Fund and Smith Barney
Small Cap Value Fund between Registrant and
Mutual Management Corp. is incorporated by reference
To Post-Effective Amendment No. 49.
(e)(1) Distribution Agreement dated July 30, 1993,
between the Registrant and Smith Barney Shearson Inc.
is incorporated by reference to the registration
statement filed on Form N-14 on September 2, 1993.
File 33-50153.
(e)(2) Form of Distribution Agreement between the
Registrant and PFS Distributors on behalf of Smith
Barney Investment Funds Inc. is incorporated by
reference to Post-Effective Amendment No. 40 filed on
June 27, 1995.
(e)(3) Form of Distribution Agreement between the
Registrant and CFBDS, Inc. is incorporated by reference
To Post-Effective Amendment No. 49.
(e)(4) Selling Group Agreement
is incorporated by reference
To Post-Effective Amendment No.56 filed on
February 26, 1999.
(f) Not Applicable.
(g)(1) Custodian Agreement with PNC Bank, National
Association is incorporated by reference to Post -
Effective Amendment No. 44 filed on April 29, 1997.
(g)(2) Custodian Agreement with Chase Manhattan Bank
is incorporated by reference to Post-Effective
Amendment No. 46.
(h)(1) Transfer Agency and Registrar Agreement dated
August 5, 1993 with First Data Investor Services
Group, Inc. (formerly The Shareholder Services Group,
Inc.) is incorporated by reference to Post-Effective
Amendment No. 31 as filed on December 22, 1993 (Post-
Effective Amendment No. 31").
(h)(2)Sub-Transfer Agency Agreement between the
Registrant and PFS Shareholders Services on behalf of
Smith Barney Investment Funds Inc. is incorporated by
reference to Post-Effective Amendment No. 40 filed on
June 27, 1995.
(i) Opinion of Robert A. Vegliante, Deputy General
Counsel of Smith Barney Mutual Funds Management Inc.
filed with the Registrant's rule 24-f2 Notice
(Accession No. 000091155-97-000104) is incorporated by
reference.
(j) To be filed by amendment.
(k) Not Applicable
(l) Not Applicable
(m)(1) Amended Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on behalf
of Smith Barney Investment Grade Bond Fund, Smith
Barney Government Securities Fund, Smith Barney Special
Equities Fund and Smith Barney European Fund and Smith
Barney, Inc. ("Smith Barney") are incorporated by
reference to Post-Effective Amendment No. 37'
(m)(2) Form of Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on
behalf of Smith Barney Growth Opportunity Fund and
Smith Barney Managed Growth Fund is incorporated by
reference to Post-Effective Amendment No. 40 filed on
June 27, 1995.
(m)(3) Form of Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on
behalf of the Global Value Fund and Small Cap Fund is
incorporated by reference to Post-Effective Amendment
No. 46.
(m)(4) Form of Amended and Restated Shareholder Services and
Distribution Plan pursuant to Rule 12b-1 between
the Registrant on behalf of each of its series
is incorporated by reference to Post-Effective Amendment
No. 49.
(n) Not Applicable.
(o) Form of Plan pursuant to Rule 18f-3 is incorporated by
reference to Post-Effective Amendment No.50 to
Registration Statement.
Item 24.
None.
Item 25. Indemnification
The response to this item is incorporated by
reference to Pre-Effective Amendment No. 1 to the
registration statement filed on Form N-14 on October
8, 1993 (File No. 33-50153).
Item 26. Business and Other Connections of
Investment Adviser
Investment Adviser -SSBC Fund Management Inc.("SSBC")
formerly Mutual Management Corp.
SSBC was incorporated in December 1968 under the laws
of the State of Delaware. SSBC is a wholly owned
subsidiary of Salomon Smith Barney Holdings Inc.
("Holdings")(formerly known as Smith Barney Holdings
Inc.), which in turn is a wholly owned subsidiary of
Citigroup Inc. SSBC is registered as an
investment adviser under the Investment Advisers Act
of 1940 (the "Advisers Act").The list required by this
Item 26 of officers and directors of SSBC together with
information as to any other business, profession,
vocation or employment of a substantial nature engaged
in by such officers and directors during the past two
years, is incorporated by reference to Schedules A and
D of FORM ADV filed by SSBC pursuant to the Advisers
Act (SEC File No. 801-8314).
Item 27. Principal Underwriters
(a) CFBDS, Inc. the Registrant's Distributor, is also
the distributor for
CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Equity Portfolio, CitiFundsSM Large Cap
Growth
Portfolio, CitiFundsSM Intermediate Income Portfolio,
CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM Emerging Asian Markets Equity Portfolio,
CitiFundsSM U.S. Treasury Reserves, CitiFundsSM Cash Reserves,
CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves, CitiFundsSM Institutional U.S.
Treasury Reserves, CitiFundsSM Institutional Liquid Reserves,
SM Institutional Cash Reserves, CitiFundsSM Tax Free Reserves,
CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves,
CitiFundsSM New York Tax Free Reserves, CitiFundsSM Balanced Portfolio,
CitiFundsSM Small Cap Value Portfolio, CitiFundsSM Growth & Income
Portfolio,
CitiFundsSM Small Cap Growth Portfolio, CitiFundsSM National
Tax Free Income Portfolio, CitiFundsSM New York Tax Free Income
Portfolio,
CitiSelect VIP Folio 200, Citiselect VIP Folio 300,
CitiSelect (VIP Folio 400, CitiSelect (VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect (Folio 200,
CitiSelect (Folio 300, CitiSelect (Folio 400, and CitiSelect (Folio
500.
CFBDS is also the placement agent for Large Cap Value Portfolio,
International Portfolio, Foreign Bond Portfolio,
Intermediate Income Portfolio, Short-Term Portfolio,
Growth & Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio, Emerging
Asian Markets Equity Portfolio, Tax Free Reserves Portfolio,
Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio.
CFBDS, Inc. is also the distributor for the following
Smith Barney Mutual Fund registrants:
Concert Investment Series
Consulting Group Capital Markets Funds
Greenwich Street Series Fund
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Institutional Cash Management Fund, Inc.
Smith Barney Investment Trust
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney Variable Account Funds
Smith Barney World Funds, Inc.
Travelers Series Fund Inc.
And various series of unit investment trusts.
CFBDS, Inc. is also the distributor for the following
Salomon Brothers funds;
Salomon Brothers Opportunity Fund Inc
Salomon Brothers Investors Fund Inc
Salomon Brothers Capital Fund Inc
Salomon Brothers Series Funds Inc
Salomon Brothers Institutional Series Funds Inc
Salomon Brothers Variable Series Funds Inc
The information required by this Item 27 with respect
to each director, officer and partner of CFBDS, Inc.
is incorporated by reference to Schedule A of Form BD
filed by CFBDS, Inc. pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-32417).
Item 28. Location of Accounts and Records
(1) Smith Barney Investment Funds Inc.
388 Greenwich Street
New York, New York 10013
(2) SSBC Fund Management Inc.
388 Greenwich Street
New York, New York 10013
(3) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA
(4) The Chase Manhattan Bank
Chase Metrotech Center
Brooklyn, New York 11245
(5) First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
(6) CFBDS Inc.
21 Milk Street, 5th floor
Boston, Massachusetts 02109
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of
1940, as amended, the Registrant, SMITH BARNEY
INVESTMENT FUNDS INC., has duly caused this Amendment
to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized,
all in the City of New York, State of New York on the
12th day of August, 1999.
SMITH BARNEY INVESTMENT FUNDS INC.
By: /s/ Heath B. McLendon*
Heath B. McLendon
Chief Executive Officer
WITNESS our hands on the date set forth below.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Post-Effective Amendment
to the Registration Statement has been signed below by
the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/ Heath B. McLendon Chairman of the Board 8/12/99
Heath B. McLendon (Chief Executive Officer)
/s/ Lewis E. Daidone Senior Vice President
Lewis E. Daidone and Treasurer 8/12/99
(Chief Financial
and Accounting Officer)
/s/ Paul R. Ades * Director 8/12/99
Paul R. Ades
/s/ Herbert Barg* Director 8/12/99
Herbert Barg
/s/ Dwight B. Crane* Director 8/12/99
Dwight B. Crane
/s/ Frank Hubbard* Director 8/12/99
Frank Hubbard
/s/ Jerome Miller** Director 8/12/99
Jerome Miller
/s/ Ken Miller* Director 8/12/99
Ken Miller
*Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant
to power of attorney dated November 3, 1994.
**Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant
to power of attorney dated April 15, 1998.
/s/ Heath B. McLendon
Heath B. McLendon
EXHIBITS
Exhibit No. Description of Exhibit
NONE
