Securities Act Registration No. 33-43446
Investment Company Act Registration No. 811-6444
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
Pre-Effective Amendment No. [
]
Post-Effective Amendment No. 31 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 31 [X]
__________________
Smith Barney Investment Trust
(a Massachusetts Business Trust)
(Exact Name of Registrant as Specified in Charter)
7 World Trade Center, 39th Floor
New York, New York 10048
(Address of Principal Executive Offices)
(212) 816-6474
(Registrants Telephone Number, including Area Code)
Christina T. Sydor, Secretary
Smith Barney Investment Trust
7 World Trade Center, 39th Floor
New York, New York 10048
(Name and Address of Agent for Service)
_____________________
Approximate Date of Proposed Public Offering:
Continuous.
It is proposed that this filing will become effective
(check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
of Rule 485
[ ] on (date) pursuant to paragraph (b)
of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1)
of Rule 485
[ ] On (date) pursuant to paragraph (a)(1) of Rule 485
[XX] 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:
[ ] This post-effective amendment designates
a new effective date for a previously filed
post effective amendment.
Title of Securities Being Registered: Shares of
Beneficial
PART A - PROSPECTUS FOR SMITH BARNEY EMERGING GROWTH FUND
<PAGE>
[S B] Smith Barney
[M F] Mutual Funds
Your Serious Money. Professionally Managed./SM/
P R O S P E C T U S
Smith Barney
Emerging
Growth Fund
Class A, B, L and Y Shares
--------------------------------------
February __, 2001,
--------------------------------------------------------------------------------
INVESTMENT PRODUCTS: NOT FDIC INSURED . NO BANK GUARANTEE . MAY LOSE VALUE
--------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved the fund's shares as an
investment or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
Smith Barney Emerging Growth Fund
Contents
<TABLE>
<S> <C>
Investments, risks and performance.......................................... 2
More on the fund's investments.............................................. 6
Management.................................................................. 7
Subscription offering period................................................ 8
Choosing a class of shares to buy........................................... 8
Comparing the fund's classes................................................ 10
Sales charges............................................................... 11
More about deferred sales charges........................................... 14
Buying shares............................................................... 15
Exchanging shares........................................................... 16
Redeeming shares............................................................ 17
Other things to know about share transactions............................... 19
Dividends, distributions and taxes.......................................... 21
Share price................................................................. 22
</TABLE>
Smith Barney Mutual Funds
1
<PAGE>
Investments, risks and performance
Investment objective
The fund seeks capital appreciation.
Principal investment strategies
The fund invests primarily in securities of emerging growth companies, without
regard to market capitalization. These securities may include common stock,
preferred stock and convertible securities. Emerging growth companies are
domestic or foreign companies that the manager believes are likely to benefit
from new or innovative products, services or processes. The fund may invest up
to 20% of its assets in securities of foreign issuers. While the fund will
invest without regard to market capitalization, the fund expects to invest a
significant portion of its assets in securities of small- and medium-sized com-
panies. Investing in such companies involves risks not ordinarily associated
with investments in larger, more established companies.
Selection process The manager emphasizes individual security selection while
diversifying the fund's investments across industries, which may help to reduce
risk. The manager focuses primarily, but not exclusively, on those companies
that it believes have rising earnings expectations and rising valuations. The
fund generally sells securities when earning expectations or valuations flatten
or decline. The fund may also invest in special situations involving new man-
agement, special products and techniques, unusual developments, mergers or liq-
uidations. When evaluating an individual stock, the manager considers whether
the company may benefit from:
.new technologies, products or services
.new cost control measures
.changes in management
.favorable changes in government regulations
Smith Barney Emerging Growth Fund
2
<PAGE>
Principal risks of investing in the fund
Investors could lose money on their investments in the fund, or the fund may
not perform as well as other investments, if:
.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 or medium capitalization stocks fall out of favor with investors
.A particular product or service developed by a company in which the fund
invests is unsuccessful, the company does not meet earnings expectations or
other events depress the value of the company's stock
.The manager's judgment about the attractiveness, growth prospects or potential
appreciation of a particular stock proves to be incorrect
Companies that the fund's manager believes are emerging growth companies are
often companies with limited product lines, markets, distribution channels or
financial resources and the management of such companies may be dependent upon
one or a few key people. The stocks of emerging growth companies can therefore
be subject to more abrupt or erratic market movements than stocks of larger,
more established companies or the stock market in general.
Who may want to invest The fund may be an appropriate investment if you:
.Are seeking to participate in the long-term growth potential of small and
medium capitalization companies
.Currently have exposure to the stocks commonly held by large capitalization
and/or value oriented mutual funds and wish to broaden your investment port-
folio
.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 more lim-
ited track records.
Smith Barney Mutual Funds
3
<PAGE>
Performance
The fund is new and does not yet have the performance information which other
Smith Barney funds have in bar and table form in this part of the prospectus.
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 % % % %
Distribution and service (12b-1) fees 0.25% 1.00% 1.00% None
Other expenses % % % %
----- ----- ----- -----
Total annual fund operating expenses % % % %
===== ===== ===== =====
</TABLE>
*You may buy Class A shares in amounts of $1,000,000 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%.
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
Smith Barney Emerging Growth Fund
4
<PAGE>
Number of years you own your shares
<TABLE>
<CAPTION>
1 year 3 years
<S> <C> <C>
Class A (with or without redemption) $ $
Class B (redemption at end of period) $ $
Class B (no redemption) $ $
Class L (redemption at end of period) $ $
Class L (no redemption) $ $
Class Y (with or without redemption) $ $
</TABLE>
Smith Barney Mutual Funds
5
<PAGE>
More on the fund's investments
Foreign Investments The fund may invest up to 20% of its net assets in the
securities of foreign issuers directly or in the form of depositary receipts
representing an interest in those securities. The fund's investments in securi-
ties of foreign issuers involve greater risk than investments in securities of
U.S. issuers. Many foreign countries the fund invests in have markets that are
less liquid and more volatile than markets in the U.S. In some foreign coun-
tries, 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 investing in foreign securities are greater for securities of emerging
market issuers because political or economic instability, lack of market
liquidity, and negative government actions like currency controls or seizure of
private businesses or property are more likely.
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
. Settle transactions in securities quoted in foreign currencies
. As a substitute for buying or selling securities
. To enhance return
. 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 Emerging Growth Fund
6
<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 money market instruments. If the fund takes a
temporary defensive position, it may be unable to achieve its investment goal.
Master/feeder option The fund may in the future seek to achieve its investment
objective by investing all of its net assets in another investment company hav-
ing the same investment objective and substantially the same investment poli-
cies and restrictions as those applicable to the fund.
Management
Manager The fund's investment manager is SSB Citi Fund Management LLC ("SSB
Citi"), an affiliate of Salomon Smith Barney Inc. The manager's address is 7
World Trade Center, New York, New York 10048. 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 services--asset management, banking and consumer finance, credit
and charge cards, insurance, investments, investment banking and trading--and
use diverse channels to make them available to consumer and corporate customers
around the world.
, investment officer of SSB Citi and managing director of Salomon Smith
Barney.
Management fee For its services, SSB Citi receives a fee equal on an annual
basis to % of the fund's average daily net assets.
Distribution plan The fund has adopted a Rule 12b-1 distribution plan for its
Class A, B and L shares. Under the plan, the fund pays distribution and/or
service fees. These fees are an ongoing expense and, over time, may cost you
more than other types of sales charges.
In addition, a distributor may make payments for distribution and/or share-
holder servicing activities out of its past profits and other available sourc-
es. A distributor may also make payments for marketing, promotional or related
expenses to dealers. The amount of these payments is determined by the distrib-
utor and may be substantial. The manager or an affiliate may make similar pay-
ments under similar arrangements.
Smith Barney Mutual Funds
7
<PAGE>
Transfer agent and shareholder servicing agent Citi Fiduciary Trust Company
serves as the fund's transfer agent and shareholder servicing agent (the
"transfer agent"). The transfer agent has entered into sub-transfer agency and
services agreements with PFPC Global Fund Services and PFS Shareholder Services
to serve as the fund's sub-transfer agents (the "sub-transfer agents"). The
sub-transfer agents perform certain shareholder record keeping and accounting
services and functions.
Subscription offering period
Salomon Smith Barney and investment dealers in the selling group will solicit
subscriptions for shares of the fund during the subscription offering period,
which is scheduled to end on . On the third business day after the end
of the subscription offering period, subscriptions for the shares will be pay-
able, exchanges into the fund will be permitted, shares will be issued and the
fund will commence investment operations.
The fund will suspend the offering of shares to new investors on .
This suspension, which is expected to last two weeks, may be lengthened or
shortened at the fund's sole discretion. During the suspension, existing share-
holders of the fund may still purchase, redeem or exchange fund shares. After
the suspension, the fund will commence a continuous offering of shares to the
public.
For more information on how to subscribe for fund shares during the subscrip-
tion offering period, please contact your Service Agent.
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.
Smith Barney Emergency Growth Fund
8
<PAGE>
You may buy shares from:
. A broker-dealer, financial intermediary, financial institution or a
distributor's financial consultants (each called a "Service Agent")
. The fund, but only if you are investing through certain qualified plans or
Service Agents
All classes of shares are not available through all Service Agents. You should
contact your Service Agent for further information.
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.
Smith Barney Mutual Funds
9
<PAGE>
Comparing the fund's classes
Your Service Agent can help you decide which class meets your goals. The Serv-
ice Agent may receive different compensation 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
purchases
and waived
for cer-
tain
investors.
No charge
for pur-
chases of
$1,000,000
or more
------------------------------------------------------------------------
Deferred sales charge 1.00% on Up to 1.00% if None
purchases 5.00% you redeem
of charged within 1
$1,000,000 when you year of
or more if redeem purchase
you redeem shares.
within 1 The charge
year of is 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
------------------------------------------------------------------------
Exchangable into* 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 Service Agent for the Smith Barney funds available for exchange.
Smith Barney Emerging Growth Fund
10
<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.
The table below shows the rate of sales charge you pay, depending on the amount
you purchase. The table below also shows the amount of broker/dealer compensa-
tion that is paid out of the sales charge. This compensation includes commis-
sions and other fees Service Agents that sell shares of the fund receive. The
distributors keep up to approximately 10% of the sales charge imposed on Class
A shares. Service Agents also will receive the service fee payable on Class A
shares at an annual rate equal to 0.25% of the average daily net assets repre-
sented by the Class A shares sold by them.
<TABLE>
<CAPTION>
Broker/Dealer
Sales Charge as a % of commission
Offering Net amount as a % of
Amount of purchase price (%) invested (%) offering price
<S> <C> <C> <C>
Less than $25,000 5.00 5.26 4.50
$25,000 but less than $50,000 4.25 4.44 3.83
$50,000 but less than $100,000 3.75 3.90 3.38
$100,000 but less than $250,000 3.25 3.36 2.93
$250,000 but less than $500,000 2.75 2.83 2.48
$500,000 but less than
$1,000,000 2.00 2.04 1.80
$1,000,000 or more -0- -0- up to 1.00*
</TABLE>
*A distributor pays up to 1.00% to a Service Agent.
Investments of $1,000,000 or more You do not pay an initial sales charge when
you buy $1,000,000 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%.
Smith Barney Mutual Funds
11
<PAGE>
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 made within 90 days before you sign the letter.
Waivers for certain Class A investors Class A initial sales charges are waived
for certain types of investors, including:
.Employees of NASD members
.Investors participating in a fee-based program sponsored by certain broker-
dealers affiliated with Citigroup
.Investors who redeemed Class A shares of a Smith Barney fund in the past 60
days, if the investor's Service Agent is notified
If you want to learn about additional waivers of Class A initial sales charges,
contact your Service Agent 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>
Service Agents selling Class B shares receive a commission of up to 4.50% of
the purchase price of the Class B shares they sell. Service Agents also receive
a service fee at an annual rate equal to 0.25% of the average daily net assets
represented by the Class B shares they are servicing.
Smith Barney Emerging Growth Fund
12
<PAGE>
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: Shares issued:
At initial purchase On reinvestment of Upon exchange from
dividends and another Smith Barney
distributions fund
<S> <C> <C>
Eight years after the In same proportion On the date the
date of purchase as the number of shares originally
Class B shares con- acquired would have
verting is to total converted into Class
Class B shares you A shares
own (excluding
shares issued as
dividends)
</TABLE>
Class L shares (available through certain Service Agents)
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 funds on June 12, 1998, you will not pay an initial sales charge on
Class L shares you buy before June 22, 2001.
Service Agents selling Class L shares receive a commission of up to 2.00% of
the purchase price of the Class L shares they sell. Starting in the thirteenth
month, Service Agents also receive an annual fee of up to 1.00% of the average
daily net assets represented by the Class L shares held by their clients.
Class Y shares (available through certain Service Agents)
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 also use a letter of intent to meet this
requirement by buying Class Y shares over a 13-month period. To qualify, you
must initially invest $5,000,000.
Smith Barney Mutual Funds
13
<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
Each time you place a request to redeem shares, the fund will first redeem any
shares in your account that are not subject to a deferred sales charge and then
the shares in your account that have been held the longest.
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 Service Agent.
The fund's distributors receive deferred sales charges as partial compensation
for their expenses in selling shares, including the payment of compensation to
your Service Agent.
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 Service Agent or consult the SAI.
Smith Barney Emerging Growth Fund
14
<PAGE>
Buying shares
Through a You should contact your Service Agent to open a brokerage
Service Agent account and make arrangements to buy shares.
If you do not provide the following information, your order
will be rejected:
.Class of shares being bought
.Dollar amount or number of shares being bought
Your Service Agent may charge an annual account maintenance
fee.
--------------------------------------------------------------------------------
Through the Qualified retirement plans and certain other investors who
fund are clients of certain Service Agents are eligible to buy
shares directly from the fund.
.Write the fund at the following address:
Smith Barney Investment Trust
Smith Barney Emerging Growth Fund
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
.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 a Service Agent or a sub-transfer agent to
systematic transfer funds, automatically from (i) a regular bank
investment account, (ii) cash held in a brokerage account opened with a
plan Service Agent or (iii) certain money market funds, in order
to buy shares on a regular basis.
.Amounts transferred should be at least: $25 monthly or $50
quarterly.
.If you do not have sufficient funds in your account on a
transfer date, your Service Agent or the sub--transfer
agent may charge you a fee.
For more information, contact your Service Agent or the
transfer agent or consult the SAI.
Smith Barney Mutual Funds
15
<PAGE>
Exchanging shares
Smith Barney You should contact your Service Agent to exchange into other
offers a Smith Barney funds. Be sure to read the prospectus of the
distinctive Smith Barney fund you are exchanging into. An exchange is a
family of taxable transaction.
funds
tailored to .You may exchange shares only for shares of the same class of
help meet the another Smith Barney fund. Not all Smith Barney funds offer
varying needs all classes.
of both large .Not all Smith Barney funds may be offered in your state of
and small residence. Contact your Service Agent or the transfer agent
investors for further information.
.You must meet the minimum investment amount for each fund
(except for systematic investment plan exchanges).
.If you hold share certificates, the sub-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.
--------------------------------------------------------------------------------
Your shares will not be subject to an initial sales charge at
Waiver of the time of the exchange.
additional
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.
--------------------------------------------------------------------------------
By telephone If you do not have a brokerage account with a Service Agent,
you may be eligible to exchange shares through the fund. You
must complete an authorization form to authorize telephone
transfers. If eligible, you may make telephone exchanges on
any day the New York Stock Exchange is open. For clients of a
PFS Investments Registered Representative, call PFS Share-
holder Services at 1-800-544-5445 between 8:00 a.m. and 8:00
p.m. (Eastern time). All other shareholders should call the
transfer agent at 1-800-451-2010 between 9:00 a.m. and 4:00
p.m. (Eastern time). Requests received after the close of
regular trading on the Exchange are priced at the net asset
value next determined.
You can make telephone exchanges only between accounts that
have identical registrations.
--------------------------------------------------------------------------------
Smith Barney Emerging Growth Fund
16
<PAGE>
By mail If you do not have a brokerage account, contact your Service
Agent or write to a sub-transfer agent at the address listed
below.
Redeeming shares
Generally Contact your Service Agent to redeem shares of the fund.
If you hold share certificates, the sub-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 brokerage account with a Service Agent, 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.
--------------------------------------------------------------------------------
By mail For accounts held directly at the fund, send written requests
to the fund at either of the following addresses:
For clients of a PFS Investments Registered Representative,
write PFS Shareholder Services at the following address:
PFS Shareholder Services
P.O. Box 105043
Atlanta, GA 30348-5043
For all other investors, send your request to PFPC Global
Fund Services at the following address:
Smith Barney Investment Trust
Smith Barney Emerging Growth Fund
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
Smith Barney Mutual Funds
17
<PAGE>
Your written request must provide the following:
.The fund name and 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
registered
--------------------------------------------------------------------------------
By telephone If you do not have a brokerage account with a Service Agent,
you may be eligible to redeem shares (except those held in
retirement plans) in amounts up to $50,000 per day through
the fund. You must complete an authorization form to autho-
rize telephone redemptions. If eligible, you may request
redemptions by telephone on any day the New York Stock
Exchange is open. For clients of a PFS Investments Registered
Representative, call PFS Shareholder Services at 1-800-544-
5445 between 8:00 a.m. and 8:00 p.m. (Eastern time). All
other shareholders should call the transfer agent at 1-800-
451-2010 between 9:00 a.m. and 4:00 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 or electronic transfer (ACH) to a bank
account designated on your authorization form. You must sub-
mit a new authorization form to change the bank account des-
ignated to receive wire or electronic transfers and you may
be asked to provide certain other documents. The sub-transfer
agents may charge a fee on an electronic transfer (ACH).
--------------------------------------------------------------------------------
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 are equal to or less than 1% per
month of the value of your shares subject to a deferred sales
charge.
The following conditions apply:
.Your shares must not be represented by certificates
.All dividends and distributions must be reinvested
For more information, contact your Service Agent or consult
the SAI.
Smith Barney Emerging 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 fund will try to confirm that any telephone exchange or redemption request
is genuine by recording calls, asking the caller to provide certain personal
identification information, 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 $50,000
.Are sending signed share certificates or stock powers to the sub-transfer
agent
.Instruct the sub-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 ($250 for IRA accounts)
because of a redemption of fund shares, the fund may ask you to bring your
account up to the applicable minimum investment amounts. If you choose not to
do so within 60 days, the fund may close your account and send you the redemp-
tion 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 signed by all registered owners is made to the sub-transfer agent. If
you hold share certificates it will take longer to exchange or redeem shares.
Smith Barney Emerging Growth Funds
20
<PAGE>
Dividends, distributions and taxes
Dividends The fund generally pays dividends and makes capital gain distribu-
tions, 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. Unless otherwise directed, capital gain distributions and divi-
dends are reinvested in additional 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 Service Agent, the transfer agent or a sub-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 your Service Agent, transfer agent or a sub-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 capital gain distribution 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.
Smith Barney Mutual Funds
21
<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 portfolio securities based on market prices or
quotations. The fund's currency conversions are calculated when the London
Stock Exchange closes, which is 12 noon Eastern time. When reliable market
prices or quotations are not readily available, or when the value of a security
has been materially affected by events occurring after a foreign exchange
closes, the fund may price those securities at fair value. Fair value is deter-
mined in accordance 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 Service Agent or one of the fund's sub-transfer agents
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.
Service Agents must transmit all orders to buy, exchange or redeem shares to
one of the fund's sub-transfer agents before the sub-transfer agent's close of
business.
Smith Barney Emerging Growth Fund
22
<PAGE>
[S B] Smith Barney
[M F] Mutual Funds
Your Serious Money. Professionally Managed./SM/
Smith Barney
Emerging
Growth Fund
An investment portfolio of Smith Barney Investment Trust
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 significantly affected the fund's
performance during its last fiscal year or period.
The fund sends only one report to a household if more than one account has the
same address. Contact your Service Agent 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 Service
Agent, by calling the fund's sub--transfer agents (PFS Shareholders Services at
1-800-544-5445 or PFPC Global Fund Services at 1-800-451-2010), or by writing
to the fund at Smith Barney Mutual Funds, 7 World Trade Center, New York, New
York 10048.
Information about the fund (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's (the "Commission") Public Reference
Room in Washington, D.C. In addition, information on the operation of the Pub-
lic Reference Room may be obtained by calling the Commission at 1-202-942-8090.
Reports and other information about the fund are available on the EDGAR Data-
base on the Commission's Internet site at http://www.sec.gov. Copies of this
information may be obtained for a duplicating fee by electronic request at the
following E-mail address: [email protected], or by writing the Commission's
Public Reference Section, Washington, D.C. 20549-0102.
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.
/SM/Your Serious Money. Professionally Managed. is a service mark of Salomon
Smith Barney Inc.
(Investment Company Act
file no. 811-06444)
/01
PART B - STATEMENT OF ADDITIONAL INFORMATION FOR SMITH BARNEY
EMERGING GROWTH FUND
February , 2001
STATEMENT OF ADDITIONAL INFORMATION
SMITH BARNEY INVESTMENT TRUST
Smith Barney Emerging Growth Fund
388 Greenwich Street
New York, New York 10013
(800) 451-2010
This Statement of Additional Information ("SAI") is
meant to be read in conjunction with the prospectus
of the Smith Barney Emerging Growth Fund (the "fund")
dated February , 2001, as amended or supplemented
from time to time (the "prospectus"), and is
incorporated by reference in its entirety into the
prospectus. Additional information about the fund's
investments is available in the fund's annual and
semi-annual reports to shareholders which are
incorporated herein by reference. The prospectus and
copies of the reports may be obtained free of charge
by contacting a broker-dealer, financial
intermediary, financial institution or a
distributor's financial consultants (each called a
"Service Agent"), or by writing or calling Salomon
Smith Barney Inc. ("Salomon Smith Barney") at the
address or telephone number above. The fund is a
separate investment series of Smith Barney Investment
Trust (the "trust").
TABLE OF CONTENTS
Investment Objective, Management Policies and Risks
Investment Restrictions...... .............
Trustees of the Trust and Executive Officers of the
Fund
Investment Management and Other Services
Portfolio Transactions... .............................
Portfolio Turnover............................
Purchase of Shares .............................................
PFS Accounts..............................................................
Redemption of Shares
Valuation of Shares
Exchange Privilege
Performance Data .......................................................
Dividends, Distributions and Taxes
Additional Information
INVESTMENT OBJECTIVE, MANAGEMENT POLICIES AND RISKS
The prospectus discusses the fund's investment
objective and policies. 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
associated with these investments, policies and
strategies. SSB Citi Fund Management LLC ("SSB Citi"
or the "manager") serves as investment manager to the
fund.
The fund normally invests at least 65% of its total
assets in equity securities of emerging growth
companies, without regard to market capitalization.
These are domestic or foreign companies the manager
believes are likely to benefit from new or innovative
products, services or processes. While the fund will
invest without regard to market capitalization, the
fund expects to invest a significant portion of its
assets in securities of small- and medium-sized
companies. Investments in such companies may offer
greater opportunities for growth of capital than
larger, more established companies, but also may
involve certain special risks. Emerging growth
companies often have limited product lines, markets
or financial resources, and they may be dependent
upon one or a few key people for management. The
securities of such companies may be subject to more
abrupt or erratic market movements than securities of
larger, more established companies or the market
averages in general. While the portfolio will invest
primarily in common stocks, to a limited extent it
may invest in other securities such as preferred
stocks, convertible securities and warrants.
The fund does not limit its investments to any single
group or type of security. The fund also may invest
in special situations involving new management,
special products and techniques, unusual
developments, mergers or liquidations. Investments in
unseasoned companies and special situations often
involve much greater risks than are inherent in
ordinary investments, because securities of such
companies may be more likely to experience unexpected
fluctuations in price.
The fund may invest in securities that have above-
average volatility of price movement. Because prices
of common stocks and other securities fluctuate, the
value of an investment in the portfolio will vary
based upon its investment performance. The fund
attempts to reduce overall exposure to risk from
declines in securities prices by spreading its
investments over many different companies in a
variety of industries. There is, however, no
assurance that the fund will be successful in
achieving its objective.
The fund may invest up to 20% of its total assets in
securities of foreign issuers. Additionally, the
portfolio may invest up to 15% of the value of its
total assets in restricted securities (i.e.,
securities that may not be sold without registration
under the Securities Act of 1933, as amended (the
"1933 Act")) and in other securities not having
readily available market quotations. The fund may
enter into repurchase agreements with domestic banks
and broker-dealers, which involve certain risks.
Under normal market conditions, the majority of the
fund's portfolio will consist of common stock, but it
also may contain money market instruments for cash
management purposes. The fund reserves the right, as
a defensive measure, to hold money market securities,
including repurchase agreements or cash, in such
proportions as, in the opinion of management,
prevailing market or economic conditions warrant.
Risks Associated with Particular Investments
Market Risk. Market risk is the possibility that the
market values of securities owned by the fund will
decline. Market risk may affect a single issuer,
industry, sector of the economy or the market as a
whole. Investments in common stocks generally are
affected by changes in the stock markets, which
fluctuate substantially over time, sometimes suddenly
and sharply. The fund emphasizes a "growth" style of
investing. The market values of such securities may
be more volatile than other types of investments. The
returns on "growth" securities may or may not move in
tandem with the returns on other styles of investing
or the overall stock markets. During an overall stock
market decline, stock prices of smaller or unseasoned
companies often fluctuate more and may fall more than
the stock prices of larger, more established
companies. Historically, smaller and medium sized
company stocks have sometimes gone through extended
periods when they did not perform as well as larger
company stocks. The fund may from time to time
emphasize certain sectors of the market. To the
extent the fund invests a significant portion of its
assets in securities of companies in the same sector
of the market, it is more susceptible to economic,
political, regulatory and other occurrences
influencing those sectors.
Emerging Growth and Smaller Capitalization Companies;
Unseasoned Issuers. Investments in securities of
small- and medium-sized, emerging growth companies
and companies with continuous operations of less than
three years ("unseasoned issuers") involve
considerations that are not applicable to investing
in securities of established, larger-capitalization
issuers, including reduced and less reliable
information about issuers and markets, less stringent
financial disclosure requirements, illiquidity of
securities and markets, higher brokerage commissions
and fees and greater market risk in general.
Securities of these companies may also involve
greater risks since these securities may have limited
marketability and, thus, may be more volatile.
Because such companies normally have fewer shares
outstanding than larger, more established companies,
it may be more difficult for a Fund to buy or sell
significant amounts of such shares without an
unfavorable impact on prevailing prices. These
companies may have limited product lines, markets or
financial resources and may lack management depth.
In addition, these companies are typically subject to
a greater degree of changes in earnings and business
prospects than are larger, more established
companies. Although investing in securities of these
companies offers potential for above-average returns
if the companies are successful, the risk exists that
the companies will not succeed and the prices of the
companies' shares could significantly decline in
value.
Special Situations. Although the fund does not
currently intend to do so, it may invest in "special
situations." A special situation arises when, in the
opinion of the fund's manager, the securities of a
particular company will, within a reasonably
estimable period of time, be accorded market
recognition at an appreciated value solely by reason
of a development applicable to that company, and
regardless of general business conditions or
movements of the market as a whole. Developments
creating special situations might include, among
others: liquidations, reorganizations,
recapitalizations, mergers, material litigation,
technical breakthroughs, and new management or
management policies. Although large and well-known
companies may be involved, special situations more
often involve comparatively small or unseasoned
companies. Investments in unseasoned companies and
special situations often involve much greater risk
than is inherent in ordinary investment securities.
Liquidity Risk. A fund's portfolio is liquid if the
fund is able to sell the securities it owns at a fair
price within a reasonable time. Liquidity is
generally related to the market trading volume for a
particular security. Investments in smaller companies
or in foreign companies or companies in emerging
markets are subject to a variety of risks, including
potential lack of liquidity.
Lack of Timely Information Risk. Timely information
about a security or its issuer may be unavailable,
incomplete or inaccurate. This risk is more common
to smaller company securities issued by foreign
companies and companies in emerging markets than it
is to the securities of U.S.-based companies.
Foreign Risks. Because the fund may own securities
of foreign issuers, it may be subject to risks not
usually associated with owning securities of U.S.
issuers. These risks can include fluctuations in
foreign currencies, foreign currency exchange
controls, political and economic instability,
differences in financial reporting, differences in
securities regulation and trading, and foreign
taxation issues.
Risks of Using Derivative Instruments. In general
terms, a derivative instrument is one whose value
depends on (or is derived from) the value of an
underlying asset, interest rate or index. Options,
futures and options on futures are examples of
derivative instruments. Derivative instruments
involve risks different from the direct investment in
underlying securities. These risks include imperfect
correlation between the value of the instruments and
the underlying assets; risks of default by the other
party to certain transactions; risks that the
transactions may result in losses that partially or
completely offset gains in portfolio positions; and
risks that the transactions may not be liquid.
Manager Risk. As with any managed fund, the Fund's
manager may not be successful in selecting the best-
performing securities or investment techniques, and
the Fund's performance may lag behind that of similar
funds.
Master/feeder fund structure. The Board of Trustees
has the discretion to retain the current distribution
arrangement for the fund while investing the fund's
assets in a master fund in a master/feeder fund
structure. A master/feeder fund structure is one in
which a fund (a "feeder fund"), instead of investing
directly in a portfolio of securities, invests most
or all of its investment assets in a separate
registered investment company (the "master fund")
with substantially the same investment objective and
policies as the feeder fund. Such a structure
permits the pooling of assets of two or more feeder
funds, preserving separate identities or distribution
channels at the feeder fund level. Based on the
premise that certain of the expenses of operating an
investment portfolio are relatively fixed, a larger
investment portfolio may eventually achieve a lower
ratio of operating expenses to average net assets.
An existing investment company is able to convert to
a feeder fund by selling all of its investments,
which involves brokerage and other transaction costs
and realization of a taxable gain or loss, or by
contributing its assets to the master fund and
avoiding transaction costs and, if proper procedures
are followed, the realization of taxable gain or
loss.
Equity Securities. The fund will normally invest at
least 65% of its assets in equity securities,
including primarily common stocks and, to a lesser
extent, preferred stocks, securities convertible into
common stock and rights to subscribe for common
stock. Common stocks represent an equity (ownership)
interest in a corporation. Although equity
securities have a history of long-term growth in
value, their prices fluctuate based on changes in a
company's financial condition and on overall market
and economic conditions.
Preferred Stock The fund may invest in preferred
stocks, which, like debt obligations, are generally
fixed-income securities. Shareholders of preferred
stocks normally have the right to receive dividends
at a fixed rate when and as declared by the issuer's
board of directors, but do not participate in other
amounts available for distribution by the issuing
corporation. Preferred stock dividends must be paid
before common stock dividends and, for that reason,
preferred stocks generally entail less risk than
common stocks. Upon liquidation, preferred stocks
are entitled to a specified liquidation preference,
which is generally the same as the par or stated
value, and are senior in right of payment to common
stock. Preferred stocks are, however, equity
securities in the sense that they do not represent a
liability of the issuer and, therefore, do not offer
as great a degree of protection of capital or
assurance of continued income as investments in
corporate debt securities. In addition, preferred
stocks are subordinated in right of payment to all
debt obligations and creditors of the issuer and
convertible preferred stocks may be subordinated to
other preferred stock of the same issuer.
Convertible Securities The fund may invest in
convertible securities. A convertible security is a
fixed-income security (a bond or preferred stock)
which may be converted at a stated price within a
specified period of time into a certain quantity of
common stock or other equity securities of the same
or a different issuer. Convertible securities rank
senior to common stock in a corporation's capital
structure but are usually subordinated to similar
non-convertible securities. While providing a fixed-
income stream (generally higher in yield than the
income derivable from common stock but lower than
that afforded by a similar non-convertible security),
a convertible security also affords an investor the
opportunity, through its conversion feature, to
participate in the capital appreciation attendant
upon a market price advance in the convertible
security's underlying common stock.
In general, the market value of a convertible
security is at least the higher of its "investment
value" (i.e., its value as a fixed-income security)
or its "conversion value" (i.e., its value upon
conversion into its underlying stock). As a fixed-
income security, a convertible security tends to
increase in market value when interest rates decline
and tends to decrease in value when interest rates
rise. However, the price of a convertible security
is also influenced by the market value of the
security's underlying common stock. The price of a
convertible security tends to increase as the market
value of the underlying stock rises, whereas it tends
to decrease as the market value of the underlying
stock declines. While no securities investment is
without some risk, investments in convertible
securities generally entail less risk than
investments in the common stock of the same issuer.
When-Issued Securities and Delayed-Delivery
Transactions. The fund may purchase securities on a
"when-issued" basis, for delayed delivery (i.e.,
payment or delivery occur beyond the normal
settlement date at a stated price and yield) or on a
forward commitment basis. The fund does not intend
to engage in these transactions for speculative
purposes, but only in furtherance of its investment
goal. These transactions occur when securities are
purchased or sold by the fund with payment and
delivery taking place in the future to secure what is
considered an advantageous yield and price to the
fund at the time of entering into the transaction.
The payment obligation and the interest rate that
will be received on when-issued securities are fixed
at the time the buyer enters into the commitment.
Because of fluctuations in the value of securities
purchased or sold on a when-issued, delayed-delivery
basis or forward commitment basis, the prices
obtained on such securities may be higher or lower
than the prices available in the market on the dates
when the investments are actually delivered to the
buyers.
When the fund agrees to purchase when-issued or
delayed-delivery securities, the fund will set aside
cash or liquid securities equal to the amount of the
commitment in a segregated account on the fund's
books. Normally, the custodian will set aside
portfolio securities to satisfy a purchase
commitment, and in such a case the fund may be
required subsequently to place additional assets in
the segregated account in order to ensure that the
value of the account remains equal to the amount of
the fund's commitment. The assets contained in the
segregated account will be marked-to-market daily.
It may be expected that the fund's net assets will
fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase
commitments than when it sets aside cash. When the
fund engages in when-issued or delayed-delivery
transactions, it relies on the other party to
consummate the trade. Failure of the seller to do so
may result in the fund's incurring a loss or missing
an opportunity to obtain a price considered to be
advantageous.
Money Market Instruments. The fund may invest for
temporary defensive purposes in corporate and
government bonds and notes and money market
instruments. Money market instruments include:
obligations issued or guaranteed by the United States
government, its agencies or instrumentalities ("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.
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.
Repurchase Agreements. The fund may agree to
purchase securities from a bank or recognized
securities dealer and simultaneously commit to resell
the securities to the bank or dealer at an agreed-
upon date and price reflecting a market rate of
interest unrelated to the coupon rate or maturity of
the purchased securities ("repurchase agreements").
The fund would maintain custody of the underlying
securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the
repurchase price on the date agreed to would be, in
effect, secured by such securities. If the value of
such securities were less than the repurchase price,
plus interest, the other party to the agreement would
be required to provide additional collateral so that
at all times the collateral is at least 102% of the
repurchase price plus accrued interest. Default by
or bankruptcy of a seller would expose the fund to
possible loss because of adverse market action,
expenses and/or delays in connection with the
disposition of the underlying obligations. The
financial institutions with which the fund may enter
into repurchase agreements will be banks and non-bank
dealers of U.S. Government securities on the Federal
Reserve Bank of New York's list of reporting dealers,
if such banks and non-bank dealers are deemed
creditworthy by the fund's manager. The manager will
continue to monitor creditworthiness of the seller
under a repurchase agreement, and will require the
seller to maintain during the term of the agreement
the value of the securities subject to the agreement
to equal at least 102% of the repurchase price
(including accrued interest). In addition, the
manager will require that the value of this
collateral, after transaction costs (including loss
of interest) reasonably expected to be incurred on a
default, be equal to 102% or greater than the
repurchase price (including accrued premium) provided
in the repurchase agreement or the daily amortization
of the difference between the purchase price and the
repurchase price specified in the repurchase
agreement. The manager will mark-to-market daily the
value of the securities. Repurchase agreements are
considered to be loans by the fund under the
Investment Company Act of 1940, as amended (the "1940
Act").
Lending of Portfolio Securities. Consistent with
applicable regulatory requirements, the fund may lend
portfolio securities to brokers, dealers and other
financial organizations that meet capital and other
credit requirements or other criteria established by
the Board. The fund will not lend portfolio
securities to affiliates of the manager unless they
have applied for and received specific authority to
do so from the Securities and Exchange Commission
("SEC"). Loans of portfolio securities will be
collateralized by cash, letters of credit or U.S.
Government Securities, which are maintained at all
times in an amount equal to at least 102% of the
current market value of the loaned securities. Any
gain or loss in the market price of the securities
loaned that might occur during the term of the loan
would be for the account of the fund. From time to
time, the fund may return a part of the interest
earned from the investment of collateral received for
securities loaned to the borrower and/or a third
party that is unaffiliated with the fund and that is
acting as a "finder."
By lending its securities, the fund can increase its
income by continuing to receive interest and any
dividends on the loaned securities as well as by
either investing the collateral received for
securities loaned 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. Although the generation of income is not
the primary investment goal of the fund, income
received could be used to pay the fund's expenses and
would increase an investor's total return. The fund
will adhere to the following conditions whenever its
portfolio securities are loaned: (i) the fund must
receive at least 102% cash collateral or equivalent
securities of the type discussed in the preceding
paragraph from the borrower; (ii) the borrower must
increase such collateral whenever the market value of
the securities rises above the level of such
collateral; (iii) the fund must be able to terminate
the loan at any time; (iv) the fund must receive
reasonable interest on the loan, as well as any
dividends, interest or other distributions on the
loaned securities and any increase in market value;
(v) the fund may pay only reasonable custodian fees
in connection with the loan; and (vi) voting rights
on the loaned securities may pass to the borrower,
provided, however, that if a material event adversely
affecting the investment occurs, the Board must
terminate the loan and regain the right to vote the
securities. Loan agreements involve certain risks in
the event of default or insolvency of the other party
including possible delays or restrictions upon a
Fund's ability to recover the loaned securities or
dispose of the collateral for the loan.
Illiquid Securities The fund may invest up to 15% of
the value of its net assets in securities as to which
a liquid trading market does not exist, provided such
investments are consistent with its investment
objective. Such securities may include securities
that are not readily marketable, such as privately
issued securities and other securities that are
subject to legal or contractual restrictions on
resale, floating- and variable-rate demand
obligations as to which the Fund cannot exercise a
demand feature on not more than seven days' notice
and as to which there is no secondary market and
repurchase agreements providing for settlement more
than seven days after notice.
Rule 144A Securities Each Fund may invest in
privately issued securities, including those which
may be resold only in accordance with Rule 144A under
the Securities Act of 1933 ("Rule 144A Securities").
Rule 144A Securities are restricted securities that
are not publicly traded. Accordingly, the liquidity
of the market for specific Rule 144A Securities may
vary. Delay or difficulty in selling such securities
may result in a loss to the Fund. Privately issued
or Rule 144A securities that are determined by the
portfolio managers to be "illiquid" are subject to
the Fund's policy of not investing more than 15% of
its net assets in illiquid securities. The portfolio
managers, under guidelines approved by the board of
trustees, will evaluate the liquidity characteristics
of each Rule 144A Security proposed for purchase by
the Fund on a case-by-case basis and will consider
the following factors, among others, in their
evaluation: (1) the frequency of trades and quotes
for the Rule 144A Security; (2) the number of dealers
willing to purchase or sell the Rule 144A Security
and the number of other potential purchasers;
(3) dealer undertakings to make a market in the Rule
144A Security; and (4) the nature of the Rule 144A
Security and the nature of the marketplace trades
(e.g., the time needed to dispose of the Rule 144A
Security, the method of soliciting offers and the
mechanics of transfer).
Options, Futures and Currency Exchange Transactions
Securities Options. The fund may write covered call
options on stock securities and may purchase U.S.
exchanged-traded and over-the counter ("OTC") put and
call options.
The fund realizes fees (referred to as "premiums")
for granting the rights evidenced by the options it
has written. A put option embodies the right of its
purchaser to compel the writer of the option to
purchase from the option holder an underlying
security at a specified price for a specified time
period or at a specified time. In contrast, a call
option embodies the right of its purchaser to compel
the writer of the option to sell to the option holder
an underlying security at a specified price for a
specified time period or at a specified time.
The principal reason for writing covered options on a
security 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 fund as the writer of a covered call
option forfeits 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 fund as a call writer retains the risk of a
decline in the price of the underlying security. The
size of the premiums that 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.
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, the time
required to convert or exchange and obtain physical
delivery of the underlying common stock 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, since the fund will have the
absolute right to receive from the issuer of the
underlying security an equal number of shares to
replace the borrowed securities, but the fund may
incur additional transaction costs or interest
expenses in connection with any such purchase or
borrowing.
Additional risks exist with respect to certain of the
securities for which the fund may write covered call
options. For example, if the fund writes covered
call options on mortgage-backed securities, the
mortgage-backed securities that it holds as cover
may, because of scheduled amortization or unscheduled
prepayments, cease to be sufficient cover. If this
occurs, the fund will compensate for the decline in
the value of the cover by purchasing an appropriate
additional amount of mortgage-backed securities.
Options written by the fund will normally have
expiration dates between one and twelve months from
the date written. The exercise price of the options
may be below, equal to or above the 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 (i) in-the-money call options when
the manager expects that the price of the underlying
security will remain flat or decline moderately
during the option period, (ii) at-the-money call
options when the manager expects that the price of
the underlying security will remain flat or advance
moderately during the option period and
(iii) out-of-the-money call options when the manager
expects that the premiums received from writing the
call option plus the appreciation in market price of
the underlying security up to the exercise price will
be greater than the appreciation in the price of the
underlying security alone. 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. To
secure its obligation to deliver the underlying
security when it writes a call 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 (the "Clearing
Corporation") and of the securities exchange on which
the option is written.
Prior to their expirations, put and call options may
be sold in closing sale or purchase transactions
(sales or purchases by the fund prior to the exercise
of options that it has purchased or written,
respectively, of options of the same series) in which
the fund may realize a profit or loss from the sale.
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. When the fund has purchased
an option and engages in a closing sale transaction,
whether the fund realizes 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.
Similarly, in cases where the 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. The fund may engage in a
closing purchase transaction to realize a profit, to
prevent an underlying security with respect to which
it has written an option from being called or put or,
in the case of a call option, to unfreeze an
underlying security (thereby permitting its sale or
the writing of a new option on the security prior to
the outstanding option's expiration). The obligation
of the fund under an option it has written would be
terminated by a closing purchase transaction, but the
fund would not be deemed to own an option as a result
of the transaction. 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 the fund to deliver 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.
There is no assurance that sufficient trading
interest will exist to create a liquid secondary
market on a securities exchange 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 various 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. Moreover, the fund's ability
to terminate options positions established in the
over-the-counter market may be more limited than for
exchange-traded options and may also involve the risk
that securities dealers participating in
over-the-counter transactions would fail to meet
their obligations to the fund. The fund, however,
intends to purchase over-the-counter options only
from dealers whose debt securities, as determined by
the manager, are considered to be investment grade.
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. In
either case, the fund would continue to be at market
risk on the security and could face higher
transaction costs, including brokerage commissions.
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 time 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 the manager and certain of its
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. These
limits may restrict the number of options the fund
will be able to purchase on a particular security.
Stock Index Options. The fund may purchase and write
exchange-listed and OTC put and call options on stock
indexes. A stock index measures the movement of a
certain group of stocks by assigning relative values
to the common stocks included in the index,
fluctuating 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 NYSE Composite Index, or a narrower market index
such as the Standard & Poor's 100. Indexes may also
be based on a particular industry or market segment.
Options on stock indexes are similar to options on
stock except that (i) the expiration cycles of stock
index options are monthly, while those of stock
options are currently quarterly, and (ii) 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 index
and the exercise price of the option times a
specified multiple. The writer of the option is
obligated, in return for the premium received, to
make delivery of this amount. Stock index options
may be offset by entering into closing transactions
as described above for securities options.
OTC Options. The fund may purchase OTC or dealer
options or sell OTC options. Unlike exchange-listed
options where an intermediary or clearing
corporation, such as the Clearing Corporation,
assures that all transactions in such options are
properly executed, the responsibility for performing
all transactions with respect to OTC options rests
solely with the writer and the holder of those
options. A listed call option writer, for example,
is obligated to deliver the underlying stock to the
clearing organization if the option is exercised, and
the clearing organization is then obligated to pay
the writer the exercise price of the option. If the
fund were to purchase a dealer option, however, it
would rely on the dealer from whom it purchased the
option to perform if the option were exercised. If
the dealer fails to honor the exercise of the option
by the fund, the fund would lose the premium it paid
for the option and the expected benefit of the
transaction.
Listed options generally have a continuous liquid
market while dealer options have none. Consequently,
the fund will generally be able to realize the value
of a dealer option it has purchased only by
exercising it or reselling it to the dealer who
issued it. Similarly, when the fund writes a dealer
option, it generally will be able to close out the
option prior to its expiration only by entering into
a closing purchase transaction with the dealer to
which the fund originally wrote the option. Although
the fund will seek to enter into dealer options only
with dealers who will agree to and that are expected
to be capable of entering into closing transactions
with the fund, there can be no assurance that the
fund will be able to liquidate a dealer option at a
favorable price at any time prior to expiration. The
inability to enter into a closing transaction may
result in material losses to the fund. Until the
fund, as a covered OTC call option writer, is able to
effect a closing purchase transaction, it will not be
able to liquidate securities (or other assets) used
to cover the written option until the option expires
or is exercised. This requirement may impair the
fund's ability to sell portfolio securities or, with
respect to currency options, currencies at a time
when such sale might be advantageous. In the event
of insolvency of the other party, the fund may be
unable to liquidate a dealer option.
Futures Activities. The fund may enter into foreign
currency, interest rate and stock index futures
contracts and purchase and write (sell) related
options traded on exchanges designated by the
Commodity Futures Trading Commission (the "CFTC") or
consistent with CFTC regulations on foreign
exchanges. These transactions may be entered into
for "bona fide hedging" purposes as defined in CFTC
regulations and other permissible purposes including
hedging against changes in the value of portfolio
securities due to anticipated changes in currency
values, interest rates and/or market conditions and
increasing return.
The fund will not enter into futures contracts and
related options for which the aggregate initial
margin and premiums (discussed below) required to
establish positions other than those considered to be
"bona fide hedging" by the CFTC exceed 5% of the
fund's net asset value after taking into account
unrealized profits and unrealized losses on any such
contracts it has entered into. The fund reserves the
right to engage in transactions involving futures
contracts and options on futures contracts to the
extent allowed by CFTC regulations in effect from
time to time and in accordance with the Fund's
policies. There is no overall limit on the
percentage of fund assets that may be at risk with
respect to futures activities.
The over the counter market in forward foreign
currency exchange contracts offers less protection
against defaults by the other party to such
instruments than is available for currency
instruments traded on an exchange. Such contracts
are subject to the risk that the counterparty to the
contract will default on its obligations. Since
these contracts are not guaranteed by an exchange or
clearinghouse, a default on the contract would
deprive the fund of unrealized profits, transaction
costs or the benefits of a currency hedge or force
the fund to cover its purchase or sale commitments,
if any, at the current market price. Currency
exchange rates may fluctuate significantly over short
periods of time. They generally are determined by
the forces of supply and demand in the foreign
exchange markets and the relative merits of
investments in different countries, actual or
perceived changes in interest rates and other complex
factors as seen from an international perspective.
Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign
governments or central banks, or the failure to
intervene, or by currency controls or political
developments in the U.S. or abroad.
Futures Contracts. A foreign currency futures
contract provides for the future sale by one party
and the purchase by the other party of a certain
amount of a specified non-U.S. currency at a
specified price, date, time and place. An interest
rate futures contract provides for the future sale by
one party and the purchase by the other party of a
certain amount of a specific interest rate sensitive
financial instrument (debt security) at a specified
price, date, time and place. Stock indexes are
capitalization weighted indexes which reflect the
market value of the stock listed on the indexes. A
stock index futures contract is an agreement to be
settled by delivery of an amount of cash equal to a
specified multiplier times the difference between the
value of the index at the close of the last trading
day on the contract and the price at which the
agreement is made.
No consideration is paid or received by the fund upon
entering into a futures contract. Instead, the fund
is required to deposit in a segregated account with
its custodian an amount of cash or liquid securities
acceptable to the broker, equal to approximately 1%
to 10% of the contract amount (this amount is subject
to change by the exchange on which the contract is
traded, and brokers 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. The
broker will have access to amounts in the margin
account if the fund fails to meet its contractual
obligations. Subsequent payments, known as
"variation margin," to and from the broker, will be
made daily as the currency, financial instrument or
stock index 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." The fund will also
incur brokerage costs in connection with entering
into futures transactions.
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. Positions in futures contracts and options
on futures contracts (described below) may be closed
out only on the exchange on which they were entered
into (or through a linked exchange). No secondary
market for such contracts exists. Although the fund
intends to enter into futures contracts only if there
is an active market for such contracts, there is no
assurance that an active market will exist at any
particular time. Most futures exchanges 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 or trading may be suspended for specified
periods during the day. 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 at an advantageous price and
subjecting the fund 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 situations, if
the fund had insufficient cash, it might have to sell
securities to meet daily variation margin
requirements at a time when it would be
disadvantageous to do so. In addition, if the
transaction is entered into for hedging purposes, in
such circumstances the fund may realize a loss on a
futures contract or option that is not offset by an
increase in the value of the hedged position. Losses
incurred in futures transactions and the costs of
these transactions will affect the fund's
performance.
Options on Futures Contracts. The fund may purchase
and write put and call options on foreign currency,
interest rate and stock index futures contracts and
may enter into closing transactions with respect to
such options to terminate existing positions. There
is no guarantee that such closing transactions can be
effected; the ability to establish and close out
positions on such options will be subject to the
existence of a liquid market.
An option on a currency, interest rate or stock index
futures contract, as contrasted with the direct
investment in such a contract, gives the purchaser
the right, in return for the premium paid, to assume
a position in a futures contract at a specified
exercise price at any time prior to the expiration
date of the option. The writer of the option is
required upon exercise to assume an offsetting
futures position (a short position if the option is a
call and a long position if the option is a put).
Upon exercise of an option, the delivery of the
futures position by the writer of the option to the
holder of the option will be accompanied by delivery
of the accumulated balance in the writer's futures
margin account, which represents the amount by which
the market price of the futures contract exceeds, in
the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures
contract. The potential loss related to the purchase
of an option on futures contracts is limited to the
premium paid for the option (plus transaction costs).
Because the value of the option is fixed at the point
of sale, there are no daily cash payments by the
purchaser to reflect changes in the value of the
underlying contract; however, the value of the option
does change daily and that change would be reflected
in the net asset value of the fund.
Currency Exchange Transactions. The value in U.S.
dollars of the assets of the fund that are invested
in foreign securities may be affected favorably or
unfavorably by changes in exchange control
regulations, and the fund may incur costs in
connection with conversion between various
currencies. Currency exchange transactions may be
from any non-U.S. currency into U.S. dollars or into
other appropriate currencies. The fund will conduct
its currency exchange transactions (i) on a spot
(i.e., cash) basis at the rate prevailing in the
currency exchange market, (ii) through entering into
futures contracts or options on such contracts (as
described above), (iii) through entering into forward
contracts to purchase or sell currency or (iv) by
purchasing exchange-traded currency options.
Forward Currency Contracts. A forward currency
contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any
fixed number of days from the date of the contract as
agreed upon by the parties, at a price set at the
time of the contract. These contracts are entered
into in the interbank market conducted directly
between currency traders (usually large commercial
banks and brokers) and their customers. Forward
currency contracts are similar to currency futures
contracts, except that futures contracts are traded
on commodities exchanges and are standardized as to
contract size and delivery date.
At or before the maturity of a forward contract, the
fund may either sell a portfolio security and make
delivery of the currency, or retain the security and
fully or partially offset its contractual obligation
to deliver the currency by negotiating with its
trading partner to purchase a second, offsetting
contract. If the fund retains the portfolio security
and engages in an offsetting transaction, the fund,
at the time of execution of the offsetting
transaction, will incur a gain or a loss to the
extent that movement has occurred in forward contract
prices.
Currency Options. The fund may purchase exchange-
traded put and call options on foreign currencies.
Put options convey the right to sell the underlying
currency at a price which is anticipated to be higher
than the spot price of the currency at the time the
option is exercised. Call options convey the right
to buy the underlying currency at a price which is
expected to be lower than the spot price of the
currency at the time the option is exercised.
Currency Hedging. A Fund's currency hedging will be
limited to hedging involving either specific
transactions or portfolio positions in the aggregate.
Transaction hedging is the purchase or sale of
forward currency with respect to specific receivables
or payables of the fund generally accruing in
connection with the purchase or sale of its portfolio
securities. Position hedging is the sale of forward
currency with respect to portfolio security
positions. The fund may not position hedge to an
extent greater than the aggregate market value (at
the time of entering into the hedge) of the hedged
securities.
A decline in the U.S. dollar value of a foreign
currency in which the fund's securities are
denominated will reduce the U.S. dollar value of the
securities, even if their value in the foreign
currency remains constant. The use of currency
hedges does not eliminate fluctuations in the
underlying prices of the securities, but it does
establish a rate of exchange that can be achieved in
the future. For example, in order to protect against
diminutions in the U.S. dollar value of securities it
holds, the fund may purchase currency put options.
If the value of the currency does decline, the fund
will have the right to sell the currency for a fixed
amount in dollars and will thereby offset, in whole
or in part, the adverse effect on the U.S. dollar
value of its securities that otherwise would have
resulted. Conversely, if a rise in the U.S. dollar
value of a currency in which securities to be
acquired are denominated is projected, thereby
potentially increasing the cost of the securities,
the fund may purchase call options on the particular
currency. The purchase of these options could
offset, at least partially, the effects of the
adverse movements in exchange rates. The benefit to
the fund derived from purchases of currency options,
like the benefit derived from other types of options,
will be reduced by premiums and other transaction
costs. Because transactions in currency exchange are
generally conducted on a principal basis, no fees or
commissions are generally involved. Currency hedging
involves some of the same risks and considerations as
other transactions with similar instruments.
Although currency hedges limit the risk of loss due
to a decline in the value of a hedged currency, at
the same time, they also limit any potential gain
that might result should the value of the currency
increase. If a devaluation is generally anticipated,
the fund may not be able to contract to sell a
currency at a price above the devaluation level it
anticipates.
While the values of currency futures and options on
futures, forward currency contracts and currency
options may be expected to correlate with exchange
rates, they will not reflect other factors that may
affect the value of the fund's investments and a
currency hedge may not be entirely successful in
mitigating changes in the value of the fund's
investments denominated in that currency. A currency
hedge, for example, should protect a Yen-denominated
bond against a decline in the Yen, but will not
protect a Fund against a price decline if the
issuer's creditworthiness deteriorates.
Swaps. The fund may enter into swaps relating to
indexes, currencies and equity interests of domestic
and foreign issuers. A swap transaction is an
agreement between the fund and a counterparty to act
in accordance with the terms of the swap contract.
Index swaps involve the exchange by the fund with
another party of the respective amounts payable with
respect to a notional principal amount related to one
or more indexes. Currency swaps involve the exchange
of cash flows on a notional amount of two or more
currencies based on their relative future values. An
equity swap is an agreement to exchange streams of
payments computed by reference to a notional amount
based on the performance of a basket of stocks or a
single stock. The fund may enter into these
transactions to preserve a return or spread on a
particular investment or portion of its assets, to
protect against currency fluctuations, as a duration
management technique or to protect against any
increase in the price of securities the fund
anticipates purchasing at a later date. The fund may
also use these transactions for speculative purposes,
such as to obtain the price performance of a security
without actually purchasing the security in
circumstances, for example, the subject security is
illiquid, is unavailable for direct investment or
available only on less attractive terms. Swaps have
risks associated with them including possible default
by the counterparty to the transaction, illiquidity
and, where swaps are used as hedges, the risk that
the use of a swap could result in losses greater than
if the swap had not been employed
The fund will usually enter into swaps on a net basis
(i.e., the two payment streams are netted out in a
cash settlement on the payment date or dates
specified in the agreement, with the fund receiving
or paying, as the case may be, only the net amount of
the two payments). Swaps do not involve the delivery
of securities, other underlying assets or principal.
Accordingly, the risk of loss with respect to swaps
is limited to the net amount of payments that the
fund is contractually obligated to make. If the
counterparty to a swap defaults, the fund's risk of
loss consists of the net amount of payments that the
fund is contractually entitled to receive. Where
swaps are entered into for good faith hedging
purposes, the manager believes such obligations do
not constitute senior securities under the Investment
Company Act of 1940, as amended (the "1940 Act"),
and, accordingly, will not treat them as being
subject to the fund's borrowing restrictions. Where
swaps are entered into for other than hedging
purposes, the fund will segregate an amount of cash
or liquid securities having a value equal to the
accrued excess of its obligations over entitlements
with respect to each swap on a daily basis.
Hedging. In addition to entering into options,
futures and currency exchange transactions for other
purposes, including generating current income to
offset expenses or increase return, the fund may
enter into these transactions as hedges to reduce
investment risk, generally by making an investment
expected to move in the opposite direction of a
portfolio position. A hedge is designed to offset a
loss in a portfolio position with a gain in the
hedged position; at the same time, however, a
properly correlated hedge will result in a gain in
the portfolio position being offset by a loss in the
hedged position. As a result, the use of options,
futures, contracts and currency exchange transactions
for hedging purposes could limit any potential gain
from an increase in the value of the position hedged.
In addition, the movement in the portfolio position
hedged may not be of the same magnitude as movement
in the hedge. With respect to futures contracts,
since the value of portfolio securities will far
exceed the value of the futures contracts sold by the
fund, an increase in the value of the futures
contracts could only mitigate, but not totally
offset, the decline in the value of the fund's
assets.
In hedging transactions based on an index, 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.
The risk of imperfect correlation increases as the
composition of the fund's portfolio varies from the
composition of the index. In an effort to compensate
for imperfect correlation of relative movements in
the hedged position and the hedge, a fund's hedge
positions may be in a greater or lesser dollar amount
than the dollar amount of the hedged position. Such
"over hedging" or "under hedging" may adversely
affect a fund's net investment results if market
movements are not as anticipated when the hedge is
established. Stock index futures transactions may be
subject to additional correlation risks. First, all
participants in the futures market are subject to
margin deposit and maintenance requirements. Rather
than meeting additional margin deposit requirements,
investors may close futures contracts through
offsetting transactions which would distort the
normal relationship between the stock index and
futures markets. Secondly, from the point of view of
speculators, the deposit requirements in the futures
market are less onerous than margin requirements in
the securities market. Therefore, increased
participation by speculators in the futures market
also may cause temporary price distortions. Because
of the possibility of price distortions in the
futures market and the imperfect correlation between
movements in the stock index and movements in the
price of stock index futures, a correct forecast of
general market trends by the manager still may not
result in a successful hedging transaction.
The fund will engage in hedging transactions only
when deemed advisable by the manager, and successful
use by the fund of hedging transactions will be
subject to the manager's ability to predict trends in
currency, interest rate or securities markets, as the
case may be, and to correctly predict movements in
the directions of the hedge and the hedged position
and the correlation between them, which predictions
could prove to be inaccurate. This requires
different skills and techniques than predicting
changes in the price of individual securities, and
there can be no assurance that the use of these
strategies will be successful. Even a well-conceived
hedge may be unsuccessful to some degree because of
unexpected market behavior or trends. Losses
incurred in hedging transactions and the costs of
these transactions will affect the fund's
performance.
Asset Coverage for Forward Contracts, Options,
Futures and Options on Futures. The fund will comply
with guidelines established by the SEC with respect
to coverage of forward currency contracts; options
written by a Fund on securities and indexes; and
currency, interest rate and index futures contracts
and options on these futures contracts. These
guidelines may, in certain instances, require
segregation by the fund of cash or liquid securities.
For example, a call option written by the fund on
securities may require the fund to hold the
securities subject to the call (or securities
convertible into the securities without additional
consideration) or to segregate assets (as described
above) sufficient to purchase and deliver the
securities if the call is exercised. A call option
written by the fund on an index may require the fund
to own portfolio securities that correlate with the
index or to segregate assets (as described above)
equal to the excess of the index value over the
exercise price on a current basis. The fund could
purchase a put option if the strike price of that
option is the same or higher than the strike price of
a put option sold by the fund. If the fund holds a
futures or forward contract, the fund could purchase
a put option on the same futures or forward contract
with a strike price as high or higher than the price
of the contract held. The fund may enter into fully
or partially offsetting transactions so that its net
position, coupled with any segregated assets (equal
to any remaining obligation), equals its net
obligation. Asset coverage may be achieved by other
means when consistent with applicable regulatory
policies.
Additional Information on Other Investment Practices
Foreign Investments. Investors should recognize that
investing in foreign companies involves certain
risks, including those discussed below, which are not
typically associated with investing in U.S. issuers.
The fund may invest in securities of foreign issuers
directly or in the form of American Depository
Receipts ("ADRs"), European Depository Receipts
("EDRs") or similar securities representing interests
in the common stock of foreign issuers. Management
intends to limit the fund's investment in these
types of securities to 20% of the fund's net assets.
ADRs are receipts, typically issued by a U.S. bank or
trust company, which evidence ownership of underlying
securities issued by a foreign corporation. EDRs are
receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, in
registered form, are designed for use in the U.S.
securities markets and EDRs are designed for use in
European securities markets. The underlying
securities are not always denominated in the same
currency as the ADRs or EDRs. Although investment in
the form of ADRs or EDRs facilitates trading in
foreign securities, it does not mitigate the risks
associated with investing in foreign securities.
Investments in foreign securities incur higher costs
than investments in U.S. securities, including higher
costs in making securities transactions as well as
foreign government taxes which may reduce the
investment return of the fund. In addition, foreign
investments may include additional risks associated
with currency exchange rates, less complete financial
information about individual companies, less market
liquidity and political instability.
Foreign Currency Exchange. Since the Fund may invest
in securities denominated in currencies other than
the U.S. dollar, and since the fund may temporarily
hold funds in bank deposits or other money market
investments denominated in foreign currencies, the
fund may be affected favorably or unfavorably by
exchange control regulations or changes in the
exchange rate between such currencies and the dollar.
A change in the value of a foreign currency relative
to the U.S. dollar will result in a corresponding
change in the dollar value of fund assets denominated
in that foreign currency. Changes in foreign
currency exchange rates may also affect the value of
dividends and interest earned, gains and losses
realized on the sale of securities and net investment
income and gains, if any, to be distributed to
shareholders by the fund. The rate of exchange
between the U.S. dollar and other currencies is
determined by the forces of supply and demand in the
foreign exchange markets. Changes in the exchange
rate may result over time from the interaction of
many factors directly or indirectly affecting
economic and political conditions in the United
States and a particular foreign country, including
economic and political developments in other
countries. Of particular importance are rates of
inflation, interest rate levels, the balance of
payments and the extent of government surpluses or
deficits in the United States and the particular
foreign country, all of which are in turn sensitive
to the monetary, fiscal and trade policies pursued by
the governments of the United States and foreign
countries important to international trade and
finance. Governmental intervention may also play a
significant role. National governments rarely
voluntarily allow their currencies to float freely in
response to economic forces. Sovereign governments
use a variety of techniques, such as intervention by
a country's central bank or imposition of regulatory
controls or taxes, to affect the exchange rates of
their currencies. The fund may use hedging
techniques with the objective of protecting against
loss through the fluctuation of the value of the yen
against the U.S. dollar, particularly the forward
market in foreign exchange, currency options and
currency futures. See "Currency Exchange
Transactions" and "Futures Activities" above.
Information. There may be less publicly available
information about foreign securities and about the
foreign company or government issuing them than is
available about a domestic company or government
entity. Foreign companies are generally not subject
to uniform financial reporting standards, practices
and requirements comparable to those applicable to
U.S. companies.
Political Instability. With respect to some foreign
countries, there is the possibility of expropriation
or confiscatory taxation, limitations on the removal
of funds or other assets of a Fund, political or
social instability, or domestic developments, which
could affect U.S. investments in those and
neighboring countries.
Delays. Securities of some foreign companies are
less liquid and their prices are more volatile than
securities of comparable U.S. companies. Certain
foreign countries are known to experience long delays
between the trade and settlement dates of securities
purchased or sold.
General. Individual foreign economies may differ
favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource
self-sufficiency, and balance of payments positions.
A Fund may invest in securities of foreign
governments (or agencies or instrumentalities
thereof), and many, if not all, of the foregoing
considerations apply to such investments as well.
Securities of Other Investment Companies. The fund
may invest in securities of other investment
companies to the extent permitted under the 1940 Act.
Presently, under the 1940 Act, the fund may hold
securities of another investment company in amounts
which (i) do not exceed 3% of the total outstanding
voting stock of such company, (ii) do not exceed 5%
of the value of the fund's total assets and (iii)
when added to all other investment company securities
held by the fund, do not exceed 10% of the value of
the fund's total assets.
Index-Related Securities ("Equity Equivalents") The
fund may invest in certain types of securities that
enable investors to purchase or sell shares in a
portfolio of securities that seeks to track the
performance of an underlying index or a portion of an
Index. Such Equity Equivalents include among others
DIAMONDS (interests in a portfolio of securities that
seeks to track the performance of the Dow Jones
Industrial Average), SPDRs or Standard & Poor's
Depositary Receipts (interests in a portfolio of
securities that seeks to track the performance of the
S&P 500 Index), WEBS or World Equity Benchmark Shares
(interests in a portfolio of securities that seeks to
track the performance of a benchmark index of a
particular foreign country's stocks), and the Nasdaq-
100 Trust (interests in a portfolio of securities of
the largest and most actively traded non-financial
companies listed on the Nasdaq Stock Market). Such
securities are similar to index mutual funds, but
they are traded on various stock exchanges or
secondary markets. The value of these securities is
dependent upon the performance of the underlying
index on which they are based. Thus, these
securities are subject to the same risks as their
underlying indexes as well as the securities that
make up those indexes. For example, if the securities
comprising an index that an index-related security
seeks to track perform poorly, the index-related
security will lose value.
Equity Equivalents may be used for several purposes,
including, to simulate full investment in the
underlying index while retaining a cash balance for
fund management purposes, to facilitate trading, to
reduce transaction costs or to seek higher investment
returns where an Equity Equivalent is priced more
attractively than securities in the underlying index.
Because the expense associated with an investment in
Equity Equivalents may be substantially lower than
the expense of small investments directly in the
securities comprising the indices they seek to track,
investments in Equity Equivalents may provide a cost-
effective means of diversifying a Fund's assets
across a broad range of equity securities.
To the extent the fund invests in securities of other
investment companies, fund shareholders would
indirectly pay a portion of the operating costs of
such companies in addition to the expenses of its own
operation. These costs include management,
brokerage, shareholder servicing and other
operational expenses. Indirectly, then, shareholders
of the fund that invests in Equity Equivalents may
pay higher operational costs than if they owned the
underlying investment companies directly.
Additionally, the fund's investments in such
investment companies are subject to limitations under
the 1940 Act and market availability.
The prices of Equity Equivalents are derived and
based upon the securities held by the particular
investment company. Accordingly, the level of risk
involved in the purchase or sale of an Equity
Equivalent is similar to the risk involved in the
purchase or sale of traditional common stock, with
the exception that the pricing mechanism for such
instruments is based on a basket of stocks. The
market prices of Equity Equivalents are expected to
fluctuate in accordance with both changes in the net
asset values of their underlying indices and the
supply and demand for the instruments on the
exchanges on which they are traded. Substantial
market or other disruptions affecting an Equity
Equivalent could adversely affect the liquidity and
value of the shares of the Fund investing in such
instruments.
Rights Offerings and Purchase Warrants. The fund may
invest in rights and warrants to purchase newly
created equity securities consisting of common and
preferred stock. The equity security underlying a
right or warrant is outstanding at the time the right
or warrant is issued or is issued together with the
right or warrant.
Investing in rights and warrants can provide a
greater potential for profit or loss than an
equivalent investment in the underlying security,
and, thus, can be a speculative investment. The
value of a right or warrant may decline because of a
decline in the value of the underlying security, the
passage of time, changes in interest rates or in the
dividend or other policies of the company whose
equity underlies the warrant or a change in the
perception as to the future price of the underlying
security, or any combination thereof. Rights and
warrants generally pay no dividends and confer no
voting or other rights other than to purchase the
underlying security.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 7
below and each Fund's investment objective have been
adopted by the Company as fundamental policies of
each Fund. Under the 1940 Act, a fundamental policy
may not be changed with respect to a fund without the
vote of a majority of the outstanding voting
securities of the Fund. Majority is defined in the
1940 Act as the lesser of (a) 67% or more of the
shares present at a fund meeting, if the holders of
more than 50% of the outstanding shares of the fund
are present or represented by proxy, or (b) more than
50% of outstanding shares. The remaining
restrictions may be changed by a vote of a majority
of the Company's Board of Directors at any time.
Under the investment restrictions adopted by the
Company with respect to each Fund, each 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. 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 331/3% 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.
3. 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.
4. Make loans. This restriction does not apply
to: (a) the purchase of debt obligations in which the
Fund may invest consistent with its investment
objectives and policies; (b) repurchase agreements;
and (c) loans of its portfolio securities, to the
fullest extent permitted under the 1940 Act.
5. 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.
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 otherwise acquire any illiquid
security except as permitted under the 1940 Act for
open-end investment companies, which currently
permits up to 15% of the Fund's net assets to be
invested in illiquid securities.
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.
TRUSTEES OF THE TRUST AND EXECUTIVE OFFICERS OF THE
FUND
The names of the trustees of the trust and executive
officers of the fund, together with information as to
their principal business occupations, are set forth
below. The executive officers of the fund are
employees of organizations that provide services to
the fund. Each trustee who is an "interested person"
of the trust, as defined in the 1940 Act, is
indicated by an asterisk. The address of the "non-
interested" trustees and the executive officers of
the fund is 7 World Trade Center, New York, New York
10048, unless otherwise indicated.
Herbert Barg, Trustee (Age 77). Private Investor.
His address is 273 Montgomery Avenue, Bala Cynwyd,
Pennsylvania 19004. Director/Trustee of sixteen
investment companies associated with Citigroup, Inc.
("Citigroup")
*Alfred J. Bianchetti Trustee (Age 77). Retired;
formerly Senior Consultant to Dean Witter Reynolds
Inc. His address is 19 Circle End Drive, Ramsey, New
Jersey 07466. Director/Trustee of eleven investment
companies associated with Citigroup.
Martin Brody Trustee (Age 79). Consultant, HMK
Associates; Retired Vice Chairman of the Board of
Restaurant Associates Corp. His address is c/o HMK
Associates, 30 Columbia Turnpike, Florham Park, New
Jersey 07932. Director/Trustee of twenty investment
companies associated with Citigroup.
Dwight B. Crane Trustee (Age 62). Professor, Harvard
Business School. His address is c/o Harvard Business
School, Soldiers Field Road, Boston, Massachusetts
02163. Director/Trustee of twenty-three investment
companies associated with Citigroup.
Burt N. Dorsett Trustee (Age 69). Managing Partner
of Dorsett McCabe Management. Inc., an investment
counseling firm; Director of Research Corporation
Technologies, Inc., a nonprofit patent clearing and
licensing firm. His address is 201 East 62nd Street,
New York, New York 10021. Director/Trustee of eleven
investment companies associated with Citigroup.
Elliot S. Jaffe Trustee (Age 74). Chairman of the
Board and President of The Dress Barn, Inc. His
address is 30 Dunnigan Drive, Suffern, New York
10901. Director/Trustee of eleven investment
companies associated with Citigroup.
Stephen E. Kaufman Trustee (Age 68). Attorney. His
address is 277 Park Avenue, New York, New York 10172.
Director/Trustee of thirteen investment companies
associated with Citigroup.
Joseph J. McCann Trustee (Age 70). Financial
Consultant; Retired Financial Executive, Ryan Homes,
Inc. His address is 200 Oak Park Place, Pittsburgh,
Pennsylvania 15243. Director/Trustee of eleven
investment companies associated with Citigroup.
*Heath B. McLendon Trustee (Age 66). Chairman of the
Board, President and Chief Executive Officer;
Managing Director of Salomon Smith Barney; President
of SSB Citi and Travelers Investment Adviser, Inc.
("TIA"); Chairman or Co-Chairman of the Board of
seventy-eight investment companies associated with
Salomon Smith Barney. His address is 7 World Trade
Center, New York, New York 10048.
Cornelius C. Rose, Jr. Trustee (Age 67). President,
Cornelius C. Rose Associates, Inc., financial
consultants, and Chairman and Director of Performance
Learning Systems, an educational consultant. His
address is Meadowbrook Village, Building 4, Apt 6,
West Lebanon, New Hampshire 03784. Director/Trustee
of eleven investment companies associated with
Citigroup.
Lewis E. Daidone (Age 43). Senior Vice President and
Treasurer; Managing Director of Salomon Smith Barney;
Chief Financial Officer of the Smith Barney mutual
funds; Treasurer and Senior Vice President or
Executive Vice President of sixty-one investment
companies associated with Citigroup; Director and
Senior Vice President of SSB Citi and TIA. His
address is 125 Broad Street, New York, New York
10004.
Alan Blake (Age 50). Vice President and Investment
Officer; Managing Director of Salomon Smith Barney;
Investment Officer of two investment companies
associated with Citigroup; Investment Officer of SSB
Citi. His address is 7 World Trade Center, New
York, New York 10048
Paul Brook (Age 47). Controller; Director of Salomon
Smith Barney; Controller or Assistant Treasurer of
forty-three 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 125 Broad Street,
New York, New York 10004
Christina T. Sydor (Age 49) Secretary; Managing
Director of Salomon Smith Barney; Secretary of sixty-
one investment companies associated with Citigroup;
General Counsel and Secretary of SSB Citi and TIA.
Her address is 7 World Trade Center, New York, New
York 10048.
As of [ ], the trustees and
officers owned, in the aggregate, less than 1% of the
outstanding shares of each of the funds. No officer,
director or employee of Salomon Smith Barney or any
of its affiliates receives any compensation from the
trust for serving as an officer of the funds or
trustee of the trust. The trust pays each trustee
who is not an officer, director or employee of
Salomon Smith Barney or any of its affiliates a fee
of $12,000 per annum plus $1000 per in-person meeting
and $100 per telephonic meeting. Each trustee
emeritus who is not an officer, director or employee
of Salomon Smith Barney or its affiliates receives a
fee of $5,000 per annum plus $500 per in-person
meeting and $50 per telephonic meeting. All trustees
are reimbursed for travel and out-of-pocket expenses
incurred to attend such meetings, and for the most
recent calendar year the aggregate reimbursement was
$[ ].
For the fiscal year ended November 30, 2000, the
Trustees of the trust were paid the following
compensation:
Name of Person
Aggregate
Compensat
ion
From
Trust
Total
Pension or
Retirement
Benefits
Accrued
As part of
Trust
Expenses
Compensation
From Trust
and Fund
Complex
Paid to
Trustees+
Number of
Funds for
Which Trustee
Serves
Within
Fund Complex
Herbert Barg**
Alfred
Bianchetti*
Martin Brody**
Dwight B.
Crane**
Burt N.
Dorsett**
Elliot S.
Jaffe**
Stephen E.
Kaufman**
Joseph J.
McCann**
Heath B.
McLendon*
Cornelius C.
Rose, Jr.**
$
-----
$0
0
0
0
0
0
0
0
0
0
$114,288
53,900
138,600
155,363
57,950
45,100
110,650
58,050
------
53,500
16
11
20
23
11
11
13
11
71
11
+ For calendar year ended December 31, 1999.
* Designated an "interested" trustee.
** Designates member of Audit Committee.
Upon attainment of age 80, fund trustees are
required to change to emeritus status. Trustees
emeritus are entitled to serve in emeritus
status for a maximum of 10 years. A trustee
emeritus may attend meetings but has no voting
rights.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Investment Manager - SSB Citi
SSB Citi serves as investment manager to the fund
pursuant to an investment management agreement (the
"Investment Management Agreement") with the trust
which was approved by the board of trustees,
including a majority of trustees who are not
"interested persons" of the trust 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.
Subject to the supervision and direction of the
trust's board of trustees, the manager manages the
fund's portfolio in accordance with the fund's stated
investment objective and policies, makes investment
decisions for the fund, places orders to purchase and
sell securities, and employs professional portfolio
managers and securities analysts who provide research
services to the fund. The manager pays the salary of
any officer and employee who is employed by both it
and the trust. The manager bears all expenses in
connection with the performance of its services. The
manager also: (a) assists in supervising all aspects
of the fund's operations except those performed by
the fund's investment manager under its investment
advisory agreement; b) supplies the fund with office
facilities (which may be in SSB Citi's own offices),
statistical and research data, data processing
services, clerical, accounting and bookkeeping
services, including, but not limited to, the
calculation of (i) the net asset value of shares of
the fund, (ii) applicable contingent deferred sales
charges ("deferred sales charge") and similar fees
and charges and (iii) distribution fees, internal
auditing and legal services, internal executive and
administrative services, and stationary and office
supplies; and (c) prepares reports to shareholders of
the fund, tax returns and reports to and filings with
the SEC and state blue sky authorities.
As compensation for investment management services,
the fund pays the manager a fee computed daily and
paid monthly at the annual rate of [___%] of the
fund's average daily net assets.
Auditors
KPMG LLP, independent auditors, 757 Third Avenue, New
York, New York 10017, have been selected to serve as
auditors of the trust and to render opinions on the
fund's financial statements for the fiscal year
ending November 30, 2001.
Counsel
Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, New York 10019, serves as counsel to the fund.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New
York, New York, serves as counsel to the directors
who are not "interested persons" of the fund.
Custodian, Transfer Agent and Sub-Transfer Agents
PFPC Trust Company (successor assigned by PNC Bank,
National Association) ("custodian"), located at 17th
and Chestnut Streets, Philadelphia, Pennsylvania,
19103, serves as the custodian of the fund. Under
its custody agreement with the fund, the custodian
holds the fund's securities and keeps all necessary
accounts and records. For its services, the custodian
receives a monthly fee based upon the month-end
market value of securities held in custody and also
receives securities transactions charges. The assets
of the fund are held under bank custodianship in
compliance with the 1940 Act.
Citi Fiduciary Trust Company (the "transfer agent"),
located at 125 Broad Street, New York, New York
10004, serves as the fund's transfer and dividend-
paying agent. Under the transfer agency agreement,
the transfer agent maintains the shareholder account
records for the fund, handles certain communications
between shareholders and the fund, distributes
dividends and distributions payable by the fund and
produces statements with respect to account activity
for the fund and its shareholders. For these
services, the transfer agent receives fees from the
fund computed on the basis of the number of
shareholder accounts that the transfer agent
maintains for the fund during the month and is
reimbursed for out-of-pocket expenses.
PFPC Global Fund Services ("PFPC" or "sub-transfer
agent"), located at Exchange Place, Boston,
Massachusetts 02109, serves as a sub-transfer agent.
Under the transfer agency agreement, the sub-transfer
agent maintains the shareholder account records for
the trust, handles certain communications between
shareholders and the trust and distributes dividends
and distributions payable by the trust. For these
services, the sub-transfer agent receives a monthly
fee computed on the basis of the number of
shareholder accounts it maintains for the trust
during the month, and is reimbursed for out-of-pocket
expenses.
The Fund has engaged the services of PFS Shareholder
Services, located at 3100 Breckinridge Blvd., Bldg
200, Duluth, Georgia 30099-0062, as the Sub-Transfer
Agent for PFS Accounts.
Code of Ethics. Pursuant to Rule 17j-1 of the 1940
Act, the fund, its investment manager and principal
underwriter has adopted a code of ethics that permits
personnel to invest in securities for their own
accounts, including securities that may be purchased
or held by the fund. All personnel must place the
interests of clients first and avoid activities,
interests and relationships that might interfere with
the duty to make decisions in the best interests of
the clients. All personal securities transactions by
employees must adhere to the requirements of the code
and must be conducted in such a manner as to avoid
any actual or potential conflict of interest, the
appearance of such a conflict, or the abuse of an
employee's position of trust and responsibility. A
copy of the Fund's Code of Ethics is on file with the
Securities and Exchange Commission.
Distributor
Salomon Smith Barney Inc., located at 388 Greenwich
Street, New York, New York 10013 serves as the fund's
distributor pursuant to a written agreement (the
"Distribution Agreement") which was approved by the
fund's Board of Trustees, including a majority of the
independent trustees.
The Distributor may be deemed to be an underwriter
for purposes of the Securities Act of 1933. From time
to time, the Distributor, or PFS or its affiliates
may also pay for certain non-cash sales incentives
provided to PFS Investments Registered
Representatives. Such incentives do not have any
effect on the net amount invested. In addition to the
reallowances from the applicable public offering
price described above, PFS may, from time to time,
pay or allow additional reallowances or promotional
incentives, in the form of cash or other compensation
to PFS Investments Registered Representatives that
sell shares of each portfolio.
The Distributor has entered into a selling agreement
with PFS and PFS has entered into an agreement with
PFSI giving PFSI the right to sell shares of each
portfolio of the fund on behalf of the Distributor.
The Distributor's obligation is an agency or "best
efforts" arrangement under which the Distributor is
required to take and pay only for such shares of each
portfolio as may be sold to the public. The
Distributor is not obligated to sell any stated
number of shares. The Distribution Agreement is
renewable from year to year if approved (a) by the
directors or by a vote of a majority of the fund's
outstanding voting securities, and (b) by the
affirmative vote of a majority of directors who are
not parties to the Distribution Agreement or
interested persons of any party by votes cast in
person at a meeting called for such purpose. The
Distribution Agreement provides that it will
terminate if assigned, and that it may be terminated
without penalty by either party on 60 days' written
notice.
When payment is made by the investor before the
settlement date, unless otherwise noted by the
investor, the funds will be held as a free credit
balance in the investor's brokerage account and
Salomon Smith Barney may benefit from the temporary
use of the funds. The fund's Board of Trustees has
been advised of the benefits to Salomon Smith Barney
resulting from these settlement procedures and will
take such benefits into consideration when reviewing
the Investment Management and Distribution Agreements
for continuance.
Distribution Arrangements. To compensate Salomon
Smith Barney and PFSI for the service it provides and
for the expense it bears, the fund has adopted a
services and distribution plan (the "Plan") pursuant
to Rule 12b-1 under the 1940 Act. The only classes
of shares being offered for sale through PFSI are
Class A shares and Class B shares. Under the Plan,
the fund pays Salomon Smith Barney or PFSI (which
pays it registered representative) a service fee,
accrued daily and paid monthly, calculated at the
annual rate of [ %] of the value of the fund's
average daily net assets attributable to the Class A,
and Class B shares. In addition, the fund pays
Salomon Smith Barney a distribution fee with respect
to Class B and Class L shares primarily intended to
compensate Salomon 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
[ %] of the value of the fund's average net
assets attributable to the shares of the respective
Class.
Under its terms, the Plan continues from year to
year, provided such continuance is approved annually
by vote of the board of trustees, including a
majority of the trustees who are not interested
persons of the trust and who have no direct or
indirect financial interest in the operation of the
Plan or in the Distribution Agreement (the
"independent trustees"). The Plan may not be amended
to increase the amount of the service and
distribution fees without shareholder approval, and
all amendments of the Plan also must be approved by
the trustees including all of the independent
trustees in the manner described above. The Plan may
be terminated with respect to a Class at any time,
without penalty, by vote of a majority of the
independent trustees or, with respect to any fund, by
vote of a majority of the outstanding voting
securities of a fund (as defined in the 1940 Act).
Pursuant to the Plan, Salomon Smith Barney will
provide the board of trustees with periodic reports
of amounts expended under the Plan and the purpose
for which such expenditures were made.
The only classes of shares being offered for sale
through PFS Distributors is Class A shares and
Class B shares. Pursuant to the Plan (described
above), PFS Distributors is paid an annual service
fee with respect to Class A and Class B shares of the
fund sold through PFS Distributors at the annual rate
of [ %] of the average daily net assets of the
respective class. PFS Distributors is also paid an
annual distribution fee with respect to Class B
shares at the annual rate of [ %] of the average
daily net assets attributable to that Class. Class B
shares that automatically convert to Class A shares
eight years after the date of original purchase will
no longer be subject to a distribution fee. The fees
are paid to PFS Distributors, which in turn, pays PFS
Investments Inc. ("PFS Investments") to pay its PFS
Investments Registered Representatives for servicing
shareholder accounts and, in the case of Class B
shares, to cover expenses primarily intended to
result in the sale of those shares. These expenses
include: advertising expenses; the cost of printing
and mailing prospectuses to potential investors;
payments to and expenses of PFS Investments
Registered Representatives and other persons who
provide support services in connection with the
distribution of shares; interest and/or carrying
charges; and indirect and overhead costs of PFS
Investments associated with the sale of fund shares,
including lease, utility, communications and sales
promotion expenses.
The payments to PFS Investments Registered
Representatives for selling shares of a class include
a commission or fee paid by the investor or PFS at
the time of sale and, with respect to Class A and
Class B shares, a continuing fee for servicing
shareholder accounts for as long as a shareholder
remains a holder of that class. PFS Investments
Registered Representatives may receive different
levels of compensation for selling different classes
of shares.
PFS Investments may be deemed to be an underwriter
for purposes of the Securities Act of 1933. From time
to time, PFS or its affiliates may also pay for
certain non-cash sales incentives provided to PFS
Investments Registered Representatives. Such
incentives do not have any effect on the net amount
invested. In addition to the reallowances from the
applicable public offering price described above, PFS
may from time to time, pay or allow additional
reallowances or promotional incentives, in the form
of cash or other compensation to PFS Investments
Registered Representatives who sell shares of the
fund.
PORTFOLIO TRANSACTIONS
The manager arranges for the purchase and sale of the
fund's securities and selects brokers and dealers
(including Salomon Smith Barney) which in its best
judgment provide prompt and reliable execution at
favorable prices and reasonable commission rates.
The manager may select brokers and dealers that
provide it with research services and may cause the
fund to pay such brokers and dealers commissions
which exceed those other brokers and dealers may have
charged, if it views the commissions as reasonable in
relation to the value of the brokerage and/or
research services. In selecting a broker, including
Salomon Smith Barney, for a transaction, the primary
consideration is prompt and effective execution of
orders at the most favorable prices. Subject to that
primary consideration, dealers may be selected for
research statistical or other services to enable the
manager to supplement its own research and analysis.
Decisions to buy and sell securities for the fund are
made by the manager, subject to the overall
supervision and review of the trust's board of
trustees. Portfolio securities transactions for the
fund are effected by or under the supervision of the
manager.
Transactions on stock exchanges involve the payment
of negotiated brokerage commissions. There is
generally no stated commission in the case of
securities traded in the over-the-counter market, but
the price of those securities includes an undisclosed
commission or mark-up. Over-the-counter purchases and
sales are transacted directly with principal market
makers except in those cases in which better prices
and executions may be obtained elsewhere. The cost of
securities purchased from underwriters includes an
underwriting commission or concession, and the prices
at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down.
In executing portfolio transactions and selecting
brokers or dealers, it is the fund's policy to seek
the best overall terms available. The manager, in
seeking the most favorable price and execution,
considers all factors it deems relevant, including,
for example, the price, the size of the transaction,
the reputation, experience and financial stability of
the broker-dealer involved and the quality of service
rendered by the broker-dealer in other transactions.
The manager receives research, statistical and
quotation services from several broker-dealers with
which it places the fund's portfolio transactions. It
is possible that certain of the services received
primarily will benefit one or more other accounts for
which the manager exercises investment discretion.
Conversely, the fund may be the primary beneficiary
of services received as a result of portfolio
transactions effected for other accounts. The
manager's fee under the management agreement is not
reduced by reason of its receiving such brokerage and
research services. The trust's board of trustees, in
its discretion, may authorize the manager to cause
the fund to pay a broker that provides brokerage and
research services to the manager a commission in
excess of that which another qualified broker would
have charged for effecting the same transaction.
Salomon Smith Barney will not participate in
commissions from brokerage given by the fund to other
brokers or dealers and will not receive any
reciprocal brokerage business resulting therefrom.
In accordance with Section 17(e) of the 1940 Act and
Rule 17e-1 thereunder, the trust's board of trustees
has determined that any portfolio transaction for the
fund may be executed through Salomon Smith Barney or
an affiliate of Salomon Smith Barney if, in the
manager's judgment, the use of Salomon Smith Barney
or an affiliate is likely to result in price and
execution at least as favorable as those of other
qualified brokers and if, in the transaction, Salomon
Smith Barney or the affiliate charges the fund a
commission rate consistent with those charged by
Salomon Smith Barney or an affiliate to comparable
unaffiliated customers in similar transactions. In
addition, under SEC rules Salomon Smith Barney may
directly execute such transactions for the fund on
the floor of any national securities exchange,
provided: (a) the board of trustees has expressly
authorized Salomon Smith Barney to effect such
transactions; and (b) Salomon Smith Barney annually
advises the fund of the aggregate compensation it
earned on such transactions.
Even though investment decisions for the fund are
made independently from those of the other accounts
managed by the manager, 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 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. 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.
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.
Portfolio securities transactions on behalf of the
fund are placed by the manager with a number of
brokers and dealers, including Salomon Smith Barney.
Salomon Smith Barney has advised the fund that in
transactions with the fund, Salomon Smith Barney
charges a commission rate at least as favorable as
the rate that Salomon Smith Barney charges its
comparable unaffiliated customers in similar
transactions.
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 [ %]. 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.
PURCHASE OF SHARES
Sales Charge Alternatives
The following classes of shares are available for
purchase. See the prospectus for a discussion of
factors to consider in selecting which Class of
shares to purchase.
Class A Shares. Class A shares are sold to investors
at the public offering price, which is the net asset
value plus an initial sales charge as follows:
Amount
of
Investme
nt
Sales Charge
as a %
of
Transaction
Sales
Charge as a
%
of Amount
Invested
Dealers'
Reallowance as
%
Of Offering
Price
Less than
$25,000
5.00%
5.26%
4.50%
$ 25,000 -
49,999
4.25
4.44
3.83
$ 50,000 -
99,999
3.75
3.63
3.38
$100,000 -
249,999
3.25
3.09
2.48
$250,000 -
499,999
2.75
2.04
1.80
$500,000 -
999,000
$1,000,000 or
more
2.00
0
2.04
0
1.80
up to 1.00
Purchases of Class A shares of $1,000,000 or more
will be made at net asset value without any initial
sales charge, but will be subject to a deferred sales
charge of 1.00% on redemptions made within 12 months
of purchase. The deferred sales charge on Class A
shares is payable to Salomon Smith Barney, which
compensates Salomon Smith Barney Financial
Consultants, PFS or Service Agents whose clients make
purchases of $1,000,000 or more. The deferred sales
charge is waived in the same circumstances in which
the deferred sales charge applicable to Class B and
Class L shares is waived. See "Deferred Sales Charge
Provisions" and "Waivers of Deferred Sales Charge."
Members of the selling group may receive up to 90% of
the sales charge and may be deemed to be underwriters
of the fund as defined in the 1933 Act. The reduced
sales charges shown above apply to the aggregate of
purchases of Class A shares of the fund made at one
time by "any person," which includes an individual
and his or her immediate family, or a trustee or
other fiduciary of a single trust estate or single
fiduciary account.
Class B Shares. Class B shares are sold without an
initial sales charge but are subject to a deferred
sales charge payable upon certain redemptions. See
"Deferred Sales Charge Provisions" below.
Class L Shares. Class L shares are sold with an
initial sales charge of 1.00% (which is equal to
1.01% of the amount invested) and are subject to a
deferred sales charge payable upon certain
redemptions. See "Deferred Sales Charge Provisions"
below. Until June 22, 2001 purchases of Class L
shares by investors who were holders of Class C
shares of the fund and/or other Smith Barney mutual
funds on June 12, 1998 will not be subject to the 1%
initial sales charge.
Class Y Shares. Class Y shares are sold without an
initial sales charge or deferred sales charge and are
available only to investors investing a minimum of
$15,000,000 (except purchases of Class Y shares by
Smith Barney Allocation Series Inc., for which there
is no minimum purchase amount).
General
Investors may purchase shares from a Service Agent.
In addition, certain investors, including qualified
retirement plans purchasing through certain Service
Agents, may purchase shares directly from the fund.
When purchasing shares of the fund, investors must
specify whether the purchase is for Class A, Class B,
Class L or Class Y shares. Service Agents may charge
their customers an annual account maintenance fee in
connection with a brokerage account through which an
investor purchases or holds shares. Accounts held
directly at a sub-transfer agent are not subject to a
maintenance fee.
Investors in Class A, Class B and Class L shares may
open an account in the fund by making an initial
investment of at least $1,000 for each account, or
$250 for an IRA or a Self-Employed Retirement Plan,
in the fund. Investors in Class Y shares may open an
account by making an initial investment of
$15,000,000. Subsequent investments of at least $50
may be made for all Classes. For participants in
retirement plans qualified under Section 403(b)(7) or
Section 401(c) of the Code, the minimum initial
investment required for Class A, Class B and Class L
shares and the subsequent investment requirement for
all Classes in the fund is $25. For shareholders
purchasing shares of the fund through the Systematic
Investment Plan on a monthly basis, the minimum
initial investment requirement for Class A, Class B
and Class L shares and subsequent investment
requirement for all Classes is $25. For shareholders
purchasing shares of the fund through the Systematic
Investment Plan on a quarterly basis, the minimum
initial investment required for Class A, Class B and
Class L shares and the subsequent investment
requirement for all Classes is $50. There are no
minimum investment requirements for Class A shares
for employees of Citigroup and its subsidiaries,
including Salomon Smith Barney, unitholders who
invest distributions from a unit investment trust
("UIT") sponsored by Salomon Smith Barney, and
Directors/Trustees of any of the Smith Barney mutual
funds, and their spouses and children. The fund
reserves the right to waive or change minimums, to
decline any order to purchase its shares and to
suspend the offering of shares from time to time.
Shares purchased will be held in the shareholder's
account by a sub-transfer agent. Share certificates
are issued only upon a shareholder's written request
to a sub-transfer agent.
Purchase orders received by the fund or a Salomon
Smith Barney Financial Consultant prior to the close
of regular trading on the New York Stock Exchange
("NYSE"), on any day the fund calculates its net
asset value, are priced according to the net asset
value determined on that day (the ''trade date'').
Orders received by a Dealer Representative prior to
the close of regular trading on the NYSE on any day
the fund calculates its net asset value, are priced
according to the net asset value determined on that
day, provided the order is received by the fund or
the fund's agent prior to its close of business. For
shares purchased through Salomon Smith Barney or a
Dealer Representative purchasing through Salomon
Smith Barney, payment for shares of the fund is due
on the third business day after the trade date. In
all other cases, payment must be made with the
purchase order.
Systematic Investment Plan. Shareholders may make
additions to their accounts at any time by purchasing
shares through a service known as the Systematic
Investment Plan. Under the Systematic Investment
Plan, Salomon Smith Barney or a sub-transfer agent is
authorized through preauthorized transfers of at
least $25 on a monthly basis or at least $50 on a
quarterly basis to charge the shareholder's account
held with a bank or other financial institution on a
monthly or quarterly basis as indicated by the
shareholder, to provide for systematic additions to
the shareholder's fund account. A shareholder who
has insufficient funds to complete the transfer will
be charged a fee of up to $25 by Salomon Smith Barney
or a sub-transfer agent. The Systematic Investment
Plan also authorizes Salomon Smith Barney to apply
cash held in the shareholder's Salomon Smith Barney
brokerage account or redeem the shareholder's shares
of a Smith Barney money market fund to make additions
to the account. Additional information is available
from the fund or a Service Agent.
Sales Charge Waivers and Reductions
Initial Sales Charge Waivers. Purchases of Class A
shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales to
(i) Board Members and employees of Citigroup and its
subsidiaries and any Citigroup affiliated funds
including the Smith Barney mutual funds (including
retired Board Members and employees); the immediate
families of such persons (including the surviving
spouse of a deceased Board Member or employee); and
to a pension, profit-sharing or other benefit plan
for such persons and (ii) employees of members of the
National Association of Securities Dealers, Inc.,
provided such sales are made upon the assurance of
the purchaser that the purchase is made for
investment purposes and that the securities will not
be resold except through redemption or repurchase;
(b) offers of Class A shares to any other investment
company to effect the combination of such company
with the fund by merger, acquisition of assets or
otherwise; (c) purchases of Class A shares by any
client of a newly employed Salomon Smith Barney
Financial Consultant (for a period up to 90 days from
the commencement of the Financial Consultant's
employment with Salomon Smith Barney), on the
condition the purchase of Class A shares is made with
the proceeds of the redemption of shares of a mutual
fund which (i) was sponsored by the Financial
Consultant's prior employer, (ii) was sold to the
client by the Financial Consultant and (iii) was
subject to a sales charge; (d) purchases by
shareholders who have redeemed Class A shares in the
fund (or Class A shares of another Smith Barney
mutual fund that is offered with a sales charge) and
who wish to reinvest their redemption proceeds in the
fund, provided the reinvestment is made within 60
calendar days of the redemption; (e) purchases by
accounts managed by registered investment advisory
subsidiaries of Citigroup; (f) direct rollovers by
plan participants of distributions from a 401(k) plan
offered to employees of Citigroup or its subsidiaries
or a 401(k) plan enrolled in the Smith Barney 401(k)
Program (Note: subsequent investments will be subject
to the applicable sales charge); (g) purchases by a
separate account used to fund certain unregistered
variable annuity contracts; (h) investments of
distributions from or proceeds from a sale of a UIT
sponsored by Salomon Smith Barney; (i) purchases by
investors participating in a Salomon Smith Barney
fee-based arrangement; and (j) purchases of Class A
shares by Section 403(b) or Section 401(a) or (k)
accounts associated with Copeland Retirement
Programs. In order to obtain such discounts, the
purchaser must provide sufficient information at the
time of purchase to permit verification that the
purchase would qualify for the elimination of the
sales charge.
Right of Accumulation. Class A shares of the fund
may be purchased by ''any person'' (as defined above)
at a reduced sales charge or at net asset value
determined by aggregating the dollar amount of the
new purchase and the total net asset value of all
Class A shares of the fund and of other Smith Barney
mutual funds that are offered with a sales charge as
currently listed under ''Exchange Privilege'' then
held by such person and applying the sales charge
applicable to such aggregate. In order to obtain
such discount, the purchaser must provide sufficient
information at the time of purchase to permit
verification that the purchase qualifies for the
reduced sales charge. The right of accumulation is
subject to modification or discontinuance at any time
with respect to all shares purchased thereafter.
Letter of Intent - Class A Shares. A Letter of
Intent for an amount of $50,000 or more provides an
opportunity for an investor to obtain a reduced sales
charge by aggregating investments over a 13 month
period, provided that the investor refers to such
Letter when placing orders. For purposes of a Letter
of Intent, the ''Amount of Investment'' as referred
to in the preceding sales charge table includes
(i) all Class A shares of the fund and other Smith
Barney mutual funds offered with a sales charge
acquired during the term of the letter plus (ii) the
value of all Class A shares previously purchased and
still owned. Each investment made during the period
receives the reduced sales charge applicable to the
total amount of the investment goal. If the goal is
not achieved within the period, the investor must pay
the difference between the sales charges applicable
to the purchases made and the charges previously
paid, or an appropriate number of escrowed shares
will be redeemed. The term of the Letter will
commence upon the date the Letter is signed, or at
the options of the investor, up to 90 days before
such date. Please contact a Salomon Smith Barney
Financial Consultant or the transfer agent to obtain
a Letter of Intent application.
Letter of Intent - Class Y Shares. A Letter of
Intent may also be used as a way for investors to
meet the minimum investment requirement for Class Y
shares (except purchases of Class Y shares by Smith
Barney Allocation Series Inc., for which there is no
minimum purchase amount). Such investors must make
an initial minimum purchase of $5,000,000 in Class Y
shares of the fund and agree to purchase a total of
$15,000,000 of Class Y shares of the fund within 13
months from the date of the Letter. If a total
investment of $15,000,000 is not made within the 13-
month period, all Class Y shares purchased to date
will be transferred to Class A shares, where they
will be subject to all fees (including a service fee
of 0.25%) and expenses applicable to the fund's Class
A shares, which may include a deferred sales charge
of 1.00%. Please contact a Salomon Smith Barney
Financial Consultant or the transfer agent for
further information.
Deferred Sales Charge Provisions
''Deferred Sales Charge Shares'' are: (a) Class B
shares; (b) Class L shares; and (c) Class A shares
that were purchased without an initial sales charge
but are subject to a deferred sales charge. A
deferred sales charge may be imposed on certain
redemptions of these shares.
Any applicable deferred sales charge will be assessed
on an amount equal to the lesser of the original cost
of the shares being redeemed or their net asset value
at the tims charge to the extent that the value of
such shares represents: (a) capital appreciation of
fund assets; (b) reinvestment of dividends or capital
gain distributions; (c) with respect to Class B
shares, shares redeemed more than five years after
their purchase; or (d) with respect to Class L shares
and Class A shares that are deferred sales charge
shares, shares redeemed more than 12 months after
their purchase.
Class L shares and Class A shares that are deferred
sales charge shares are subject to a 1.00% deferred
sales charge if redeemed within 12 months of
purchase. In circumstances in which the deferred
sales charge is imposed on Class B shares, the amount
of the charge will depend on the number of years
since the shareholder made the purchase payment from
which the amount is being redeemed. Solely for
purposes of determining the number of years since a
purchase payment, all purchase payments made during a
month will be aggregated and deemed to have been made
on the last day of the preceding Salomon Smith Barney
statement month. The following table sets forth the
rates of the charge for redemptions of Class B shares
by shareholders, except in the case of Class B shares
held under the Smith Barney 401(k) Program, as
described below. See ''Purchase of Shares-Smith
Barney 401(k) and ExecChoiceTM Programs.''
Year Since Purchase Payment Was
Made
Deferred Sales Charge
First
5.00%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth and thereafter
0.00
Class B shares will convert automatically to Class A
shares eight years after the date on which they were
purchased and thereafter will no longer be subject to
any distribution fees. There will also be converted
at that time such proportion of Class B Dividend
Shares owned by the shareholders as the total number
of his or her Class B shares converting at the time
bears to the total number of outstanding Class B
shares (other than Class B Dividend Shares) owned by
the shareholder.
In determining the applicability of any deferred
sales charge, it will be assumed that a redemption is
made first of shares representing capital
appreciation, next of shares representing the
reinvestment of dividends and capital gain
distributions and finally of other shares held by the
shareholder for the longest period of time. The
length of time that deferred sales charge shares
acquired through an exchange have been held will be
calculated from the date that the shares exchanged
were initially acquired in one of the other Smith
Barney mutual funds, and fund shares being redeemed
will be considered to represent, as applicable,
capital appreciation or dividend and capital gain
distribution reinvestments in such other funds. For
Federal income tax purposes, the amount of the
deferred sales charge will reduce the gain or
increase the loss, as the case may be, on the amount
realized on redemption. The amount of any deferred
sales charge will be paid to Salomon Smith Barney.
To provide an example, assume an investor purchased
100 Class B shares of the fund at $10 per share for a
cost of $1,000. Subsequently, the investor acquired
5 additional shares of the fund through dividend
reinvestment. During the fifteenth month after the
purchase, the investor decided to redeem $500 of his
or her investment. Assuming at the time of the
redemption the net asset value had appreciated to $12
per share, the value of the investor's shares would
be $1,260 (105 shares at $12 per share). The deferred
sales charge would not be applied to the amount which
represents appreciation ($200) and the value of the
reinvested dividend shares ($60). Therefore, $240 of
the $500 redemption proceeds ($500 minus $260) would
be charged at a rate of 4.00% (the applicable rate
for Class B shares) for a total deferred sales charge
of $9.60.
Waivers of Deferred Sales Charge
The deferred sales charge will be waived on: (a)
exchanges (see ''Exchange Privilege''); (b) automatic
cash withdrawals in amounts equal to or less than
1.00% per month of the value of the shareholder's
shares at the time the withdrawal plan commences (see
''Automatic Cash Withdrawal Plan'') (provided,
however, that automatic cash withdrawals in amounts
equal to or less than 2.00% per month of the value of
the shareholder's shares will be permitted for
withdrawal plans that were established prior to
November 7, 1994); (c) redemptions of shares within
12 months following the death or disability of the
shareholder; (d) redemptions of shares made in
connection with qualified distributions from
retirement plans or IRAs upon the attainment of age
591/2; (e) involuntary redemptions; and (f) redemptions
of shares to effect a combination of the fund with
any investment company by merger, acquisition of
assets or otherwise. In addition, a shareholder who
has redeemed shares from other Smith Barney mutual
funds may, under certain circumstances, reinvest all
or part of the redemption proceeds within 60 days and
receive pro rata credit for any deferred sales charge
imposed on the prior redemption.
Deferred sales charge waivers will be granted subject
to confirmation (by Salomon Smith Barney in the case
of shareholders who are also Salomon Smith Barney
clients or by the transfer agent in the case of all
other shareholders) of the shareholder's status or
holdings, as the case may be.
PFS ACCOUNTS
Initial purchase of shares of the fund must be made
through a PFS Investments Registered Representative
by completing the appropriate application. The
completed application should be forwarded to PFS
Shareholder Services, a sub-transfer agent, with
regard to PFS Accounts, P.O. Box 105033, Atlanta,
Georgia 30348-5033. Checks drawn on foreign banks
must be payable in U.S. dollars and have the routing
number of the U.S. bank encoded on the check.
Subsequent investments may be sent directly to a sub-
transfer agent. In processing applications and
investments, the transfer agent acts as agent for the
investor and for PFS Investments and also as agent
for the distributor, in accordance with the terms of
the prospectus. If the transfer agent ceases to act
as such, a successor company named by the fund will
act in the same capacity so long as the account
remains open.
Shares purchased will be held in the shareholder's
account by a sub-transfer agent. Share certificates
are issued only upon a shareholder's written request
to a sub-transfer agent. A shareholder that has
insufficient funds to complete any purchase will be
charged a fee of $30 per returned purchase by PFS.
A shareholder, enrolled in the Systematic Investment
Plan, who has insufficient funds to complete a
transfer will be charged a fee of up to $30.
Investors in Class A and Class B shares may open an
account by making an initial investment of at least
$1,000 for each account in each Class (except for
Systematic Investment Plan accounts), or $250 for an
IRA or a Self-Employed Retirement Plan in a fund.
Subsequent investments of at least $50 may be made
for each Class. For participants in retirement plans
qualified under Section 403(b)(7) or Section 401(a)
of the Code, the minimum initial investment
requirement for Class A and Class B shares and the
subsequent investment requirement for each Class in
the fund is $25. For the fund's Systematic Investment
Plan, the minimum initial investment requirement for
Class A and Class B shares and the subsequent
investment requirement for each Class is $25. There
are no minimum investment requirements in Class A
shares for employees of Citigroup and its
subsidiaries, including Salomon Smith Barney,
directors or trustees of any of the Smith Barney
mutual funds, and their spouses and children. The
fund reserves the right to waive or change minimums,
to decline any order to purchase its shares and to
suspend the offering of shares from time to time.
Purchase orders received by the transfer agent or
sub-transfer agent prior to the close of regular
trading on the NYSE, on any day the fund calculates
its net asset value, are priced according to the net
asset value determined on that day.
Upon completion of certain automated systems,
shareholders who establish telephone transaction
authority on their account and supply bank account
information may make additions to their accounts at
any time. Initial purchases of fund shares may also
be made by wire. The minimum investment that can be
made by wire is $10,000. Once an account is open, a
shareholder may make additional investments by wire.
Prior to sending a wire, shareholders should contact
a sub-transfer agent at (800) 544-5445 between 8:00
a.m. and 8:00 p.m. eastern time any day that the NYSE
is open. If a shareholder does not wish to allow
telephone subsequent investments by any person in his
account, he should decline the telephone transaction
option on the account application. The minimum
telephone subsequent investment is $250 and can be up
to a maximum of $10,000. By requesting a subsequent
purchase by telephone, you authorize a sub-transfer
agent to transfer funds from the bank account
provided for the amount of the purchase. A
shareholder that has insufficient funds to complete
the transfer will be charged a fee of up to $30 by
PFS or a sub-transfer agent. A shareholder who
places a stop payment on a transfer or the transfer
is returned because the account has been closed, will
also be charged a fee of up to $30 by PFS or a sub-
transfer agent. Subsequent investments by telephone
may not be available if the shareholder cannot reach
a sub-transfer agent whether because all telephone
lines are busy or for any other reason; in such case,
a shareholder would have to use the fund's regular
subsequent investment procedure described above.
Redemption proceeds can be sent by check to the
address of record or by wire transfer to a bank
account designated on the application. A shareholder
will be charged a $25 service fee for wire transfers
and a nominal service fee for transfers made directly
to the shareholder's bank by the Automated Clearing
House.
Additional information regarding a sub-transfer
agent's services may be obtained by contacting the
Client Services Department at (800) 544-5445. The
sub-transfer agent will process and mail usually
within two or three business days after receiving the
redemption request in good order. The shareholder
may request the proceeds to be mailed by two days air
express for a $8 fee that will be deducted from the
shareholders account or by one day express for a $15
fee that will be deducted from the shareholder's
account.
Smith Barney Retirement Programs
You may be eligible to participate in a retirement
program sponsored by Salomon Smith Barney or one of
its affiliates. The fund offers Class A and Class L
shares at net asset value to participating plans
under the programs. You can meet minimum investment
and exchange amounts, if any by combining the plan's
investments in any of the Smith Barney mutual 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
and/or the date your account is opened. Once a class
of shares is chosen, all additional purchases must by
of the same class.
For plans opened on or after March 1, 2000 that are
not plans for which Paychex Inc. or an affiliate
provides administrative services (a "Paychex Plan")
offering, Class A shares may be purchased regardless
of the amount invested.
For plans opened prior to March 1, 2000 and for
Paychex plans, the class of shares you may purchase
depends on the amount of your initial investment:
Class A Shares. Class A shares may be purchased by
plans investing at least $1million.
Class L Shares. Class L shares may be purchased by
plans investing less than $1 million. Class L shares
are eligible to exchange into Class A shares not
later than 8 years after the plan joined the program.
They are eligible for exchange in the following
circumstances:
If the plan was opened on or after June 21, 1996 and
a total of $1 million 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 for 5 years.
If the plan 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.
Retirement Programs Opened On or After June 21, 1996.
If, at the end of the fifth year after the date the
participating plan enrolled in the Smith Barney
401(k) Program or the ExecChoiceTM Program, a
participating plan's total Class L holdings in all
non-money market Smith Barney mutual funds equal at
least $1,000,000, the participating plan will be
offered the opportunity to exchange all of its Class
L shares for Class A shares of the fund. (For
participating plans that were originally established
through a Salomon Smith Barney retail brokerage
account, the five-year period will be calculated from
the date the retail brokerage account was opened.)
Such participating plans will be notified of the
pending exchange in writing within 30 days after the
fifth anniversary of the enrollment date and, unless
the exchange offer has been rejected in writing, the
exchange will occur on or about the 90th day after
the fifth anniversary date. If the participating plan
does not qualify for the five-year exchange to Class
A shares, a review of the participating plan's
holdings will be performed each quarter until either
the participating plan qualifies or the end of the
eighth year.
Retirement Programs Opened Prior to June 21, 1996.
In any year after the date a participating plan
enrolled in the Smith Barney 401(k) Program, if a
participating plan's total Class L holdings in all
non-money market Smith Barney mutual funds equal at
least $500,000 as of the calendar year-end, the
participating plan will be offered the opportunity to
exchange all of its Class L shares for Class A shares
of the fund. Such Plans will be notified in writing
within 30 days after the last business day of the
calendar year and, unless the exchange offer has been
rejected in writing, the exchange will occur on or
about the last business day of the following March.
Any participating plan in the Smith Barney 401(k) or
the ExecChoiceTM Program, whether opened before or
after June 21, 1996, that has not previously
qualified for an exchange into Class A shares will be
offered the opportunity to exchange all of its Class
L shares for Class A shares of the fund, regardless
of asset size, at the end of the eighth year after
the date the participating plan enrolled in the Smith
Barney 401(k) Program or ExecChoiceTM Program. Such
plans will be notified of the pending exchange in
writing approximately 60 days before the eighth
anniversary of the enrollment date and, unless the
exchange has been rejected in writing, the exchange
will occur on or about the eighth anniversary date.
Once an exchange has occurred, a participating plan
will not be eligible to acquire additional Class L
shares, but instead may acquire Class A shares of the
same fund. Any Class L shares not converted will
continue to be subject to the distribution fee.
Participating plans wishing to acquire shares of the
fund through the Smith Barney 401(k) Program or the
Smith Barney ExecChoiceTM Program must purchase such
shares directly from the transfer agent. For further
information regarding these Programs, investors
should contact a Salomon Smith Barney Financial
Consultant.
Retirement Programs Investing in Class B Shares:
Class B shares of a fund are not available for
purchase by participating plans opened on or after
June 21, 1996, but may continue to be purchased by
any participating plan in the Smith Barney 401 (k)
Program opened prior to such date and originally
investing in such Class. Class B shares acquired are
subject to a deferred sales charge of 3.00% of
redemption proceeds if the participating plan
terminates within eight years of the date the
participating plan first enrolled in the Smith Barney
401 (k) Program.
At the end of the eighth year after the date the
participating plan enrolled in the Smith Barney 401
(k) Program, the participating plan will be offered
the opportunity to exchange all of its Class B shares
for Class A shares of the same fund. Such
participating plan will be notified of the pending
exchange in writing approximately 60 days before the
eighth anniversary of the enrollment date and, unless
the exchange has been rejected in writing, the
exchange will occur on or about the eighth
anniversary date. Once the exchange has occurred, a
participating plan will not be eligible to acquire
additional Class B shares, but instead may acquire
Class A shares ofa the same fund. If the
participating elects not to exchange all of its Class
B shares at that time, each Class B share held by the
participating plan will have the same conversion
feature as Class B shares held by other investors.
See "Purchase of Shares-Deferred Sales Charge
Alternatives."
No deferred sales charge is imposed on redemptions of
Class B shares to the extent that the net asset value
of the shares redeemed does not exceed the current
net asset value of the sahres purchased through
reinvestment of dividends or capital gain
distributions, plus the current net asset vlaue of
Class B shares purchased more than eight years prior
to the redemption, plus increases in the net asset
value of the shareholders Class B shares above the
purchase payments made during the preceding eight
years. Whether or not the deferred sales charge
applies to the redemption by a participating plan
depends on the number of years since the
participating plan first became enrolled in the
Smith Barney 401(k) Program, unlike the applicability
of the deferred sales charge to redemptions by other
shareholders, which depends on the number of years
since those shareholders made the purchase payment
from which the amount is being redeemed.
The deferred sales charge will be waived on
redemptions of Class B shares in connection with
lump-sum or other distributions made by a
participating plan; as a result of (a) the retirement
of an employee in the participating plan; (b) the
termination of employment of an employee in the
participating plan; (c) the death or disability or an
employee in the participating plan; (d) the
attainment of age 59 1/2 by an employee in the
participating plan; (e) hardship of an employee in
the participating plan to the extent permitted under
Section 401(k) o the Code; or (f) redemptions of
shares in connection with a loan made by the
participating plan to an employee.
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 (and 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 deferred sales charge, however, 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 each fund's financial
statements, incorporated by reference in their
entirety into this SAI.
REDEMPTION OF SHARES
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 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.
If the shares to be redeemed were issued in
certificate form, the certificates must be endorsed
for transfer (or be accompanied by an endorsed stock
power) and must be submitted to a sub-transfer agent
together with the redemption request. Any signature
appearing on a share certificate, stock power or
written redemption request in excess of $50,000 must
be guaranteed by an eligible guarantor institution
such as a domestic bank, savings and loan
institution, domestic credit union, member bank of
the Federal Reserve System or member firm of a
national securities exchange. Written redemption
requests of $50,000 or less do not require a
signature guarantee unless more than one such
redemption request is made in any 10-day period or
the redemption proceeds are to be sent to an address
other than the address of record. Unless otherwise
directed, redemption proceeds will be mailed to an
investor's address of record. The transfer agent may
require additional supporting documents for
redemptions made by corporations, executors,
administrators, trustees or guardians. A redemption
request will not be deemed properly received until
the transfer agent receives all required documents in
proper form.
If a shareholder holds shares in more than one Class,
any request for redemption must specify the Class
being redeemed. In the event of a failure to specify
which Class, or if the investor owns fewer shares of
the Class than specified, the redemption request will
be delayed until the transfer agent receives further
instructions from Salomon Smith Barney, or if the
shareholder's account is not with Salomon Smith
Barney, from the shareholder directly. The
redemption proceeds will be remitted on or before the
third business day following receipt of proper
tender, except on any days on which the NYSE is
closed or as permitted under the 1940 Act, in
extraordinary circumstances. Generally, if the
redemption proceeds are remitted to a Salomon Smith
Barney brokerage account, these funds will not be
invested for the shareholder's benefit without
specific instruction and Salomon Smith Barney will
benefit from the use of temporarily uninvested funds.
Redemption proceeds for shares purchased by check,
other than a certified or official bank check, will
be remitted upon clearance of the check, which may
take up to fifteen days or more.
Distribution in Kind
If the board of trustees of the trust 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 of the fund who
own shares of the fund with a value of at least
$10,000 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.
Any applicable deferred sales charge will not be
waived on amounts withdrawn by shareholders that
exceed 1.00% per month of the value of a
shareholder's shares at the time the Withdrawal Plan
commences. (With respect to Withdrawal Plans in
effect prior to November 7, 1994, any applicable
deferred sales charge will be waived on amounts
withdrawn that do not exceed 2.00% per month of the
value of a shareholder's shares at the time the
Withdrawal Plan commences). To the extent that
withdrawals exceed dividends, distributions and
appreciation of a shareholder's investment in a fund,
continued withdrawal payments will reduce the
shareholder's investment, and may ultimately exhaust
it. Withdrawal payments should not be considered as
income from investment in a 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 of a fund who wish to participate in the
Withdrawal Plan and who hold their shares of the fund
in certificate form must deposit their share
certificates with a sub-transfer agent 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 involved. A
shareholder who purchases shares directly through a
sub-transfer agent may continue to do so and
applications for participation in the Withdrawal Plan
must be received by a sub-transfer agent 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.
Additional Information Regarding Telephone Redemption
And Exchange Program
Neither the fund nor its agents will be liable for
following instructions communicated by telephone that
are reasonably believed to be genuine. The fund and
its agents will employ procedures designed to verify
the identity of the caller and legitimacy of
instructions (for example, a shareholder's name and
account number will be required and phone calls may
be recorded). The fund reserves the right to
suspend, modify or discontinue the telephone
redemption and exchange program or to impose a charge
for this service at any time following at least seven
(7) days prior notice to shareholders.
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 trust 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 fund's
board of trustees. 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 trustees. 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 fund's board of trustees.
EXCHANGE PRIVILEGE
Except as noted below, 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, 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 deferred sales charge of the
two funds and, for purposes of calculating
deferred sales charge 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
deferred sales charge applicability, Class L
shares of the fund exchanged for Class C 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 in any
Smith Barney mutual fund to acquire shares of the
same Class in a fund with different investment
objectives when they believe a shift between funds is
an appropriate investment decision. This privilege
is available to shareholders residing in any state in
which the 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,
subject to any applicable deferred sales charge, 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.
Additional Information Regarding the Exchange
Privilege. Although the exchange privilege is an
important benefit, excessive exchange transactions
can be detrimental to the fund's performance and its
shareholders. The manager may determine that a
pattern of frequent exchanges is excessive and
contrary to the best interests of the fund's other
shareholders. In this event, the fund may, at its
discretion, decide to limit additional purchases
and/or exchanges by a shareholder. Upon such a
determination, the fund will provide notice in
writing or by telephone to the shareholder at least
15 days prior to suspending the exchange privilege
and during the 15 day period the shareholder will be
required to (a) redeem his or her shares in the fund
or (b) remain invested in the fund or exchange into
any of the funds of the Smith Barney mutual funds
ordinarily available, which position the shareholder
would be expected to maintain for a significant
period of time. All relevant factors will be
considered in determining what constitutes an abusive
pattern of exchanges.
PERFORMANCE DATA
From time to time the fund may advertise its total
return and average annual total return in
advertisements and/or other types of sales
literature. These figures are computed separately
for Class A, Class B, Class L and Class Y shares of
the fund. These figures are based on historical
earnings and are not intended to indicate future
performance. Total return is computed for a
specified period of time assuming deduction of the
maximum sales charge, if any, from the initial amount
invested and reinvestment of all income dividends and
capital gain distributions on the reinvestment dates
at prices calculated as stated in this prospectus,
then dividing the value of the investment at the end
of the period so calculated by the initial amount
invested and subtracting 100%. The standard average
annual total return, as prescribed by the SEC is
derived from this total return, which provides the
ending redeemable value. Such standard total return
information may also be accompanied with nonstandard
total return information for differing periods
computed in the same manner but without annualizing
the total return or taking sales charges into
account. The fund may also include comparative
performance information in advertising or marketing
its shares. Such performance information may include
data from Lipper Analytical Services, Inc. and other
financial publications.
From time to time, the trust may quote a fund's yield
or total return in advertisements or in reports and
other communications to shareholders. The trust 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, Investor's Business 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
A fund's "average annual total return," as described
below, is 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 a 1-, 5- or
10-year period
(or fractional
portion thereof),
assuming
reinvestment of
all dividends and
distributions.
The ERV assumes complete redemption of the
hypothetical investment at the end of the measuring
period. A fund's net investment income changes in
response to fluctuations in interest rates and the
expenses of the fund.
Average Annual Total Return
Class of Shares
1-Year
5-Year
10-
Year
Since
Inceptio
n
Class A1
N/A
N/A
N/A
N/A
Class B2
N/A
N/A
N/A
N/A
Class L3
N/A
N/A
N/A
N/A
Class Y4
N/A
N/A
N/A
N/A
_______________________
1 The average annual total return figure assumes
that the maximum 5.00% sales charge has been
deducted from the investment at the time of
purchase.
2 The average annual total return figure assumes
that the maximum applicable deferred sales
charge has been deducted from the investment at
the time of redemption.
3 The average annual total return figure assumes
that the maximum applicable initial and
deferred sales charges have been deducted from
the investment at the time of redemption.
4 Class Y shares do not incur sales charges nor
deferred sales charges.
Aggregate Total Return
The fund's "aggregate total return," as described
below, represents the cumulative change in the value
of an investment in the fund for the specified period
and is computed by the following formula:
ERV - P
P
Where: P = a hypothetical initial
payment of $10,000.
ERV = Ending Redeemable Value
of a hypothetical
$10,000 investment made
at the beginning of the
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.
The ERV assumes complete redemption of the
hypothetical investment at the end of the measuring
period.
Aggregate Annual Total Return
Class of Shares
1-Year
5-Year
10-
Year
Since
Inceptio
n
Class A1
N/A
N/A
N/A
N/A
Class B2
N/A
N/A
N/A
N/A
Class L3
N/A
N/A
N/A
N/A
Class Y4
N/A
N/A
N/A
N/A
_______________________
1 The average annual total return figure assumes
that the maximum 5.00% sales charge has been
deducted from the investment at the time of
purchase.
2 The average annual total return figure assumes
that the maximum applicable deferred sales
charge has been deducted from the investment at
the time of redemption
3 The average annual total return figure assumes
that the maximum applicable initial and
deferred sales charges have been deducted from
the investment at the time of redemption.
4 Class Y shares do not incur sales charges nor
deferred sales charges.
Performance will vary from time to time depending
upon market conditions, the composition of the fund's
portfolio and operating expenses and the expenses
exclusively attributable to the Class. Consequently,
any given performance quotation should not be
considered representative of the Class'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 Class with certain
bank deposits or other investments that pay a fixed
yield for a stated period of time. Investors
comparing a Class's performance with that of other
mutual funds should give consideration to the quality
and maturity of the respective investment companies'
portfolio securities.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions
The fund's policy is to distribute its net investment
income and net realized capital gains, if any,
annually. The fund may also pay additional dividends
shortly before December 31 from certain amounts of
undistributed ordinary and capital gains realized, in
order to avoid a Federal excise tax liability.
If a shareholder does not otherwise instruct,
dividends and capital gains distributions will be
reinvested automatically in additional shares of the
same Class at net asset value, subject to no sales
charge or deferred sales charge. A shareholder may
change the option at any time by notifying his
Service Agent. Shareholders whose account are held
directly at a sub-transfer agent should notify a sub-
transfer agent in writing, requesting a change to
this reinvest option
The per share dividends on Class B and Class L shares
of the fund may be lower than the per share dividends
on Class A and Class Y shares principally as a result
of the distribution fee applicable with respect to
Class B and Class L shares. The per share dividends
on Class A shares of the fund may be lower than the
per share dividends on Class Y shares principally as
a result of the service fee applicable to Class A
shares. Distributions of capital gains, if any, will
be in the same amount for Class A, Class B, Class L
and Class Y shares.
Taxes
The following is a summary of the material United
States federal income tax considerations regarding
the purchase, ownership and disposition of shares of
a fund. Each prospective shareholder is urged to
consult his own tax adviser with respect to the
specific federal, state, local and foreign tax
consequences of investing in a fund. The summary is
based on the laws in effect on the date of this SAI
and existing judicial and administrative
interpretations thereof, both of, which are subject
to change.
The Fund and Its Investments
The fund intends to continue to qualify to be treated
as a regulated investment company during each taxable
year under the Internal Revenue Code of 1986, as
amended (the "Code"). To so qualify, the fund must,
among other things: (a) derive at least 90% of its
gross income in each taxable year from dividends,
interest, payments with respect to securities loans
and gains from the sale or other disposition of stock
or securities, foreign currencies, or other income
(including, but not limited to, gains from options,
futures or forward contracts) derived with respect to
its business of investing in such stock, securities
or currencies; and (b) diversify its holdings so
that, at the end of each quarter of the fund's
taxable year, (i) at least 50% of the market value of
the fund's assets is represented by cash, securities
of other regulated investment companies, United
States government securities and other securities,
with such other securities limited, in respect of any
one issuer, to an amount not greater than 5% of the
fund's assets and not greater than 10% of the
outstanding voting securities of such issuer and (ii)
not more than 25% of the value of its assets is
invested in the securities (other than United States
government securities or securities of other
regulated investment companies) of any one issuer or
any two or more issuers that the fund controls and
which are determined to be engaged in the same or
similar trades or businesses or related trades or
businesses..
As a regulated investment company, the fund will not
be subject to United States federal income tax on its
net investment income (i.e., income other than its
net realized long-term and short-term capital gains)
and its net realized long- and short-term capital
gains, if any, that it distributes to its
shareholders, provided an amount equal to at least
90% of its investment company taxable income (i.e.,
90% of its taxable income minus the excess, if any,
of its net realized long-term capital gains over its
net realized short-term capital losses (including any
capital loss carryovers), plus or minus certain other
adjustments as specified in the Code) and its net
tax-exempt income for the taxable year is distributed
to its shareholders in compliance with the Code's
timing and other requirements, but will be subject to
tax at regular corporate rates on any taxable income
or gains it does not distribute.
The Code imposes a 4% nondeductible excise tax on the
fund to the extent it does not distribute by the end
of any calendar year at least 98% of its ordinary
income for that year and at least 98% of its net of
its capital gains (both long-term and short-term) for
the one-year period ending, as a general rule, on
October 31 of that year. For this purpose, however,
any ordinary income or net capital gains retained by
the fund that is subject to corporate income tax will
be considered to have been distributed by year-end.
In addition, the minimum amounts that must be
distributed in any year to avoid the excise tax will
be increased or decreased to reflect any
underdistribution or overdistribution, as the case
may be, from the previous year. The fund anticipates
that it will pay such dividends and will make such
distributions as are necessary in order to avoid the
application of this excise tax.
If, in any taxable year, the fund fails to qualify as
a regulated investment company under the Code or
fails to meet the distribution requirement, it would
be taxed in the same manner as an ordinary
corporation and distributions to its shareholders
would not be deductible by the fund in computing its
taxable income. In addition, in the event of a
failure to qualify, the fund's distributions, to the
extent derived from the fund's current or accumulated
earnings and profits would constitute dividends
(eligible for the corporate dividends-received
deduction) which are taxable to shareholders as
ordinary income, even though those distributions
might otherwise (at least in part) have been treated
in the shareholders' hands as long-term capital
gains. Moreover, if the fund fails to qualify as a
regulated investment company in any year, it must pay
out its earnings and profits accumulated in that year
in order to qualify again as a regulated investment
company. In addition, the fund may be required to
recognize any net built-in gains with respect to
certain of its assets (i.e. the excess of the
aggregate gains, including items of income, over
aggregate losses that would have been realized with
respect to such assets if the fund had been
liquidated) in order to qualify as a regulated
investment company in a subsequent year.
The fund's transactions in foreign currencies,
forward contracts, options and futures contracts
(including options and futures contracts on foreign
currencies) will be subject to special provisions of
the Code (including provisions relating to "hedging
transactions" and "straddles") that, among other
things, may affect the character of gains and losses
realized by the fund (i.e., may affect whether gains
or losses are ordinary or capital), accelerate
recognition of income to the fund and defer fund
losses. These rules could therefore affect the
character, amount and timing of distributions to
shareholders. These provisions also (a) will require
the fund to mark-to-market certain types of the
positions in its portfolio (i.e., treat them as if
they were closed out) and (b) may cause the fund to
recognize income without receiving cash with which to
pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements
for avoiding income and excise taxes. The fund will
monitor its transactions, will make the appropriate
tax elections and will make the appropriate entries
in its books and records when it acquires any foreign
currency, forward contract, option, futures contract
or hedged investment in order to mitigate the effect
of these rules and prevent disqualification of the
fund as a regulated investment company.
The fund's investment in so-called "section 1256
contracts", such as regulated futures contracts, most
foreign currency forward contracts traded in the
interbank market and options on most stock indices,
are subject to special tax rules. All section 1256
contracts held by the fund at the end of its taxable
year are required to be marked to their market value,
and any unrealized gain or loss on those positions
will be included in the fund's income as if each
position had been sold for its fair market value at
the end of the taxable year. The resulting gain or
loss will be combined with any gain or loss realized
by the fund from positions in section 1256 contracts
closed during the taxable year. Provided such
positions were held as capital assets and were not
part of a "hedging transaction" nor part of a
"straddle," 60% of the resulting net gain or loss
will be treated as long-term capital gain or loss,
and 40% of such net gain or loss will be treated as
short-term capital gain or loss, regardless of the
period of time the positions were actually held by
the fund.
Foreign Investments. Dividends or other income
(including, in some cases, capital gains) received by
the fund from investments in foreign securities may
be subject to withholding and other taxes imposed by
foreign countries. Tax conventions between certain
countries and the United States may reduce or
eliminate such taxes in some cases. The fund will
not be eligible to elect to treat any foreign taxes
paid by it as paid by its shareholders, who therefore
will not be entitled to credits for such taxes on
their own tax returns. Foreign taxes paid by the
fund will reduce the return from the fund's
investments.
Passive Foreign Investment Companies. If the fund
purchases shares in certain foreign investment
entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to United
States federal income tax on a portion of any "excess
distribution" or gain from the disposition of such
shares even if such income is distributed as a
taxable dividend by the fund to its shareholders.
Additional charges in the nature of interest may be
imposed on the fund in respect of deferred taxes
arising from such distributions or gains. If the
fund were to invest in a PFIC and elected to treat
the PFIC as a "qualified electing fund" under the
Code, in lieu of the foregoing requirements, the fund
might be required to include in income each year a
portion of the ordinary earnings and net capital
gains of the qualified electing fund, even if not
distributed to the fund, and such amounts would be
subject to the 90% and excise tax distribution
requirements described above. In order to make this
election, the fund would be required to obtain
certain annual information from the passive foreign
investment companies in which it invests, which may
be difficult or impossible to obtain.
Alternatively, the fund may make a mark-to-market
election that will result in the fund being treated
as if it had sold and repurchased all of the PFIC
stock at the end of each year. In such case, the
fund would report any such gains as ordinary income
and would deduct any such losses as ordinary losses
to the extent of previously recognized gains. The
election, once made, would be effective for all
subsequent taxable years of the fund, unless revoked
with the consent of the Internal Revenue Service (the
"IRS"). By making the election, the fund could
potentially ameliorate the adverse tax consequences
with respect to its ownership of shares in a PFIC,
but in any particular year may be required to
recognize income in excess of the distributions it
receives from PFICs and its proceeds from
dispositions of PFIC stock. The fund may have to
distribute this "phantom" income and gain to satisfy
the 90% distribution requirement and to avoid
imposition of the 4% excise tax. The fund will make
the appropriate tax elections, if possible, and take
any additional steps that are necessary to mitigate
the effect of these rules.
Taxation of United States Shareholders
Dividends and Distributions. Any dividend declared
by the fund in October, November or December of any
calendar year and payable to shareholders of record
on a specified date in such a month shall be deemed
to have been received by each shareholder on December
31 of such calendar year and to have been paid by the
fund not later than such December 31, provided such
dividend is actually paid by the fund during January
of the following calendar year. The fund intends to
distribute annually to its shareholders substantially
all of its investment company taxable income, and any
net realized long-term capital gains in excess of net
realized short-term capital losses (including any
capital loss carryovers). The fund currently expects
to distribute any excess annually to its
shareholders. However, if the fund retains for
investment an amount equal to all or a portion of its
net long-term capital gains in excess of its net
short-term capital losses and capital loss
carryovers, it will be subject to a corporate tax
(currently at a rate of 35%) on the amount retained.
In that event, the fund will designate such retained
amounts as undistributed capital gains in a notice to
its shareholders who (a) will be required to include
in income for United Stares federal income tax
purposes, as long-term capital gains, their
proportionate shares of the undistributed amount, (b)
will be entitled to credit their proportionate shares
of the 35% tax paid by the fund on the undistributed
amount against their United States federal income tax
liabilities, if any, and to claim refunds to the
extent their credits exceed their liabilities, if
any, and (c) will be entitled to increase their tax
basis, for United States federal income tax purposes,
in their shares by an amount equal to 65% of the
amount of undistributed capital gains included in the
shareholder's income. Organizations or persons not
subject to federal income tax on such capital gains
will be entitled to a refund of their pro rata share
of such taxes paid by the fund upon filing
appropriate returns or claims for refund with the IRS
Dividends of net investment income and distributions
of net realized short-term capital gains are taxable
to a United States shareholder as ordinary income,
whether paid in cash or in shares. Distributions of
net realized-long-term capital gains, if any, that
the fund designates as capital gains dividends are
taxable as long-term capital gains, whether paid in
cash or in shares and regardless of how long a
shareholder has held shares of the fund. Dividends
and distributions paid by the fund attributable to
dividends on stock of U.S. corporations received by
the fund, with respect to which the fund meets
certain holding period requirements, will be eligible
for the deduction for dividends received by
corporations. Distributions in excess of the fund's
current and accumulated earnings and profits will, as
to each shareholder, be treated as a tax-free return
of capital to the extent of a shareholder's basis in
his shares of the fund, and as a capital gain
thereafter (if the shareholder holds his shares of
the fund as capital assets). Shareholders receiving
dividends or distributions in the form of additional
shares should be treated for United States federal
income tax purposes as receiving a distribution in an
amount equal to the amount of money that the
shareholders receiving cash dividends or
distributions will receive, and should have a cost
basis in the shares received equal to such amount.
Investors considering buying shares just prior to a
dividend or capital gain distribution should be aware
that, although the price of shares just purchased at
that time may reflect the amount of the forthcoming
distribution, such dividend or distribution may
nevertheless be taxable to them. If the fund is the
holder of record of any stock on the record date for
any dividends payable with respect to such stock,
such dividends are included in the fund's gross
income not as of the date received but as of the
later of (a) the date such stock became ex-dividend
with respect to such dividends (i.e., the date on
which a buyer of the stock would not be entitled to
receive the declared, but unpaid, dividends) or (b)
the date the fund acquired such stock. Accordingly,
in order to satisfy its income distribution
requirements, the fund may be required to pay
dividends based on anticipated earnings, and
shareholders may receive dividends in an earlier year
than would otherwise be the case.
Sales of Shares. Upon the sale or exchange of his
shares, a shareholder will realize a taxable gain or
loss equal to the difference between the amount
realized and his basis in his shares. Such gain or
loss will be treated as capital gain or loss if the
shares are capital assets in the shareholder's hands,
and will be long-term capital gain or loss if the
shares are held for more than one year and short-term
capital gain or loss if the shares are held for one
year or less. Any loss realized on a sale or
exchange will be disallowed to the extent the shares
disposed of are replaced, including replacement
through the reinvesting of dividends and capital
gains distributions in the fund, within a 61-day
period beginning 30 days before and ending 30 days
after the disposition of the shares. In such a case,
the basis of the shares acquired will be increased to
reflect the disallowed loss. Any loss realized by a
shareholder on the sale of a fund share held by the
shareholder for six months or less will be treated
for United States federal income tax purposes as a
long-term capital loss to the extent of any
distributions or deemed distributions of long-term
capital gains received by the shareholder with
respect to such share during such six-month period.
If a shareholder incurs a sales charge in acquiring
shares of the fund, disposes of those shares within
90 days and then acquires shares in a mutual fund for
which the otherwise applicable sales charge is
reduced by reason of a reinvestment right (e.g., an
exchange privilege), the original sales charge will
not be taken into account in computing gain/loss on
the original shares to the extent the subsequent
sales charge is reduced. Instead, the disregarded
portion of the original sales charge will be added to
the tax basis of the newly acquired shares.
Furthermore, the same rule also applies to a
disposition of the newly acquired shares made within
90 days of the second acquisition. This provision
prevents a shareholder from immediately deducting the
sales charge by shifting his or her investment in a
family of mutual funds.
Backup Withholding. The fund may be required to
withhold, for United States federal income tax
purposes, 31% of the dividends, distributions and
redemption proceeds payable to shareholders who fail
to provide the fund with their correct taxpayer
identification number or to make required
certifications, or who have been notified by the IRS
that they are subject to backup withholding. Certain
shareholders are exempt from backup withholding.
Backup withholding is not an additional tax and any
amount withheld may be credited against a
shareholder's United States federal income tax
liabilities.
Notices. Shareholders will be notified annually by
the fund as to the United States federal income tax
status of the dividends, distributions and deemed
distributions attributable to undistributed capital
gains (discussed above in "Taxes - Taxation of United
States Shareholders -Dividends and Distributions")
made by the fund to its shareholders. Furthermore,
shareholders will also receive, if appropriate,
various written notices after the close of the fund's
taxable year regarding the United States federal
income tax status of certain dividends, distributions
and deemed distributions that were paid (or that are
treated as having been paid) by the fund to its
shareholders during the preceding taxable year.
Other Taxation
Distributions also may be subject to additional
state, local and foreign taxes depending on each
shareholder's particular situation.
The foregoing is only a summary of certain material
tax consequences affecting the fund and its
shareholders. Shareholders are advised to consult
their own tax advisers with respect to the particular
tax consequences to them of an investment in the
fund.
ADDITIONAL INFORMATION
The trust was organized on October 17, 1991 under the
laws of the Commonwealth of Massachusetts and is a
business entity commonly known as a "Massachusetts
business trust." The trust offers shares of
beneficial interest of seven separate funds with a
par value of $.001 per share. The fund offers shares
of beneficial interest currently classified into four
Classes - A, B, L and Y. Each Class of the fund
represents an identical interest in the fund's
investment portfolio. As a result, the Classes have
the same rights, privileges and preferences, except
with respect to: (a) the designation of each Class;
(b) the effect of the respective sales charges; if
any, for each class; (c) the distribution and/or
service fees borne by each Class pursuant to the
Plan; (d) the expenses allocable exclusively to each
Class; (e) voting rights on matters exclusively
affecting a single Class; (f) the exchange privilege
of each Class; and (g) the conversion feature of the
Class B shares. The trust's board of trustees does
not anticipate that there will be any conflicts among
the interests of the holders of the different
Classes. The trustees, on an ongoing basis, will
consider whether any such conflict exists and, if so,
take appropriate action.
Under Massachusetts's law, shareholders could, under
certain circumstances, be held personally liable for
the obligations of the fund. The Master Trust
Agreement disclaims shareholder liability for acts or
obligations of the fund, however, and requires that
notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by
the fund or a trustee. The Master Trust Agreement
provides for indemnification from fund property for
all losses and expenses of any shareholder held
personally liable for the obligations of the fund.
Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited
to circumstances in which the fund itself would be
unable to meet its obligations, a possibility which
management of the fund believes is remote. Upon
payment of any liability incurred by the fund, a
shareholder paying such liability will be entitled to
reimbursement from the general assets of the fund.
The trustees intend to conduct the operation of the
fund in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for
liabilities of the fund.
The Master Trust Agreement of the fund permits the
trustees of the fund to issue an unlimited number of
full and fractional shares of a single class and to
divide or combine the shares into a greater or lesser
number of shares without thereby changing the
proportionate beneficial interests in the fund. Each
share in the fund represents an equal proportional
interest in the fund with each other share.
Shareholders of the fund are entitled upon its
liquidation to share pro rata in its net assets
available for distribution. No shareholder of the
fund has any preemptive or conversion rights. Shares
of the fund are fully paid and non-assessable.
Pursuant to the Master Trust Agreement, the fund's
trustees may authorize the creation of additional
series of shares (the proceeds of which would be
invested in separate, independently managed
portfolios) and additional classes of shares within
any series (which would be used to distinguish among
the rights of different categories of shareholders,
as might be required by future regulations or other
unforeseen circumstances).
The fund does not hold annual shareholder meetings.
There normally will be no meetings of shareholders
for the purpose of electing trustees unless and until
such time as less than a majority of the trustees
holding office have been elected by shareholders, at
which time the trustees then in office will call a
shareholders' meeting for the election of trustees.
Shareholders of record of no less than two-thirds of
the outstanding shares of the trust may remove a
trustee through a declaration in writing or by vote
cast in person or by proxy at a meeting called for
that purpose. The trustees will call a meeting for
any purpose upon written request of shareholders
holding at least 10% of the trust's outstanding
shares and the trust will assist shareholders in
calling such a meeting as required by the 1940 Act.
When matters are submitted for shareholder vote,
shareholders of each Class will have one vote for
each full share owned and a proportionate, fractional
vote for any fractional share held of that Class.
Generally, shares of the fund will be voted on a
fund-wide basis on all matters except matters
affecting only the interests of one Class, in which
case only shares of the affected Class would be
entitled to vote.
The trust was organized as an unincorporated
Massachusetts business trust on October 17, 1991
under the name Shearson Lehman Brothers Intermediate-
Term Trust. On October 14, 1994 and August 16, 1995,
the Trust's name was changed Smith Barney Income
Trust and Smith Barney Investment Trust,
respectively.
Annual and Semi-Annual Reports. The fund sends its
shareholders a semi-annual report and an audited
annual report, which include listings of investment
securities held by the fund at the end of the period
covered. In an effort to reduce the fund's printing
and mailing costs, the fund consolidates the mailing
of its semi-annual and annual reports by household.
This consolidation means that a household having
multiple accounts with the identical address of
record will receive a single copy of each report. In
addition, the fund also consolidates the mailing of
its prospectus so that a shareholder having multiple
accounts (that is, individual, IRA and/or Self-
Employed Retirement Plan accounts) will receive a
single Prospectus annually. Shareholders who do not
want this consolidation to apply to their accounts
should contact their Salomon Smith Barney Financial
Consultant or the transfer agent.
FINANCIAL STATEMENTS
As of the date of this SAI, the fund had not yet
commenced operations. Consequently, there are no
financial statements for the fund at this time.
OTHER INFORMATION
Styles of Fund Management: In an industry where the
average portfolio manager has seven years of
experience (source: ICI, 1998), the portfolio
managers of Smith Barney mutual funds average 21
years in the industry and 15 years with the firm.
Smith Barney mutual funds offers more than 60 mutual
funds. We understand that many investors prefer an
active role in allocating the mix of funds in their
portfolio, while others want the asset allocation
decisions to be made by experienced managers.
That's why we offer four "styles" of fund management
that can be tailored to suit each investor's unique
financial goals.
Classic Series - our portfolio manager driven
funds
Our Classic Series lets investors participate
in mutual funds whose investment decisions are
determined by experienced portfolio managers,
based on each fund's investment objectives and
guidelines. Classic Series funds invest across
asset classes and sectors, utilizing a range of
strategies in order to achieve their
objectives.
Index Series - funds that track the market
Our Index funds are designed to provide
investment results that track, as closely as
possible, the performance of a stock or bond
market index. This strategy distinguishes an
index fund from an "actively managed" mutual
fund. Instead of trying to outperform a market
or segment, a portfolio manager looks to an
index to determine which securities the fund
should own.
Premier Selections Series - our best ideas,
concentrated funds
We offer a series of Premier Selections funds
managed by several of our most experienced and
proven managers. This series of funds is built
on a unique strategy of combining complementary
investment management styles to create broader,
multiclass and multicap products that are
distinguished by a highly concentrated focus.
Research Series - driven by exhaustive
fundamental securities analysis
Built on a foundation of substantial buy-side
research under the direction of our Citibank
Global Asset Management (CGAM) colleagues, our
Research funds focus on well-defined
industries, sectors and trends.
Style Pure Series - our solution to funds that
stray
Our Style Pure Series funds are the building
blocks of asset allocation. The funds stay
fully invested within their asset class and
investment style, enabling you to make asset
allocation decisions in conjunction with your
financial professional.
SMITH BARNEY
INVESTMENT TRUST
Emerging Growth Fund
February , 2001
SMITH BARNEY INVESTMENT TRUST
388 Greenwich Street
New York, NY 10013
SALOMON SMITH
BARNEY
A Member of
Citigroup [Symbol]
1
PART C - OTHER INFORMATION
Item 23. Exhibits
Unless otherwise noted, all references are to
the Registrants Registration Statement on Form N-1A
(the Registration Statement) as filed with the
Securities and Exchange
Commission (SEC) on October 21, 1991 (File Nos.
33-43446 and 811-6444).
(a)(1) Registrant's Master Trust Agreement dated
October 17, 1991 and Amendments to the Master Trust
Agreement dated November 21, 1991 and July 30,1993,
respectively, are incorporated by reference to Post-
Effective Amendment No. 4 to the Registration
Statement filed on January 28, 1994 (Post-Effective
Amendment No. 4).
(a)(2) Amendments to the Master Trust Agreement
dated October 14, 1994 and November 7, 1994,
respectively, are incorporated by reference to the
Registration Statement filed on Form N-14 on January
6, 1995 (the N-14).
(a)(3) Amendments to the Master Trust Agreement
dated July 20, 1995 and August 10, 1995 are
incorporated by reference to Post-Effective Amendment
No. 9 to the Registration Statement filed on August
29, 1995 (Post-Effective Amendment No. 9).
(a)(4) Amended and Restated Master Trust Agreement
dated February 28, 1998 is incorporated by reference
to Post Effective Amendment No. 18 to the Registration
Statement filed on March 30, 1998 (Post-
Effective Amendment No, 18)
(a)(5) Amendment No. 1 to the First Amended and
Restated
Master Trust Agreement dated June 1, 1998
is incorporated by reference to Post-Effective Amendment
No.20 to the
Registration Statement filed on June 26, 1998.
(a)(6) Amendment No. 2 to the First Amended and
Restated Master
Trust Agreement dated October 16, 1998 is incorporated by
reference
to Post-Effective Amendment No.21 to the Registration
Statement
filed on November 12, 1998.
(a)(7) Amendment No.3 to the First Amended and
Restated Master Trust Agreement dated February 28, 1998
is incorporated by reference to Post-Effective Amendment
No. 29 to the Registration Statement filed on April 25,
2000 (Post-Effective Amendment No. 29).
(a)(8) Amendment No.4 to the First Amended and
Restated Master Trust Agreement dated February 28, 1998
is incorporated by reference to Post-Effective Amendment
No. 30 to the Registration Statement filed on
August 16, 2000 (Post-Effective Amendment No. 30).
(a)(9) Amendment No.5 to the First Amended and
Restated Master Trust Agreement dated February 28, 1998
is incorporated by reference to Post-Effective
Amendment No. 30.
(a)(10) Amendment No. 6 to the First Amended and
Restated Master Trust Agreement dated February 28, 1998
is filed herein.
(b) Registrant's by-laws are incorporated by
reference to the Registration Statement.
(c)(1) Registrant's form of stock certificate
for Smith Barney S&P 500 Index Fund is incorporated by
reference to Post-Effective Amendment No. 16 to the
Registration Statement filed on December 29, 1997.
(c)(2) Registrant's form of stock certificate
for Smith Barney Large Capitalization Growth Fund is
incorporated by reference to Post-Effective Amendment
No.17 to the Registration Statement filed on
February 20, 1998 (Post-Effective Amendment No. 17).
(c)(3) Registrant's form of stock certificate for
Smith Barney Mid Cap Blend Fund is incorporated by
reference to Post-Effective Amendment No. 22 to the
Registration Statement filed on January 28, 1999
(Post-Effective Amendment No. 22).
(d)(1) Investment Advisory Agreement between
the Registrant and
Greenwich Street Advisors dated July 30, 1993 is
incorporated by reference to Post-Effective Amendment
No. 3 to the Registration Statement filed on December
1, 1993 (Post-Effective Amendment No. 3).
(d)(2) Transfer of Investment Advisory Agreement
dated November 7, 1994 between the Registrant on
behalf of Smith Barney Intermediate Maturity
California Municipals Fund, Greenwich Street Advisors
and Mutual Management Corp. is incorporated by
reference to the N-14.
(d)(3) Form of Transfer of Investment Advisory
Agreement for Smith Barney Limited Maturity
Municipals Fund, Smith Barney Intermediate Maturity
New York Municipals Fund and Smith Barney Limited
Maturity Treasury Fund is incorporated by reference
to Post-Effective Amendment No. 6 to the Registration
Statement filed on January 27, 1995 (Post-Effective
Amendment No. 6).
(d)(4) Form of Investment Advisory Agreement
between the Registrant on behalf of Smith Barney S&P
500 Index Fund and Travelers Investment
Management Company dated December 11, 1997 is
incorporated by reference to Post Effective Amendment
No. 15 to the Registration Statement
filed on December 12, 1997.
(d)(5) Form of Investment Management Agreement
between the Registrant on behalf of Smith Barney
Large Capitalization Growth Fund and Mutual
Management Corp.("MMC") (f/k/a Smith Barney Mutual Funds
Management Inc.) is incorporated by reference to
Post-Effective Amendment No. 17 to the Registration
Statement filed on February 20,1998 (Post-Effective
Amendment No. 17)
(d)(6) Form of Investment Management Agreement
between Smith Barney Mid Cap Blend Fund and MMC
is incorporated by reference to Post-Effective Amendment
No. 17 to the Registration Statement filed on February
20,1998
(Post-Effective Amendment No. 17)
(e)(1) Distribution Agreement between the
Registrant and Smith Barney Shearson Inc. dated July
30, 1993 is incorporated by reference to Post-
Effective Amendment No. 3.
(e)(2) Form of Distribution Agreement between the
Registrant on behalf of Smith Barney S&P 500 Index
Fund and PFS Distributors is incorporated by
reference to Post-Effective Amendment No. 10.
(e)(3) Distribution Agreement between the
Registrant
and CFBDS, Inc. dated October 8, 1998 is incorporated by
reference
to Post-Effective Amendment No.21 to the Registration
Statement
Filed on November 12, 1998.
(e)(4) Selling Group Agreement between CFBDS Inc.
and
Salomon Smith Barney is incorporated by reference to
Post-Effective
Amendment No. 24 to the Registration Statement filed on
March 30, 1999
(Post-Effective Amendment No.24).
(e)(5) Form of Third Party Feeder Agreement between
the
Registrant, CFBDS Inc. and Barclays Global Fund Advisors
on
behalf of the Smith Barney U.S. 5000 Index Fund and EAFE
Index Fund
is incorporated by reference to Post-Effective Amendment
No. 29.
(e)(6) Form of Distribution Agreement with Salomon
Smith Barney Inc. is incorporated by reference to
Post-Effective Amendment No. 30.
(e)(7) Form of Distribution Agreement with PFS
Distributors, Inc. is incorporated by reference to
Post-Effective Amendment No. 30.
(e)(8)Form of Third Party Feeder Agreement between
the Registrant, Salomon Smith Barney Inc. and Master Investment
Portfolio on behalf of the Smith Barney U.S. 5000 Index Fund,
and EAFE Index Fund is incorporated by reference to Post-Effective
Amendment No. 30.
(f) Not Applicable.
(g)(1) Form of Custody Agreement with PNC Bank,
National Association, is incorporated by reference to
Post-Effective Amendment No. 9.
(g)(2) Form of Custodian Agreement with Investors
Bank & Trust Company is incorporated by reference to
Post-Effective Amendment No. 29.
(h)(1) Administration Agreement between the
Registrant on behalf of Smith Barney Intermediate
Maturity California Municipals Fund and Smith Barney
Advisers, Inc. (SBA) is incorporated by reference to
the N-14.
(h)(2) Form of Administration Agreement between
the Registrant on behalf of Smith Barney Limited
Maturity Municipals Fund and Smith Barney
Intermediate Maturity New York Municipals Fund and
SBA is incorporated by reference to Post-Effective
Amendment No. 6.
(h)(3) Form of Administration Agreement between
the Registrant on behalf of Smith Barney S&P 500
Index Fund and MMC is incorporated by reference
to Post Effective Amendment No. 15.
(h)(4) Transfer Agency Agreement with First Data
Investor Services Group, Inc. is incorporated by
reference
to Post-Effective Amendment No. 3.
(h)(5) Form of Sub-Transfer Agency Agreement
between the Registrant on behalf of Smith Barney S&P
500 Index Fund and PFS Shareholder Services is
incorporated by reference to Post-Effective Amendment
No. 10.
(h)(6) Form of Administration Agreement between
the Registrant on behalf of Smith Barney U.S. 5000 Index
Fund ("U.S. 5000 Index Fund") and SSB Citi Fund
Management LLC ("SSB Citi") is incorporated by reference
to
Post-Effective Amendment No. 26 to the Registration
Statement
filed on October 13, 1999 (Post-Effective Amendment No.
26).
(h)(7) Form of Administration Agreement between
the Registrant on behalf of Smith Barney EAFE Index Fund
("EAFE Index Fund") and SSB Citi is incorporated by
reference
to Post-Effective Amendment No. 26.
(h)(8) Transfer Agency Agreement dated October 1, 1999
between the Registrant and Citi Fiduciary Trust Company
f/k/a Smith Barney Private Trust Company) is incorporated
by reference to Post-Effective Amendment No. 30.
(h)(9) Sub-Transfer Agency Agreement dated October 1, 1999
between Citi Fiduciary Trust Company ( f/k/a Smith Barney
Private Trust Company) and First Data Investor Services Group,
Inc. is incorporated by reference to Post-Effective
Amendment No. 30.
(i) Opinion of counsel regarding legality of
shares being registered is incorporated by reference to
Pre-
Effective Amendment No. 1 to the Registration
Statement filed on December 6, 1991.
(i)(2) Legal Counsel's consent is incorporated by
reference to Post-Effective Amendment No. 24.
(j) Auditor's consent is filed herein.
(k) Not Applicable.
(l) Purchase Agreement between the Registrant
and Shearson Lehman Brothers Inc. is incorporated by
reference to Pre-Effective Amendment No. 1.
(m)(1) Amended Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant on
behalf of Smith Barney Intermediate Maturity
California Municipals Fund and Smith Barney Inc. is
incorporated by reference to the N-14.
(m)(2) Form of Amended Service and Distribution
Plan pursuant to Rule 12b-1 between the Registrant on
behalf of Smith Barney Limited Maturity Municipals
Fund and Smith Barney Intermediate Maturity New York
Municipals Fund and Smith Barney Inc. is incorporated
by reference to Post-Effective Amendment No. 6.
(m)(3) Form of Shareholder Services and
Distribution Plan pursuant to Rule 12b-1 between the
Registrant on behalf of Smith Barney S&P 500 Index
Fund is incorporated by reference to Post Effective
Amendment No. 15.
(m)(4) Form of Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant on behalf
of the Fund and Smith Barney Large Capitalization Growth
Fund is incorporated by reference to Post
Effective Amendment No. 17 to the Registration
Statement filed on February 20, 1998 (Post-Effective
Amendment
No. 17).
(m)(5) Form of Amended and Restated
Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant on behalf
of the Funds is incorporated by
reference to Post-Effective Amendment No. 22.
(m)(6) Form of Shareholder Services Plan
pursuant to Rule 12b-1 between the Registrant on
behalf of the U.S. 5000 Index Fund and Salomon
Smith Barney Inc. is incorporated by reference to
Post-Effective Amendment No. 26.
(m)(7) Form of Shareholder Services Plan
pursuant to Rule 12b-1 between the Registrant on
behalf of the EAFE Index Fund and Salomon
Smith Barney Inc. is incorporated by reference
to Post-Effective Amendment No. 26.
(m)(8) Form of Amended and Restated Shareholder
Services and Distribution Plan pursuant to
Rule 12b-1 of Registrant is incorporated by reference
to Post-Effective Amendment No. 30.
(n) Financial Data Schedules are incorporated by
reference to Post-Effective Amendment No. 30.
(o)(1) Plan adopted pursuant to Rule 18f-3(d) of
the Investment Company Act of 1940, as amended, is
incorporated by reference to Post-Effective Amendment
No. 10.
(o)(2) Rule 18f-3(d) Multiple Class Plan of the
Registrant
is incorporated by reference to Post-Effective Amendment
No. 22.
(p) Code of Ethics is incorporated by reference to
Post-Effective
Amendment No. 27 to the Registration Statement filed on
March 27, 2000 (Post-Effective Amendment No. 27).
Item 24. Persons Controlled by or under Common
Control with Registrant
None
Item 25. Indemnification
The response to this item is incorporated by
reference to Pre-Effective Amendment No. 1.
Item 26(a). Business and Other Connections of Investment
Adviser
Investment Adviser - SSB Citi Fund Management LLC ("SSB
Citi")
(successor to SSBC Fund Management Inc.) was incorporated
in
March 1968 under the laws of the State of Delaware.
On September 21, 1999, SSB Citi was converted into a
Delaware Limited
Liability Company. SSB Citi is a wholly owned subsidiary
of Salomon
Smith Barney Holdings Inc. (formerly known as
Smith Barney Holdings Inc.), which in turn is
a wholly
owned subsidiary of Citigroup Inc. (formerly known as
Travelers
Group Inc.). SSB Citi is registered as an investment
adviser under the
Investment Advisers Act of 1940 (the "Advisers Act") and
has, through its
predecessors, been in the investment counseling business
since 1968.
SSB Citi serves as the Investment Adviser and
Administrator
for Smith Barney Intermediate Maturity California
Fund and Smith Barney Intermediate Maturity New York
Fund and Investment Manager for Smith Barney Large
Capitalization Growth Fund and Smith Barney Mid Cap Blend
Fund.
SSB Citi also serves as the administrator to the Smith
Barney S&P 500
Index Fund, the Smith Barney U.S. 5000 Index Fund and the
Smith Barney EAFE Index Fund.
The list required by this Item 26 of officers and
directors of SSB
Citi together with information as to any other business,
profession,
vocation or employment of a substantial nature engaged in
by such
officers and directors during the past two fiscal years,
is incorporated
by reference to Schedules A and D of FORM ADV filed by
SSB Citi
pursuant to the Advisers Act (SEC File No. 801-8314).
Investment Adviser - Travelers Investment Management
Company. (TIMCO). TIMCO serves as the investment
adviser for Smith Barney S&P 500 Index Fund pursuant to a
written
agreement (the Advisory Agreement). TIMCO was
incorporated on August 31, 1967 under the laws of the
State of Connecticut. TIMCO is a wholly owned
subsidiary of Holdings, which in turn is a wholly owned
subsidiary of Citigroup.
TIMCO is registered as an investment adviser under
the Investment Advisers Act of 1940 (the Advisers
Act) since 1971 and has, through its predecessors,
been in the investment counseling business since
1967.
The list required by this Item 26 of the officers
and directors of TIMCO together with information as
to any other business, profession, vocation or
employment of a substantial nature engaged in by such
officers and directors during the past two fiscal
years, is incorporated by reference to Schedules A
and D of FORM ADV filed by SSBC pursuant to the
Advisers Act (SEC File No.801-07212).
Item 27. Principal Underwriters
(a) Salomon Smith Barney, Inc. ("Salomon Smith Barney")
the Registrant's Distributor, is also the distributor for the
following Smith Barney funds: Smith Barney
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
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 Funds 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 New Jersey Municipals Fund Inc., Smith Barney Oregon
Municipals Fund Inc., Smith Barney Principal Return Fund,
Smith Barney Sector Series Fund Inc.,
Smith Barney Small Cap Core 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.
In addition, Salomon Smith Barney is also the distributor for the Centurion
Funds, Inc.
(b) The information required by this Item 27 with respect to each
director and officer of Salomon Smith Barney is incorporated by reference to
Schedule A of Form BD filed by Salomon Smith Barney pursuant to the Securities
and
Exchange Act of 1934 (File No. 8-32417).
(c) Not applicable.
Item 28. Location of Accounts and Records
(1) Smith Barney Investment Trust
7 World Trade Center, 39th Floor
New York, New York 10048
(2) With respect to the Registrant's Manager and Administrator:
SSB Citi Fund Management LLC
(successor to SSBC Fund Management Inc.)
7 World Trade Center, 39th Floor
New York, New York 10048
(3) With respect to the Registrant's Investment
Adviser:
Travelers Investment Management Company
One Tower Square
Hartford, CT 06183
(For Smith Barney S&P 500 Index Fund)
(4) With respect to the Registrant's Custodian:
(a) PFPC Trust Company
(successor by assignment from
PNC Bank, National Association)
8800 Tinicum Boulevard
Philadelphia, Pennsylvania 19153
(Custodian for Smith Barney Intermediate Maturity
California Municipals Fund, Smith Barney
Intermediate
Maturity New York Municipals Fund, Smith Barney
Large Capitalization Growth Fund and Smith Barney
Mid Cap Blend Fund and Smith Barney S&P 500
Index Fund)
(b) Investors Bank and Trust Company
200 Clarendon Street
Boston, Massachusetts 02117-9130
(Custodian for Smith Barney U.S. 5000 Index Fund
and
Smith Barney EAFE Index Fund)
(5) With respect to the Registrant's Sub-Transfer
Agent:
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
With respect to the Registrant's Sub-Transfer Agent
only in connection with Smith Barney Mid Cap Core Fund:
PFS Shareholder Services
3100 Breckinridge Boulevard, Building 200
Duluth, Georgia 30099-0062
(6) With respect to the Registrant's Co-Distributors:
Salomon Smith Barney Inc.
7 World Trade Center
New York, New York 10048
PFS Distributors, Inc.
3100 Breckinridge Boulevard, Building 200
Duluth, Georgia 30099-0062
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, and the Investment Company Act of 1940,
the Fund certifies that it meets all of the requirements
for effectiveness
of this registration statement under rule 485(b) under
the Securities
Act and has duly caused this registration statement to be
signed
on its behalf by the undersigned, thereto duly
authorized in the City of New York, in the State of
New York on the 1st day of December, 2000.
SMITH BARNEY INVESTMENT TRUST
/s/Heath B. McLendon
Heath B. McLendon,
Chief Executive Officer
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed
below by the following persons in the capacities and on
the date indicated.
Signature Title
Date
/s/Heath B. McLendon Chairman of the Board
12/01/00
Heath B. McLendon (Chief Executive Officer)
and President
/s/Lewis E. Daidone Treasurer
12/01/00
Lewis E. Daidone (Chief Financial and
Accounting Officer)
/s/Herbert Barg* Trustee
12/01/00
Herbert Barg
/s/Alfred J. Bianchetti* Trustee
12/01/00
Alfred J. Bianchetti
/s/Martin Brody* Trustee
12/01/00
Martin Brody
/s/Dwight B. Crane* Trustee
12/01/00
Dwight B. Crane
/s/Burt N. Dorsett* Trustee
12/01/00
Burt N. Dorsett
/s/Elliot S. Jaffe* Trustee
12/01/00
Elliot S. Jaffe
/s/Stephen E. Kaufman* Trustee
12/01/00
Stephen E. Kaufman
/s/Joseph J. McCann* Trustee
12/01/00
Joseph J. McCann
/s/Cornelius C. Rose, Jr.* Trustee
12/01/00
Cornelius C. Rose, Jr.
_________________________________________________________
____________
* Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant to power
of attorney dated July 16, 2000.
/s/ Heath B. McLendon
Heath B. McLendon
EXHIBIT INDEX
Exhibit No. Exhibit
(a)(10) Amendment No. 6 to the Amended and Restated
Master Trust Agreement
(j) Auditor's Consent
