Registration No. 2-74288
811-3275
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
[ ] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 70
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940,
Amendment No. 72
SMITH BARNEY INVESTMENT FUNDS INC.
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(800)-451-2010
(Registrant's Telephone Number, including Area Code:)
Christina T. Sydor
388 Greenwich Street, New York, New York 10013(22nd
Floor)
(Name and Address of Agent For Service)
Continuous
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective:
XXX immediately upon filing pursuant to Paragraph (b) of
Rule 485
On March 13, 2000 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
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 Common
Stock
PART A
<PAGE>
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
PROSPECTUS
Concert
Peachtree Growth
Fund
Class A, B, L and Y Shares
------------------------------------------------------------------
- ---------
March 13, 2000
The Securities and Exchange Commission has not approved or
disapproved
these securities or determined whether this prospectus is accurate
or
complete. Any statement to the contrary is a crime.
<PAGE>
Concert Peachtree Growth Fund
Contents
<TABLE>
<S>
<C>
Investments, risks and
performance.......................................... 2
More on the fund's
investments.............................................. 6
Management.............................................................
..... 7
Choosing a class of shares to
buy........................................... 8
Comparing the fund's
classes................................................ 9
Sales
charges...............................................................
10
More about deferred sales
charges........................................... 12
Buying
shares...............................................................
13
Exchanging
shares........................................................... 14
Redeeming
shares............................................................ 15
Other things to know
about share
transactions.................................................... 18
Salomon Smith Barney Retirement
programs.................................... 20
Dividends, distributions and
taxes.......................................... 21
Share
price.................................................................
22
Financial
Highlights........................................................ 23
</TABLE>
You should know: An investment in the fund is not a bank deposit and is
not
insured or guaranteed by the FDIC or any other government agency.
Smith Barney
Mutual Funds
1
<PAGE>
Investments, risks and performance
Investment objective
The fund seeks capital appreciation.
Principal investment strategies
Key investments The fund invests primarily in common stocks of
companies with
medium and large market capitalizations.
To a lesser extent, the fund also may invest in common stocks of
companies with
small market capitalizations and other equity securities, including
exchange
traded and over-the-counter common stocks and preferred shares, debt
securities
convertible into equity securities, and warrants and rights relating to
equity
securities.
Selection process The manager emphasizes individual security selection,
while
diversifying across industries and sectors. The manager uses a
disciplined man-
agement style involving both quantitative analysis and fundamental
research.
The manager uses a computer-aided quantitative model supported by its
own fun-
damental qualitative research. In selecting individual securities for
invest-
ment, the manager looks for the following:
.Above average potential for capital appreciation
.Strong, sustainable earnings growth
.Stocks of companies in cyclical industries that the manager believes
are tem-
porarily depressed
.Experienced and effective management
.Effective research, product development and marketing
.Competitive advantages
Concert Peachtree Growth Fund
2
<PAGE>
Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or the fund
may not
perform as well as other investments, if:
. The stock market declines
. Companies with medium and large market capitalizations fall out of
favor with
investors
. Companies in which the fund invests fail to meet earnings
expectations, or
other events depress their stock prices
. The manager's judgment about the attractiveness, value or potential
apprecia-
tion of a particular stock proves to be incorrect
Who may want to invest The fund may be an appropriate investment if
you:
. Are seeking to participate in the long-term capital appreciation
potential of
the stock market
. Are planning for a long-term goal and are willing to accept periods
of market
volatility
. Are willing to accept the risks of investing in the stock market
Smith Barney
Mutual Funds
3
<PAGE>
Risk return bar chart
This bar chart indicates the risks of investing in the fund by showing
changes
in the fund's performance from year to year. Past performance does not
neces-
sarily indicate how the fund will perform in the future. The bar chart
shows
the performance of the fund's Class A shares for each of the past 4
years*.
Class B, L and Y shares would have different performance because of
their dif-
ferent expenses. The performance information in the chart does not
reflect
sales charges, which would reduce your return.
Total Return for Class A Shares
[GRAPH]
96 97 98 99
13.96% 5.18% 33.13% 19.88%
Calendar years ended December 31
*The fund's current management team began managing the fund in August
1997.
Quarterly returns:
Highest: 29.90% in 4th quarter 1998; Lowest: (12.26)% in 3rd quarter
1998
Risk return table
This table indicates the risks of investing in the fund by comparing
the aver-
age annual total return of each class for the periods shown with that
of the
Russell 1000 Growth Index, a broad-based unmanaged index of large
capitaliza-
tion growth oriented common stocks and the Standard & Poor's 500 Index,
a
broad-based unmanaged index of 500 widely held common stocks. This
table assumes imposition of the maximum sales charge applicable to the
class,
redemption of shares at the end of the period, and reinvestment of
distribu-
tions and dividends.
Average Annual Total Returns
Calendar Years Ended December 31, 1999
<TABLE>
<CAPTION>
Class 1 year 5 years 10 years Since inception
Inception Date
<S> <C> <C> <C> <C> <C>
A 13.90% n/a n/a 17.72%
07/03/95
B 13.88% n/a n/a 18.02%
07/03/95
L 16.45% n/a n/a 17.00%
08/08/95
Y 20.41% n/a n/a 27.23%
10/15/97
Standard & Poor's 500
Index+ 21.03% n/a n/a 26.50% *
Russell 1000 Growth
Index+ 33.16% n/a n/a 30.55% *
</TABLE>
*Index comparison begins on 07/31/95
+It is management's opinion that the Standard & Poor's 500 Index more
accurately reflects the current composition of the fund than the
Russell 1000 Growth Index
Concert Peachtree Growth Fund
4
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay if you invest
in fund
shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment) Class A Class B Class L
Class Y
<S> <C> <C> <C>
<C>
Maximum sales charge (load) imposed on
purchases (as a % of offering price) 5.00% None 1.00%
None
Maximum deferred sales charge (load) (as a %
of the lower of net asset value at purchase or
redemption) None* 5.00% 1.00%
None
Annual fund operating expenses
<CAPTION>
(expenses deducted from fund assets)
<S> <C> <C> <C>
<C>
Management fee 0.99% 0.99% 0.99%
0.99%
Distribution and service (12b-1) fee 0.25% 1.00% 1.00%
None
Other expenses 0.20% 0.25% 0.57%
0.01%
----- ----- -----
- -----
Total annual fund operating expenses 1.44% 2.24% 2.56%
1.00%
</TABLE>
*You may buy Class A shares in amounts of $500,000 or more at net asset
value
(without an initial sales charge) but if you redeem those shares within
12
months of their purchase, you will pay a deferred sales charge of
1.00%.
Example
This example helps you compare the costs of investing in the fund with
the
costs of investing in other mutual funds. Your actual costs may be
higher or
lower. The example assumes:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a sales charge
. The fund's operating expenses remain the same
Number of years you own your shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A
(with or without redemption) $639 $ 933 $1,248 $2,138
Class B
(redemption at end of period) $727 $1,000 $1,300 $2,377
Class B
(no redemption) $227 $ 700 $1,200 $2,377
Class L
(redemption at end of period) $457 $ 889 $1,447 $2,966
Class L
(no redemption) $357 $ 889 $1,447 $2,966
Class Y
(with or without redemption) $102 $ 318 $ 552 $1,225
</TABLE>
Smith Barney
Mutual Funds
5
<PAGE>
More on the fund's investments
Foreign securities The fund may invest in American Depository Receipts
(ADRs)
and other securities quoted in U.S. dollars of foreign issuers,
including those
in emerging markets. Because the fund may invest in securities of
foreign
issuers, the fund carries additional risks. The value of your
investment may
decline if the U.S. and/or foreign stock markets decline or an adverse
event,
such as an unfavorable earnings report, depresses the value of a
particular
company's stock. Prices of foreign securities may decline because of
foreign
government actions, political instability or the more limited
availability of
accurate information about foreign companies. These risks may be more
severe
for securities of issuers in emerging markets.
Defensive investing The fund may depart from its principal investment
strate-
gies in response to adverse market, economic or political conditions by
taking
temporary defensive positions in all types of money market and short-
term debt
securities. If the fund takes a temporary defensive position, it may be
unable
to achieve its investment goal.
Concert Peachtree Growth Fund
6
<PAGE>
Management
Manager The fund's investment manager is SSB Citi Fund Management LLC
(Succes-
sor to SSBC Fund Management Inc.), an affiliate of Salomon Smith Barney
Inc.
The manager's address is 388 Greenwich Street, New York, New York
10013. The
manager selects the fund's investments and oversees its operations. The
manager
and Salomon Smith Barney are subsidiaries of Citigroup Inc. Citigroup
busi-
nesses produce a broad range of financial services--asset management,
banking
and consumer finance, credit and charge cards, insurance, investments,
invest-
ment banking and trading--and use diverse channels to make them
available to
consumer and corporate customers around the world.
Dennis A. Johnson, CFA, investment officer of the manager and president
and
chief investment officer of Peachtree Asset Management, a division of
the man-
ager, has been responsible for the management of the fund since August
1997.
Management fee For its services, the manager received a fee during the
fund's
last fiscal year equal to 0.99% of the fund's average daily net assets.
Distributor The fund has entered into an agreement with CFBDS, Inc. to
distrib-
ute the fund's shares. A selling group consisting of Salomon Smith
Barney and
other broker-dealers sells fund shares to the public.
Distribution 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.
Transfer agent and shareholder servicing agent Smith Barney Private
Trust Com-
pany serves as the fund's transfer agent and shareholder servicing
agent (the
"transfer agent"). Pursuant to a sub-transfer agency and services
agreement
with the transfer agent, PFPC Global Fund Services serves as the fund's
sub-
transfer agent (the "sub-transfer agent") to render certain shareholder
record
keeping and accounting services and functions.
Smith Barney
Mutual Funds
7
<PAGE>
Choosing a class of shares to buy
You can choose among four classes of shares: Classes A, B, L and Y.
Each class
has different sales charges and expenses, allowing you to choose the
class that
best meets your needs. Which class is more beneficial to an investor
depends on
the amount and intended length of the investment.
. If you plan to invest regularly or in large amounts, buying Class A
shares
may help you reduce sales charges and ongoing expenses.
. For Class B shares, all of your purchase amount and, for Class L
shares, more
of your purchase amount (compared to Class A shares) will be
immediately
invested. This may help offset the higher expenses of Class B and
Class L
shares, but only if the fund performs well.
. Class L shares have a shorter deferred sales charge period than Class
B
shares. However, because Class B shares convert to Class A shares,
and Class
L shares do not, Class B shares may be more attractive to long-term
investors.
You may buy shares from:
. A Salomon Smith Barney Financial Consultant
. An investment dealer in the selling group or a broker that clears
through
Salomon Smith Barney--a dealer representative
. The fund, but only if you are investing through certain qualified
plans or
certain dealer representatives
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
Concert Peachtree Growth Fund
8
<PAGE>
Comparing the fund's classes
Your Salomon Smith Barney Financial Consultant or dealer representative
can
help you decide which class meets your goals. They may receive
different com-
pensation depending upon which class you choose.
<TABLE>
<CAPTION>
Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Key features . Initial . No initial . Initial . No
initial
sales sales sales or
charge charge charge is
deferred
. You may . Deferred lower than sales
qualify sales Class A
charge
for reduc- charge . Deferred . Must
tion or declines sales
invest at
waiver of over time charge for least
$15
initial . Converts only 1
million
sales to Class A year . Lower
charge after 8 . Does not
annual
. Lower years convert to
expenses
annual . Higher Class A than
the
expenses annual . Higher other
than Class expenses annual
classes
B and than Class expenses
Class L A than Class
A
- -----------------------------------------------------------------------
- -----
Initial sales charge Up to None 1.00% None
5.00%;
reduced for
large pur-
chases and
waived for
certain
investors.
No charge
for pur-
chases of
$500,000 or
more
- -----------------------------------------------------------------------
- -----
Deferred sales charge 1% on pur- Up to 5% 1% if you None
chases of charged redeem
$500,000 or when you within 1
more if you redeem year of
redeem shares. The purchase
within 1 charge is
year of reduced
purchase over time
and there
is no
deferred
sales
charge
after 6
years
- -----------------------------------------------------------------------
- -----
Annual distribution and 0.25% of 1% of aver- 1% of aver- None
service fees average age daily age daily
daily net net assets net assets
assets
- -----------------------------------------------------------------------
- -----
Exchangeable into* Class A Class B Class L Class Y
shares of shares of shares of shares
of
most Smith most Smith most Smith most
Smith
Barney Barney Barney Barney
funds funds funds funds
- -----------------------------------------------------------------------
- -----
</TABLE>
*Ask your Salomon Smith Barney Financial Consultant or dealer
representative or
visit the web site for the Smith Barney funds available for exchange.
Smith Barney
Mutual Funds
9
<PAGE>
Sales charges
Class A shares
You buy Class A shares at the offering price, which is the net asset
value plus
a sales charge. You pay a lower sales charge as the size of your
investment
increases to certain levels called breakpoints. You do not pay a sales
charge
on the fund's distributions or dividends you reinvest in additional
Class A
shares.
<TABLE>
<CAPTION>
Sales charge as a % of
Offering Net amount
Amount of purchase price (%) invested (%)
<S> <C> <C>
Less than $25,000 5.00 5.26
$25,000 but less than $50,000 4.00 4.17
$50,000 but less than $100,000 3.50 3.63
$100,000 but less than $250,000 3.00 3.09
$250,000 but less than $500,000 2.00 2.04
$500,000 or more 0.00 0.00
</TABLE>
Investments of $500,000 or more You do not pay an initial sales charge
when you
buy $500,000 or more of Class A shares. However, if you redeem these
Class A
shares within one year of purchase, you will pay a deferred sales
charge of 1%.
Qualifying for a reduced Class A sales charge There are several ways
you can
combine multiple purchases of Class A shares of Smith Barney funds to
take
advantage of the breakpoints in the sales charge schedule.
. Accumulation privilege - lets you combine the current value of Class
A shares
owned
. by you, or
. by members of your immediate family,
and for which a sales charge was paid, with the amount of your next
purchase
of Class A shares for purposes of calculating the initial sales
charge. Cer-
tain trustees and fiduciaries may be entitled to combine accounts in
deter-
mining their sales charge.
. Letter of intent - lets you purchase Class A shares of the fund and
other
Smith Barney funds over a 13-month period and pay the same sales
charge, if
any, as if all shares had been purchased at once. You may include
purchases
on which you paid a sales charge within 90 days before you sign the
letter.
Concert Peachtree Growth Fund
10
<PAGE>
Waivers for certain Class A investors Class A initial sales charges are
waived
for certain types of investors, including:
. Employees of members of the NASD
. 403(b) or 401(k) retirement plans, if certain conditions are met
. Clients of newly employed Salomon Smith Barney Financial Consultants,
if cer-
tain conditions are met
. Investors who redeemed Class A shares of a Smith Barney fund in the
past 60
days, if the investor's Salomon Smith Barney Financial Consultant or
dealer
representative is notified
If you want to learn about additional waivers of Class A initial sales
charges,
contact your Salomon Smith Barney Financial Consultant or dealer
representative
or consult the Statement of Additional Information ("SAI").
Class B Shares
You buy Class B shares at net asset value without paying an initial
sales
charge. However, if you redeem your Class B shares within six years of
pur-
chase, you will pay a deferred sales charge. The deferred sales charge
decreases as the number of years since your purchase increases.
<TABLE>
<CAPTION>
Year after purchase 1st 2nd 3rd 4th 5th 6th through 8th
<S> <C> <C> <C> <C> <C> <C>
Deferred sales charge 5% 4% 3% 2% 1% 0%
</TABLE>
Class B conversion After 8 years, Class B shares automatically convert
into
Class A shares. This helps you because Class A shares have lower annual
expenses. Your Class B shares will convert to Class A shares as
follows:
<TABLE>
<CAPTION>
Shares issued: Shares
issued:
On reinvestment of Upon
exchange from
Shares issued: dividends and another
Smith Barney
At initial purchase distributions fund
<S> <C> <C>
Eight years after the date of purchase In same proportion On the date
the
as the number of shares
originally
Class B shares acquired
would
converting is to have
converted
total Class B into Class A
shares you own shares
(excluding shares
issued as
dividends)
</TABLE>
Smith Barney
Mutual Funds
11
<PAGE>
Class L Shares
You buy Class L shares at the offering price, which is the net asset
value plus
a sales charge of 1% (1.01% of the net amount invested). In addition,
if you
redeem your Class L shares within one year of purchase, you will pay a
deferred
sales charge of 1%. If you held Class C shares of the fund on June 12,
1998,
you will not pay an initial sales charge on Class L shares you buy
before June
22, 2001.
Class Y Shares
You buy Class Y shares at net asset value with no initial sales charge
and no
deferred sales charge when you redeem. You must meet the $15,000,000
initial
investment requirement. You can use a letter of intent to meet this
requirement
by buying Class Y shares of the fund over a 13-month period. To
qualify, you
must initially invest $5,000,000.
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 sell shares, the fund will first sell
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 Salomon Smith Barney Financial Consultant or dealer
representative.
Salomon Smith Barney receives deferred sales charges as partial
compensation
for its expenses in selling shares, including the payment of
compensation to
your Salomon Smith Barney Financial Consultant or dealer
representative.
Concert Peachtree Growth Fund
12
<PAGE>
Deferred sales charge waivers
The deferred sales charge for each share class will generally be
waived:
. On payments made through certain systematic withdrawal plans
. On certain distributions from a retirement plan
. For involuntary redemptions of small account balances
. For 12 months following the death or disability of a shareholder
If you want to learn more about additional waivers of deferred sales
charges,
contact your Salomon Smith Barney Financial Consultant or dealer
representative
or consult the SAI.
Buying shares
Through a You should contact your Salomon Smith Barney Financial
Con-
Salomon Smith sultant or dealer representative to open a brokerage
account
Barney and make arrangements to buy shares.
Financial
Consultant or
dealer
representative
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
You should pay for your shares through your brokerage
account
no later than the third business day after you place
your
order. Salomon Smith Barney or your dealer
representative may
charge an annual account maintenance fee.
- -----------------------------------------------------------------------
- ---------
Through the Qualified retirement plans and certain other investors
who
fund's are clients of the selling group are eligible to buy
shares
transfer directly from the fund.
agent
. Write the sub-transfer agent at the following
address:
Smith Barney Investment Funds Inc.
Concert Peachtree Growth Fund
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
. Enclose a check made payable to the fund to pay for
the
shares. For initial purchases, complete and send an
account
application.
. For more information, call the transfer agent at 1-
800-451-
2010.
Smith Barney
Mutual Funds
13
<PAGE>
- -----------------------------------------------------------------------
- ---------
Through a
systematic You may authorize Salomon Smith Barney, your dealer
represen-
investment tative or the sub-transfer agent to transfer funds
automati-
plan cally from a regular bank account, cash held in a
Salomon
Smith Barney brokerage account or Smith Barney money
market
fund to buy shares on a regular basis.
. Amounts transferred should be at least: $25 monthly
or $50
quarterly
. If you do not have sufficient funds in your account
on a
transfer date, Salomon Smith Barney, your dealer
represen-
tative or the sub-transfer agent may charge you a
fee
For more information, contact your Salomon Smith
Barney
Financial Consultant, dealer representative or the
transfer
agent or consult the SAI.
Exchanging shares
Smith Barney You should contact your Salomon Smith Barney Financial
Con-
offers a sultant or dealer representative to exchange into
other Smith
distinctive Barney funds. Be sure to read the prospectus of the
Smith
family of Barney fund you are exchanging into. An exchange is a
taxable
funds transaction.
tailored to
help meet the
varying needs
of both large
and small
investors.
. You may exchange shares only for shares of the same
class
of the another Smith Barney fund. Not all Smith
Barney
funds offer all classes.
. Not all Smith Barney funds may be offered in your
state of
residence. Contact your Smith Barney Financial
Consultant,
dealer representative or the transfer agent.
. You must meet the minimum investment amount for each
fund
. 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
Concert Peachtree Growth Fund
14
<PAGE>
- -----------------------------------------------------------------------
- ---------
Waiver of Your shares will not be subject to an initial sales
charge at
additional the time of the exchange.
sales charges
Your deferred sales charge (if any) will continue to
be mea-
sured from the date of your original purchase. If the
fund
you exchange into has a higher deferred sales charge,
you
will be subject to that charge. If you exchange at any
time
into a fund with a lower charge, the sales charge will
not be
reduced.
- -----------------------------------------------------------------------
- ---------
By telephone
If you do not have a brokerage account, you may be
eligible
to exchange shares through the transfer agent. You
must com-
plete an authorization form to authorize telephone
transfers.
If eligible, you may make tele-phone exchanges on any
day the
New York Stock Exchange is open. Call the transfer
agent at
1-800-451-2010 between 9:00 a.m. and 4:00 p.m.
(Eastern
time).
You can make telephone exchanges only between accounts
that
have identical registrations.
- -----------------------------------------------------------------------
- ---------
By mail
If you do not have a Salomon Smith Barney brokerage
account,
contact your dealer representative or write to the
sub-trans-
fer agent at the address on the opposite page.
- -----------------------------------------------------------------------
- ---------
Redeeming shares
- -----------------------------------------------------------------------
- ---------
Generally Contact your Salomon Smith Barney Financial Consultant
or
dealer representative to redeem shares of the fund.
If you hold share certificates, the 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.
Smith Barney
Mutual Funds
15
<PAGE>
If you have a Salomon Smith Barney brokerage account,
your
redemption proceeds will be placed in your account and
not
reinvested without your specific instruction. In other
cases,
unless you direct otherwise, your redemption proceeds
will be
paid by check mailed to your address of record.
- -----------------------------------------------------------------------
- ---------
By mail
For accounts held directly at the fund, send written
requests
to the sub-transfer agent at the following address:
Smith Barney Investment Funds Inc.
Concert Peachtree Growth Fund
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
Your written request must provide the following:
. Your account number
. The class of shares and the dollar amount or number
of
shares to be redeemed
. Signatures of each owner exactly as the account is
regis-
tered
- -----------------------------------------------------------------------
- ---------
By telephone
If you do not have a brokerage account, you may be
eligible
to redeem shares (except those held in retirement
plans) in
amounts up to $10,000 per day through the transfer
agent. You
must complete an authorization form to authorize
telephone
redemptions. If eligible, you may request redemptions
by tel-
ephone on any day the New York Stock Exchange is open.
Call
the transfer agent at 1-800-451-2010 between 9:00 a.m.
and
4:00 p.m. (Eastern time).
Your redemption proceeds can be sent by check to your
address
of record or by wire transfer to a bank account
designated on
your authorization form. You must submit a new
authorization
form to change the bank account designated to receive
wire
transfers and you may be asked to provide certain
other docu-
ments.
- -----------------------------------------------------------------------
- ---------
Automatic You can arrange for the automatic redemption of a
portion of
cash your shares on a monthly or quarterly basis. To
qualify you
withdrawal must own shares of the fund with a value of at least
$10,000
plans ($5,000 for retirement plan accounts) and each
automatic
redemption must be at
Concert Peachtree Growth Fund
16
<PAGE>
least $50. If your shares are subject to a deferred
sales
charge, the sales charge will be waived if your
automatic
payments do not exceed 1% per month of the value of
your
shares subject to a deferred sales charge.
The following conditions apply:
. Your shares must not be represented by certificates
. All dividends and distributions must be reinvested
For more information, contact your Salomon Smith
Barney
Financial Consultant or dealer representative or
consult the
SAI.
Smith Barney
Mutual Funds
17
<PAGE>
Other things to know about share transactions
When you buy, exchange or redeem shares, your request must be in good
order.
This means you have provided the following information, without which
your
request will not be processed:
. Name of the fund
. Account number
. Class of shares being bought, exchanged or redeemed
. Dollar amount or number of shares being bought, exchanged or redeemed
. Signature of each owner exactly as the account is registered
The transfer agent will try to confirm that any telephone exchange or
redemp-
tion request is genuine by recording calls, asking the caller to
provide a per-
sonal identification number for the account, sending you a written
confirmation
or requiring other confirmation procedures from time to time.
Signature guarantees To be in good order, your redemption request must
include
a signature guarantee if you:
. Are redeeming over $10,000 of shares
. Are sending signed share certificates or stock powers to the 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 reg-
istration
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
Concert Peachtree Growth Fund
18
<PAGE>
. Suspend telephone transactions
. Suspend or postpone redemptions of shares on any day when trading on
the New
York Stock Exchange is restricted, or as otherwise permitted by the
Securi-
ties and Exchange Commission
. Pay redemption proceeds by giving you securities. You may pay
transaction
costs to dispose of the securities
Small account balances If your account falls below $500 because of a
redemption
of fund shares, the fund may ask you to bring your account up to $500.
If your
account is still below $500 after 60 days, the fund may close your
account and
send you the redemption proceeds.
Excessive exchange transactions The manager may determine that a
pattern of
frequent exchanges is detrimental to the fund's performance and other
share-
holders. If so, the fund may limit additional purchases and/or
exchanges by the
shareholder.
Share certificates The fund does not issue share certificates unless a
written
request 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
Mutual Funds
19
<PAGE>
Salomon 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 open. Once a class of shares is chosen, all
additional
purchases must be of the same class.
. For plans opened on or after March 1, 2000 that are not part of the
Paychex
offering. Class A shares may be purchased regardless of the amount
invested.
. For plans opened prior to March 1, 2000 and for plans that are part
of the
Paychex offering, the class of shares you may purchase depends on the
amount
of your initial investment.
. Class A shares may be purchased by plans investing at least $1
million.
. Class L shares may be purchased by plans investing less than $1
million.
Class L shares are eligible 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 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 of any year, all Class L shares are eligible
for
exchange on or about March 31 of the following year.
For more information, call your Salomon Smith Barney Financial
Consultant or
the transfer agent, or consult the SAI.
Concert Peachtree Growth Fund
20
<PAGE>
Dividends, distributions and taxes
Dividends The fund generally pays dividends, if any, and makes capital
gain
distributions once a year, typically in December. The fund may pay
additional
distributions and dividends at other times if necessary for the fund to
avoid a
federal tax. Capital gain distributions and dividends are reinvested in
addi-
tional fund shares of the same class you hold. The fund expects
distributions
to be primarily from capital gain. You do not pay a sales charge on
reinvested
distributions or dividends. Alternatively, you can instruct your
Salomon Smith
Barney Financial Consultant, dealer representative or the transfer
agent to
have your distributions and/or dividends paid in cash. You can change
your
choice at any time to be effective as of the next distribution or
dividend,
except that any change given to the transfer agent less than five days
before
the payment date will not be effective until the next distribution or
dividend
is paid.
Taxes In general, redeeming shares, exchanging shares and receiving
distribu-
tions (whether in cash or additional shares) are all taxable events.
<TABLE>
<CAPTION>
Transaction Federal tax status
<S> <C>
Redemption or exchange of shares Usually capital gain or loss;
long-term only if shares owned
more than one year
Long-term capital gain distributions Long-term capital gain
Short-term capital gain distributions Ordinary income
Dividends Ordinary income
</TABLE>
Long-term capital gain distributions are taxable to you as long-term
capital
gain regardless of how long you have owned your shares. You may want to
avoid
buying shares when the fund is about to declare a 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 fund securities based on market prices or
quota-
tions. Fair value is determined 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.
In order to buy, redeem or exchange shares at that day's price, you
must place
your order with your Salomon Smith Barney Financial Consultant or
dealer repre-
sentative before the New York Stock Exchange closes. If the Exchange
closes
early, you must place your order prior to the actual closing time.
Otherwise,
you will receive the next business day's price.
Salomon Smith Barney or members of the selling group must transmit all
orders
to buy, exchange or redeem shares to the fund's agent before the
agent's close
of business.
Concert Peachtree Growth Fund
22
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand the
perfor-
mance of each class since inception. Certain information reflects
financial
results for a single share. Total return represents the rate that a
shareholder
would have earned (or lost) on a fund share assuming reinvestment of
all divi-
dends and distributions. The information in the following tables was
audited by
KPMG LLP, independent accountants, whose report, along with the fund's
finan-
cial statements, is included in the annual report (available upon
request).
For a Class A share of capital stock outstanding throughout each year
ended
December 31:
<TABLE>
<CAPTION>
1999(/1/) 1998(/1/) 1997 1996
1995(/2/)
- -----------------------------------------------------------------------
- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $17.71 $13.41 $13.80 $14.31
$13.36
- -----------------------------------------------------------------------
- ------
Income from operations:
Net investment income (loss) (0.12) (0.07) 0.03 0.01
0.03
Net realized and unrealized
gain 3.60 4.50 0.65 1.85
1.87
- -----------------------------------------------------------------------
- ------
Total income from operations 3.48 4.43 0.68 1.86
1.90
- -----------------------------------------------------------------------
- ------
Less distributions from:
Net investment income -- -- -- (0.11)
(0.02)
Net realized gains (2.09) (0.13) (1.07) (2.26)
(0.93)
- -----------------------------------------------------------------------
- ------
Total distributions (2.09) (0.13) (1.07) (2.37)
(0.95)
- -----------------------------------------------------------------------
- ------
Net asset value, end of year $19.10 $17.71 $13.41 $13.80
$14.31
- -----------------------------------------------------------------------
- ------
Total return 19.88% 33.13% 5.18% 13.96%
14.61%(/3/)
- -----------------------------------------------------------------------
- ------
Net assets, end of year
(millions) $124 $87 $67 $72
$58
- -----------------------------------------------------------------------
- ------
Ratios to average net assets:
Expenses 1.44% 1.40% 1.67% 1.78%
1.72%(/4/)
Net investment income (loss) (0.64) (0.48) 0.22 0.13
0.46(/4/)
- -----------------------------------------------------------------------
- ------
Portfolio turnover rate 94% 93% 227% 183%
51%
- -----------------------------------------------------------------------
- ------
</TABLE>
(/1/)Per share amounts have been calculated using the monthly average
shares
method.
(/2/)For the period from July 3, 1995 (inception date) to December 31,
1995.
(/3/)Not annualized.
(/4/)Annualized.
Smith Barney
Mutual Funds
23
<PAGE>
For a Class B share of capital stock outstanding throughout each year
ended
December 31:
<TABLE>
<CAPTION>
1999(/1/) 1998(/1/) 1997 1996
1995(/2/)
- -----------------------------------------------------------------------
- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $17.35 $13.24 $13.74 $14.27
$13.36
- -----------------------------------------------------------------------
- ------
Income from operations:
Net investment loss (0.26) (0.19) (0.07) (0.09)
(0.02)
Net realized and unrealized
gain 3.50 4.43 0.64 1.84
1.86
- -----------------------------------------------------------------------
- ------
Total income from operations 3.24 4.24 0.57 1.75
1.84
- -----------------------------------------------------------------------
- ------
Less distributions from:
Net investment income -- -- -- (0.02)
- --
Net realized gains (2.09) (0.13) (1.07) (2.26)
(0.93)
- -----------------------------------------------------------------------
- ------
Total distributions (2.09) (0.13) (1.07) (2.28)
(0.93)
- -----------------------------------------------------------------------
- ------
Net asset value, end of year $18.50 $17.35 $13.24 $13.74
$14.27
- -----------------------------------------------------------------------
- ------
Total return 18.88% 32.11% 4.40% 13.12%
14.15%(/3/)
- -----------------------------------------------------------------------
- ------
Net assets, end of year
(millions) $95 $59 $42 $43
$33
- -----------------------------------------------------------------------
- ------
Ratios to average net assets:
Expenses 2.24% 2.21% 2.42% 2.53%
2.46%(/4/)
Net investment loss (1.44) (1.29) (0.53) (0.63)
(0.27)(/4/)
- -----------------------------------------------------------------------
- ------
Portfolio turnover rate 94% 93% 227% 183%
51%
- -----------------------------------------------------------------------
- ------
</TABLE>
(/1/)Per share amounts have been calculated using the monthly average
shares
method.
(/2/)For the period from July 3, 1995 (inception date) to December 31,
1995.
(/3/)Not annualized.
(/4/)Annualized.
Concert Peachtree Growth Fund
24
<PAGE>
For a Class L share of capital stock outstanding throughout each year
ended
December 31:
<TABLE>
<CAPTION>
1999(/1/) 1998(/1/)(/2/) 1997 1996
1995(/3/)
- -----------------------------------------------------------------------
- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $17.41 $13.28 $13.78 $14.29
$14.05
- -----------------------------------------------------------------------
- -------
Income from operations:
Net investment income
(loss) (0.32) (0.18) (0.05) (0.08)
0.01
Net realized and
unrealized gain 3.54 4.44 0.62 1.85
1.16
- -----------------------------------------------------------------------
- -------
Total income from
operations 3.22 4.26 0.57 1.77
1.17
- -----------------------------------------------------------------------
- -------
Less distributions from:
Net investment income -- -- -- (0.02)
- --
Net realized gains (2.09) (0.13) (1.07) (2.26)
(0.93)
- -----------------------------------------------------------------------
- -------
Total distributions (2.09) (0.13) (1.07) (2.28)
(0.93)
- -----------------------------------------------------------------------
- -------
Net asset value, end of
year $18.54 $17.41 $13.28 $13.78
$14.29
- -----------------------------------------------------------------------
- -------
Total return 18.67% 32.17% 4.38% 13.24%
8.69%(/4/)
- -----------------------------------------------------------------------
- -------
Net assets, end of year
(000)'s $644 $222 $203 $174
$88
- -----------------------------------------------------------------------
- -------
Ratios to average net
assets:
Expenses 2.56% 2.16% 2.41% 2.40%
2.29%(/5/)
Net investment income
(loss) (1.77) (1.23) (0.53) (0.48)
0.13(/5/)
- -----------------------------------------------------------------------
- -------
Portfolio turnover rate 94% 93% 227% 183%
51%
- -----------------------------------------------------------------------
- -------
</TABLE>
(/1/)Per share amounts have been calculated using the monthly average
shares
method.
(/2/)On June 12, 1998, Class C shares were renamed Class L shares.
(/3/)For the period from August 8, 1995 (inception date) to December
31, 1995.
(/4/)Not annualized.
(/5/)Annualized.
Smith Barney
Mutual Funds
25
<PAGE>
For a Class Y share of capital stock outstanding throughout each year
ended
December 31:
<TABLE>
<CAPTION>
1999(/1/) 1998(/1/)
1997(/2/)
- -----------------------------------------------------------------------
- ----
<S> <C> <C> <C>
Net asset value, beginning of year $17.79 $13.42
$14.86
- -----------------------------------------------------------------------
- ----
Income (loss) from operations:
Net investment income (loss) (0.04) (0.02)
0.01
Net realized and unrealized gain (loss) 3.63 4.52
(0.38)
- -----------------------------------------------------------------------
- ----
Total income (loss) from operations 3.59 4.50
(0.37)
- -----------------------------------------------------------------------
- ----
Less distributions from:
Net realized gains (2.09) (0.13)
(1.07)
- -----------------------------------------------------------------------
- ----
Total distributions (2.09) (0.13)
(1.07)
- -----------------------------------------------------------------------
- ----
Net asset value, end of year $19.29 $17.79
$13.42
- -----------------------------------------------------------------------
- ----
Total return 20.41% 33.62%
(2.25)%(/3/)
- -----------------------------------------------------------------------
- ----
Net assets, end of year (millions) $228 $188
$115
- -----------------------------------------------------------------------
- ----
Ratios to average net assets:
Expenses 1.00% 1.07%
1.10%(/4/)
Net investment income (loss) (0.20) (0.14)
0.62(/4/)
- -----------------------------------------------------------------------
- ----
Portfolio turnover rate 94% 93%
227%
- -----------------------------------------------------------------------
- ----
</TABLE>
(/1/)Per share amounts have been calculated using the monthly average
shares
method.
(/2/)For the period from October 15, 1997 (inception date) to December
31,
1997.
(/3/)Not annualized.
(/4/)Annualized.
Concert Peachtree Growth Fund
26
<PAGE>
[LOGO OF SALOMON SMITH
BARNEY]
Concert Peachtree
Growth Fund
An investment portfolio of Smith Barney Investment Funds Inc.
Shareholder Reports Annual and semiannual reports to shareholders
provide addi-
tional information about the fund's investments. These reports discuss
the mar-
ket conditions and investment strategies that affected the fund's
performance.
The fund sends only one report to a household if more than one account
has the
same address. Contact your Salomon Smith Barney Financial Consultant,
dealer
representative or the transfer agent if you do not want this policy to
apply to
you.
Statement of additional information The statement of additional
information
provides more detailed information about the fund and is incorporated
by refer-
ence into (is legally part of) this prospectus.
You can make inquiries about the fund or obtain shareholder reports or
the
statement of additional information (without charge) by contacting your
Salomon
Smith Barney Financial Consultant or dealer representative, by calling
the fund
at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual
Funds,
388 Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com
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)Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act
file no. 811-03725
(FD0970 3/00)
PART B
Smith Barney
Investment Funds Inc.
388 Greenwich Street
New York, New York 10013
800 451-2010
Statement of Additional Information
March 13, 2000
This Statement of Additional Information expands upon and
supplements the information contained in the current Prospectuses
of Smith Barney Investment Funds Inc. (the "Company"), dated March
13, 2000, as amended or supplemented from time to time, and should
be read in conjunction with the Company's Prospectuses. The
Company issues a Prospectus for each of the investment Funds
offered by the Company (the "Funds"). The Company's Prospectuses
may be obtained from a Salomon Smith Barney Financial Consultant,
or by writing or calling the Company at the address or telephone
number listed above. This Statement of Additional Information,
although not in itself a prospectus, is incorporated by reference
in its entirety into each Fund's Prospectus.
CONTENTS
For ease of reference, the same section headings are used in the
Prospectuses and this Statement of Additional Information, except
where shown below:
Directors and Executive Officers of the Company 2
Investment Objectives and Management Policies 7
Risk Factors 24
Investment Restrictions 31
Brokerage 32
Portfolio Turnover 34
Purchase, Exchange, Redemption and Valuation of Shares 35
Distributor 43
PFS and Citi Accounts 47
Determination of Net Asset Value 48
Performance Data 49
Taxes 54
Class Z shares 58
IRA and Other Prototype Retirement Plans 59
Additional Information 60
Financial Statements 60
Other Information 60
Appendix A-1
Smith Barney Contrarian Fund a series of the Company is not selling
shares while its shareholders consider whether to merge the Fund
into Smith Barney Fundamental Value Fund Inc.
Directors and Executive Officers of the Company
The names of the Directors and executive officers of the Company,
together with information as to their principal business
occupations during the past five years, are shown below. Each
Director who is an "interested person" of the Company, as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"),
is indicated by an asterisk. The address of the "interested"
directors and the executive officers of the Fund, unless otherwise
noted, is 388 Greenwich Street, New York, NY 10013.
Paul R. Ades, Director (Age 59). Partner in the law firm of Murov &
Ades. His address is 272 South Wellwood Avenue, P.O. Box 504,
Lindenhurst, New York 11757.
Herbert Barg, Director (Age 76). Private investor. His address is
273 Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.
Dwight B. Crane, Director (Age 61). Professor, Graduate School of
Business Administration, Harvard University. His address is
Graduate School of Business Administration, Harvard University,
Boston, Massachusetts 02163.
Frank G. Hubbard, Director (Age 61). Vice President, S&S
Industries; Former Corporate Vice President, Materials Management
and Marketing Services of Huls America, Inc. His address is 80
Centennial Avenue P.O. Box 456, Piscataway, New Jersey 08855-0456.
*Heath B. McLendon, Chairman of the Board, President and Chief
Executive Officer (Age 66). Managing Director of Salomon Smith
Barney Inc. ("Salomon Smith Barney"); Director and President of SSB
Citi Fund Management LLC ("SSB Citi"or the Manager) and Travelers
Investment Adviser, Inc. ("TIA"); and formerly Chairman of the
Board of Smith Barney Strategy Advisers Inc. Mr. McLendon is a
director of 71 investment companies associated with Citigroup Inc
("Citigroup"). His address is 7 World Trade Center, New York, New
York 10048.
Jerome Miller, Director (Age 60). Retired, Former President, Asset
Management Group of Shearson Lehman Brothers. Director of 5
investment companies associated with Citigroup Inc. His address is
27 Hemlock Road, Manhasset, New York, NY 11030.
Ken Miller, Director (Age 57). President of Young Stuff Apparel
Group, Inc. His address is 1411 Broadway, New York, New York
10018.
John F. White, Director Emeritus President Emeritus of The Cooper
Union for the Advancement of Science and Art; Special Assistant to
the President of the Aspen Institute. His address is 97 Sunset
Drive, Apt. A402, Sarasota, FL 34236.
James Conroy, Vice President and Investment Officer. (Age 48)
Managing Director of Citigroup. His address is 388 Greenwich
Street, New York, New York 10013.
John G. Goode, (Age 55), Vice President and Investment Officer.
Managing Director of Salomon Smith Barney. Chairman and Chief
Investment Officer of Davis Skaggs Investment Management ("Davis
Skaggs"), a division of SSB. His address is One Sansome Street,
36th Floor, San Francisco, California 94104.
Dennis Johnson, Vice President and Investment Officer and Chief
Investment Officer of Peachtree Asset Management a division of .
(Age 40)
Lewis E. Daidone, Senior Vice President and Treasurer (Age 42).
Managing Director of Salomon Smith Barney, Director and Senior Vice
President of SSB Citi and TIA. Treasurer of 61 investment companies
associated with Citigroup. His address is 388 Greenwich Street, New
York, New York 10013.
Paul Brook, Controller (Age 45). Director of Salomon Smith Barney;
Controller or Assistant Treasurer of 43 investment companies
associated with Citigroup; from 1997-1998 Managing Director of AMT
Capital Services Inc.; prior to 1997 Partner with Ernst & Young
LLP; His address is 388 Greenwich Street, New York, New York 10013.
Christina T. Sydor, Secretary (Age 48). Managing Director of
Salomon Smith Barney; General Counsel and Secretary of SSB Citi and
TIA. Secretary of 61 investment companies associated with
Citigroup. Her address is 388 Greenwich Street, New York, New York
10013.
As of February 18, 2000, the Directors and officers of the Company,
as a group, owned less than 1.00% of the outstanding common stock
of the Company.
As of February 18, 2000 to the knowledge of the Funds and the Board
of Directors, no single shareholder or group (as the term is used
in Section 13(d) of the Securities Act of 1934) beneficially owned
more than 5% of the outstanding shares of the Fund with the
exception of the following:
Fund
Class
Percent
Name
Address
Government Securities
Fund
Y
40.84498
Concert Series, Inc.
Growth Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Government Securities
Fund
Y
23.9018
Concert Series, Inc.
Balanced Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Government Securities
Fund
Y
10.9809
Concert Series, Inc.
Select Growth Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Government Securities
Fund
Y
8.8893
Concert Series, Inc.
Select Balanced
Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Government Securities
Fund
Y
6.6022
Concert Series, Inc.
Conservative Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Investment Grade Bond
Fund
A
5.9494
Travelers Insurance
Company
Separate Account QPN
401(K)-TIC
Attn: Roger Ferland
One Tower Square
Hartford CT 06183
Fund
Class
Percent
Name
Address
Investment Grade Bond
Fund
B
5.7961
PFS Shareholder Services
Attn: Jay Barnhill
3100 Breckinridge Blvd
Duluth GA 30199
Investment Grade Bond
Fund
Y
76.9120
Concert Series, Inc.
Growth Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Investment Grade Bond
Fund
Y
20.8804
Concert Series, Inc.
Select Growth Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Contrarian Fund
Y
41.8593
Concert Series, Inc.
Growth Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Contrarian Fund
Y
37.9062
Concert Series, Inc.
High Growth Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Contrarian Fund
Y
12.2583
Concert Series, Inc.
Select Growth Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Contrarian Fund
Y
7.9759
Concert Series, Inc.
Select High Growth
Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Concert Peachtree Growth
Fund
A
97.6543
PFS Shareholder Services
Attn: Jay Barnhill
3100 Breckinridge Blvd
Duluth GA 30199
Concert Peachtree Growth
Fund
B
96.8037
PFS Shareholder Services
Attn: Jay Barnhill
3100 Breckinridge Blvd
Duluth GA 30199
Concert Peachtree Growth
Fund
L
14.4753
William C Loomis
3472 Fairway Drive
Cameron Park CA 95682
Concert Peachtree Growth
Fund
L
13.3689
Tendrich Group LTD
A Florida Limited
Partnership
1402 Devonshire Way
Palm Beach Gardens FL
33418-6872
Concert Peachtree Growth
Fund
L
6.6988
Nancy Schnee
68 Pelican Place
Belleair FL 33756-1568
Concert Peachtree Growth
Fund
L
6.4255
David Bowen Jr.
Dorothy C. Bowen JT Ten
1074 Wildwood Road
Waycross GA 31503-8585
Concert Peachtree Growth
Fund
L
6.0378
Richard D. Reed
16 Pickering Way
Nashua NH 03063-1532
Fund
Class
Percent
Name
Address
Concert Peachtree Growth
Fund
Y
43.7169
Concert Series, Inc.
Growth Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Concert Peachtree Growth
Fund
Y
36.4381
Concert Series, Inc.
High Growth Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Concert Peachtree Growth
Fund
Y
10.5530
Concert Series, Inc.
Select Growth Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
Concert Peachtree Growth
Fund
Y
6.7913
Concert Series, Inc.
Select High Growth
Portfolio
Attn: Beverly Timson
PNC Bank, N.A.
200 Stevens Drive
Suite 440
Lester PA 19113-1522
No officer, director or employee of Salomon Smith Barney or any
parent or subsidiary receives any compensation from the Company for
serving as an officer or Director of the Company. The Company pays
each Director who is not an officer, director or employee of
Salomon Smith Barney or any of its affiliates a fee of $22,500 per
annum plus $2,900 per meeting attended and reimburses travel and
out-of-pocket expenses. During the fiscal year ended December 31,
1999 such expenses totaled $ 18,574. For the fiscal year ended
December 31, 1999, the Directors of the Company were paid the
following compensation:
COMPENSATION TABLE
Name of Person
Aggregate Compensation from
the Company*
Compensation from Company
and Complex Paid to
Directors
Number of Funds for
Which Director Serves
Within Citigroup Fund
Complex
Paul Ades
$28,369
56,238
5
Herbert Barg
28,369
114,288
16
Dwight B. Crane
26,297
155,363
22
Frank G. Hubbard
28,269
56,138
5
Heath B.
McLendon
64
Ken Miller
24,847
47,188
5
Jerome Miller
26,197
51,613
5
*Upon attainment of age 80 Directors are required to change to
emeritus status. Directors Emeritus are entitled to serve in
emeritus status for a maximum of 10 years during which time they
are paid 50% of the annual retainer fee and meeting fees otherwise
applicable to the Fund Directors together with reasonable out-of-
pocket expenses for each meeting attended. During the Fund's last
fiscal year aggregate compensation paid by the Fund to Directors
Emeritus totaled $13,179.
Investment Adviser and Administrator -
serves as investment adviser to the Funds pursuant to separate
advisory agreements (the "Advisory Agreements"). With respect to
the Investment Grade Bond Fund, Government Securities Fund and
Special Equities Fund, the Advisory Agreements were transferred to
effective November 7, 1994, from its affiliate, Mutual Management
Corp. Mutual Management Corp. was and is a wholly owned
subsidiary of Salomon Smith Barney Holdings Inc. ("Holdings")
(formerly Smith Barney Holdings). Holdings is a wholly owned
subsidiary of Citigroup. As of January 31, 2000 had aggregate
assets under management in excess of $ 127.4 billion. The Advisory
Agreements were most recently approved by the Board of Directors,
including a majority of the Directors who are not "interested
persons" of the Company or the investment advisers (the
"Independent Directors"), on July 22, 1999. bears all expenses in
connection with the performance of its services. The services
provided by under the Advisory Agreements are described in the
Prospectuses under "Management of the Company and the Fund."
provides investment advisory and management services to investment
companies affiliated with Salomon Smith Barney.
As compensation for investment advisory and administrative services
rendered to the Contrarian Fund and Concert Peachtree Growth Fund,
Contrarian Fund pays a fee computed daily and paid monthly at the
annual rate of 0.85% and Concert Peachtree Growth Fund pays a fee
computed daily and paid monthly at the annual rate of 1.00% up to
$250 million and 0.85% thereafter, of the value of their average
daily net assets.
As compensation for investment advisory services rendered to
Government Securities Fund, the Fund pays a fee computed daily and
paid monthly at the following annual rates of average daily net
assets: 0.35% up to $2 billion; 0.30% on the next $2 billion;
0.25% on the next $2 billion; 0.20% on the next $2 billion; and
0.15% on net assets thereafter.
As compensation for investment advisory services rendered to
Investment Grade Bond Fund, the Fund pays a fee computed daily and
paid monthly at the following annual rates of average daily net
assets: 0.45% up to $500 million and 0.42% on net assets
thereafter.
For the fiscal years ended December 31, 1997, 1998 and 1999, the
Funds accrued advisory fees as follows:
Fund
1997
1998
1999
Investment Grade Bond Fund
$ 2,183,438
$ 2,618,948
$2,594,524
Government Securities Fund
1,900,510
2,107,128
2,376,064
Contrarian Fund
8,127,871
6,552,382
3,442,248
Concert Peachtree Growth Fund
1,262,626
2,644,062
3,598,241
also serves as administrator to Investment Grade Bond Fund,
Government Securities Fund pursuant to a written agreement dated
May 5, 1994 (the "Administration Agreement"), which was first
approved by the Board of Directors, including a majority of the
Independent Directors, on May 5, 1994. Under the Administration
Agreement, oversees all aspects of a Fund's administration. pays
the salary of any officer and employee who is employed by both it
and the Fund and bears all expenses in connection with the
performance of its services.
As compensation for administrative services rendered to the
Investment Grade Bond Fund and Government Securities Fund,
receives a fee computed daily and paid monthly at the annual rate
of 0.20 of the value of the Fund's average daily net assets.
For the fiscal years ended December 31, 1996, 1997 and 1998, these
Funds paid administrative fees to as follows:
Fund
1997
1998
1999
Investment Grade Bond Fund
$ 969,973
$1,158,123
$1,147,655
Government Securities Fund
1,086,006
1,204,073
1,357,751
Auditors
KPMG LLP, 345 Park Avenue, New York, New York 10154, has been
selected as the Fund's independent auditor to examine and report on
the Fund's financial statements and highlights for the fiscal year
ending December 31, 2000.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES tc \l1 "INVESTMENT
OBJECTIVES AND MANAGEMENT POLICIES
The Prospectuses discuss the investment objectives of each Fund and
the policies they employ to achieve such objectives. The following
discussion supplements the description of the Funds' investment
objectives and management policies contained in the
Prospectuses.The Funds may engage in these and any other practices
not prohibited by their investment restrictions. For further
information regarding the risks associated with these practices,
see "Risk Factors" below.
EQUITY SECURITIES (All Funds except Government Securities Fund
except as otherwise noted)
Common Stocks Common stocks are shares of a corporation or other
entity that entitle the holder to a pro rata share of the profits
of the corporation, if any, without preference over any other
shareholder or class of shareholders, including holders of the
entity's preferred stock and other senior equity. Common stock
usually carries with it the right to vote and frequently an
exclusive right to do so.
Preferred Stocks and Convertible Securities (all Funds except
Government Securities Fund and Investment Grade Bond Fund)
Convertible debt securities and preferred stock entitle the holder
to acquire the issuer's stock by exchange or purchase for a
predetermined rate. Convertible securities are subject both to the
credit and interest rate risks associated with fixed income
securities and to the stock market risk associated with equity
securities.
Warrants Warrants acquired by a Fund entitle it to buy common
stock from the issuer at a specified price and time. Warrants are
subject to the same market risks as stocks, but may be more
volatile in price. A Fund's investment in warrants will not
entitle it to receive dividends or exercise voting rights and will
become worthless if the warrants cannot be profitably exercised
before the expiration dates. The Investment Grade Bond Fund and
the Special Equities Fund will not invest in warrants if, as a
result of such investment, the value of their investments in
warrants, valued at the lower of cost or market, exceeds 5% of the
value of the Fund's net assets. Included in this 5% limitation,
but not to exceed 2% of the Fund's net assets, may be warrants
which are not listed on either the New York Stock Exchange (the
"NYSE") or the American Stock Exchange. Warrants acquired by the
Fund in units or attached to securities will be deemed to be
without value for purposes of this restriction. These limits are
not Fundamental policies of either Fund and may be changed by the
Board of Directors without shareholder approval.
REITs Real estate investment trusts ("REITs") are pooled
investment vehicles that invest in real estate or real estate loans
or interests. Investing in REITs involves risks similar to those
associated with investing in equity securities of small
capitalization companies. REITs are dependent upon management
skills, are not diversified, and are subject to risks of project
financing, default by borrowers, self-liquidation, and the
possibility of failing to qualify for the exemption from taxation
on distributed amounts under the Internal Revenue Code of 1986, as
amended (the "Code").
FIXED INCOME SECURITIES (All Funds)
Corporate Debt Obligations Corporate debt obligations are subject
to the risk of an issuer's inability to meet principal and interest
payments on the obligations and may also be subject to price
volatility due to such factors as market interest rates, market
perception of the creditworthiness of the issuer and general market
liquidity. Zero coupon securities are securities sold at a
discount to par value and on which interest payments are not made
during the life of the security.
U.S. Government Securities The U.S. Government securities in which
the Funds may invest include: bills, certificates of indebtedness,
and notes and bonds issued by the U.S. Treasury or by agencies or
instrumentalities of the U.S. Government. Some U.S. Government
securities, such as U.S. Treasury bills and bonds, are supported by
the full faith and credit of the U.S. Treasury; others are
supported by the right of the issuer to borrow from the U.S.
Treasury; others are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; still
others are supported only by the credit of the instrumentality.
Mortgage Related Securities (Government Securities Fund and
Investment Grade Bond Fund) These Funds may invest in
mortgage-related securities, including those representing an
undivided ownership interest in a pool of mortgage loans, e.g.,
GNMA, FNMA, FHLMC Certificates. Mortgage loans made by banks,
savings and loan institutions, and other lenders are often
assembled into pools, which are issued or guaranteed by an agency
or instrumentality of the U.S. Government, though not necessarily
by the U.S. Government itself. Interests in such pools are
collectively referred to as ''mortgage-related securities.''
Mortgage-related securities are characterized by monthly payments
to the holder, reflecting the monthly payments made by the
borrowers who received the underlying mortgage loans. The payments
to the securityholders (such as the Funds), like the payments on
the underlying loans, represent both principal and interest.
Although the underlying mortgage loans are for specified periods of
time, such as 20 or 30 years, the borrowers can, and typically do,
pay them off sooner. Thus, the securityholders frequently receive
prepayments of principal, in addition to the principal which is
part of the regular monthly payment. A borrower is more likely to
prepay a mortgage which bears a relatively high rate of interest.
This means that in times of declining interest rates, some of the
Fund's higher yielding securities might be converted to cash, and
the Funds will be forced to accept lower interest rates when that
cash is used to purchase additional securities. The increased
likelihood of prepayment when interest rates decline also limits
market price appreciation of mortgage-related securities. If a Fund
buys mortgage-related securities at a premium, mortgage
foreclosures or mortgage prepayments may result in a loss to the
Fund of up to the amount of the premium paid since only timely
payment of principal and interest is guaranteed.
The Government National Mortgage Association ("GNMA") is a wholly
owned corporate instrumentality of the United States within the
U.S. Department of Housing and Urban Development. GNMA's principal
programs involve its guarantees of privately issued securities
backed by pools of mortgages. Certificates of the Government
National Mortgage Association ("GNMA Certificates") are
mortgage-backed securities, which evidence an undivided interest in
a pool of mortgage loans. GNMA Certificates differ from bonds in
that principal is paid back monthly by the borrower over the term
of the loan rather than returned in a lump sum at maturity. GNMA
Certificates that the Fund purchases are the "modified
pass-through" type. "Modified pass-through" GNMA Certificates
entitle the holder to receive a share of all interest and principal
payments paid and owned on the mortgage pool net of fees paid to
the "issuer" and GNMA, regardless of whether or not the mortgagor
actually makes the payment. The National Housing Act authorizes
GNMA to guarantee the timely payment of principal and interest on
securities backed by a pool of mortgages insured by the Federal
Housing Administration ("FHA") or the Farmers' Home Administration
("FMHA"), or guaranteed by the Veterans Administration ("VA").
Once a pool of such mortgages is assembled and approved by GNMA,
the GNMA guarantee is backed by the full faith and credit of the
U.S. Government. GNMA is also empowered to borrow without
limitation from the U.S. Treasury if necessary to make any payments
required under its guarantee.
The average life of a GNMA Certificate is likely to be
substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors
and mortgage foreclosures will usually result in the return of the
greater part of principal investment long before maturity of the
mortgages in the pool. A Fund normally will not distribute
principal payments (whether regular or prepaid) to its
shareholders. Rather, it will invest such payments in additional
mortgage-related securities of the types described above or other
U.S. Government securities. Interest received by the Fund will,
however, be distributed to shareholders. Foreclosures impose no
risk to principal investment because of the GNMA guarantee.
As prepayment rates of the individual mortgage pools vary widely,
it is not possible to predict accurately the average life of a
particular issue of GNMA Certificates. However, statistics
published by the FHA indicate that the average life of
single-family dwelling mortgages with 25-to 30-year maturities, the
type of mortgages backing the vast majority of GNMA Certificates,
is approximately 12 years. Therefore, it is customary to treat
GNMA Certificates as 30-year mortgage-backed securities which
prepay fully in the twelfth year.
The coupon rate of interest of GNMA Certificates is lower than the
interest rate paid on the VA-guaranteed or FHA-insured mortgages
underlying the Certificates, but only by the amount of the fees
paid to GNMA and the GNMA Certificate issuer. For the most common
type of mortgage pool, containing single-family dwelling mortgages,
GNMA receives an annual fee of 0.06 of one percent of the
outstanding principal for providing its guarantee, and the GNMA
Certificate issuer is paid an annual servicing fee of 0.44 of one
percent for assembling the mortgage pool and for passing through
monthly payments of interest and principal to Certificate holders.
The coupon rate by itself, however, does not indicate the yield
which will be earned on the GNMA Certificates for the following
reasons:
1. Certificates are usually issued at a premium or discount,
rather than at par.
2. After issuance, Certificates usually trade in the secondary
market at a premium or discount.
3. Interest is paid monthly rather than semi-annually as is the
case for traditional bonds. Monthly compounding has the effect of
raising the effective yield earned on GNMA Certificates.
4. The actual yield of each GNMA Certificate is influenced by the
prepayment experience of the mortgage pool underlying the
Certificate. If mortgagors prepay their mortgages, the principal
returned to Certificate holders may be reinvested at higher or
lower rates.
In quoting yields for GNMA Certificates, the customary practice is
to assume that the Certificates will have a 12 year life. Compared
on this basis, GNMA Certificates have historically yielded roughly
1/4 of 1.00% more than high grade corporate bonds and 1/2 of
1.00% more than U.S. Government and U.S. Government agency bonds.
As the life of individual pools may vary widely, however, the
actual yield earned on any issue of GNMA Certificates may differ
significantly from the yield estimated on the assumption of a
twelve-year life.
Since the inception of the GNMA mortgage-backed securities program
in 1970, the amount of GNMA Certificates outstanding has grown
rapidly. The size of the market and the active participation in the
secondary market by securities dealers and many types of investors
make GNMA Certificates highly liquid instruments. Quotes for GNMA
Certificates are readily available from securities dealers and
depend on, among other things, the level of market rates, the
Certificate's coupon rate and the prepayment experience of the pool
of mortgages backing each Certificate.
The Federal Home Loan Mortgage Corporation ("FHLMC") was created in
1970 to promote development of a nationwide secondary market in
conventional residential mortgages. FHLMC issues two types of
mortgage pass-through securities, mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs").
PCs resemble GNMA Certificates in that each PC represents a pro
rata share of all interest and principal payments made and owed on
the underlying pool. Like GNMA Certificates, PCs are assumed to be
prepaid fully in their twelfth year. FHLMC guarantees timely
monthly payment of interest of PCs and the ultimate payment of
principal.
GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semiannually and return
principal once a year in guaranteed minimum payments. The expected
average life of these securities is approximately 10 years.
The Federal National Mortgage Association ("FNMA") was established
in 1938 to create a secondary market in mortgages insured by the
FHA. FNMA issues guarantee mortgage pass-through certificates
("FNMA Certificates"). FNMA Certificates resemble GNMA
Certificates in that each Certificate represents a pro rata share
of all interest and principal payments made and owed on the
underlying pool. FNMA guarantees timely payment of interest on
FNMA Certificates and the full return of principal. Like GNMA
Certificates, FNMA Certificates are assumed to be prepaid fully in
their twelfth year.
Risk of foreclosure of the underlying mortgages is greater with
FHLMC and FNMA securities because, unlike GNMA securities, FHLMC
and FNMA securities are not guaranteed by the full faith and credit
of the U.S. Government.
Short-Term Investments In certain circumstances the Funds may
invest without limitation in all types of short-term money market
instruments, including 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. To the extent a
Fund is investing in short-term investments as a temporary
defensive posture, the applicable Fund's investment objective may
not be achieved. Investment Grade Bond Fund may invest in
negotiable bank certificates of deposit and bankers' acceptances
issued by domestic banks (but not their foreign branches) having
total assets in excess of $1 billion.
Commercial Paper (Investment Grade Bond Fund) Commercial paper
consists of short-term (usually 1 to 270 days) unsecured promissory
notes issued by corporations in order to finance their current
operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement
involving periodically fluctuating rates of interest under a letter
agreement between a commercial paper issuer and an institutional
lender, such as one of the Funds pursuant to which the lender may
determine to invest varying amounts. Transfer of such notes is
usually restricted by the issuer, and there is no secondary trading
market for such notes. Each Fund therefore, may only invest in a
master demand note to the extent that the investment would not
violate the Fund's limits on restricted and illiquid securities.
Investment Grade Bond Fund may invest only in commercial paper
issued by domestic corporations rated in the highest two short-term
ratings categories by a nationally recognized ratings organization,
or, if unrated, issued by a corporation that has an outstanding
debt issue rated in the highest two ratings categories by a
nationally recognized statistical ratings organization ("NRSO").
Exchange Rate-Related Securities (Government Securities Fund) The
Government Securities Fund may invest up to 5% of its net assets in
U.S. government securities for which the principal repayment at
maturity, while paid in U.S. dollars, is determined by reference to
the exchange rate between the U.S. dollar and the currency of one
or more foreign countries ("Exchange Rate-Related Securities").
The interest payable on these securities is denominated in U.S.
dollars, is not subject to foreign currency risks and, in most
cases, is paid at rates higher than most other U.S. government
securities in recognition of the foreign currency risk component of
Exchange Rate-Related Securities.
Exchange Rate-Related Securities are issued in a variety of forms,
depending on the structure of the principal repayment formula. The
principal repayment formula may be structured so that the security
holder will benefit if a particular foreign currency to which the
security is linked is stable or appreciates against the U.S.
dollar. In the alternative, the principal repayment formula may be
structured so that the security holder benefits if the U.S. dollar
is stable or appreciates against the linked foreign currency.
Finally, the principal repayment formula can be a function of more
than one currency and, therefore, be designed in either of the
aforementioned forms or a combination of those forms.
Investments in Exchange Rate-Related Securities entail special
risks. There is the possibility of significant changes in rates of
exchange between the U.S. dollar and any foreign currency to which
an Exchange Rate-Related Security is linked. If currency exchange
rates do not move in the direction or to the extent anticipated at
the time of purchase of the security, the amount of principal
repaid at maturity might be significantly below the par value of
the security, which might not be offset by the interest earned by
the Fund over the term of the security. 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. These
forces are affected by the international balance of payments and
other economic and financial conditions, government intervention,
speculation and other factors. The imposition or modification of
foreign exchange controls by the United States or foreign
governments or intervention by central banks also could affect
exchange rates. Finally, there is no assurance that sufficient
trading interest to create a liquid secondary market will exist for
particular Exchange Rate-Related Securities due to conditions in
the debt and foreign currency markets. Illiquidity in the forward
foreign exchange market and the high volatility of the foreign
exchange market may from time to time combine to make it difficult
to sell an Exchange Rate-Related Security prior to maturity without
incurring a significant price loss.
Zero Coupon Securities (Government Securities Fund) The Government
Securities Fund may also invest in zero coupon bonds. A zero
coupon bond pays no interest in cash to its holder during its life,
although interest is accrued during that period. Its value to an
investor consists of the difference between its face value at the
time of maturity and the price for which it was acquired, which is
generally an amount significantly less than its face value
(sometimes referred to as a "deep discount" price). Because such
securities usually trade at a deep discount, they will be subject
to greater fluctuations of market value in response to changing
interest rates than debt obligations of comparable maturities which
make periodic distributions of interest. On the other hand,
because there are no periodic interest payments to be reinvested
prior to maturity, zero coupon securities eliminate reinvestment
risk and lock in a rate of return to maturity.
Dollar Roll Transactions Government Securities Fund may enter into
"dollar rolls," in which the Fund sells fixed income securities and
simultaneously contracts to repurchase substantially similar (same
type, coupon and maturity) securities on a specified future date.
During this "roll" period, the Fund would forego principal and
interest paid on such securities. The Fund would be compensated by
the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on
the cash proceeds of the initial sale. Since the Fund will receive
interest on the securities in which it invests the transaction
proceeds, such transactions may involve leverage. However, the
proceeds will be invested only in U.S. Treasury obligations and the
Fund will enter into dollar roll transactions only with dealers of
sufficient creditworthiness in the judgment of the Fund's
investment adviser, such transactions do not present the risks to
the Fund that are associated with other types of leverage. Dollar
roll transactions are considered borrowings by the Fund and will be
subject to the Fund's overall borrowing limitation.
DERIVATIVE CONTRACTS
Each Fund may use certain options, futures and other strategies to
attempt to hedge its portfolio, i.e., reduce the overall level of
investment risk normally associated with the Fund. These hedging
techniques are described in detail below. Each of Contrarian Fund
and Concert Peachtree Growth Fund may invest up to 10% of its
assets in derivative contracts. As a Fundamental policy, the
Contrarian Fund and the Concert Peachtree Growth Fund each may
write or purchase puts, calls, straddles, spreads and any
combination thereof up to 5% of their assets (Investment Grade Bond
Fund may not engage in any of these practices). Government
Securities Fund may only purchase call options on securities to
effect a closing purchase transaction. In addition, Government
Securities Fund may not purchase puts on securities if more than
10% of its net assets would be invested in premiums on put options.
The aggregate value of the obligations underlying puts written by
Government Securities Fund will not exceed 50% of its net assets.
Writing Covered Call Options (Government Securities Fund, Concert
Peachtree Growth Fund and Contrarian Fund) These Funds may write
(sell) covered call options for hedging purposes. Covered call
options will generally be written on securities and currencies
which, in the opinion of the Manager, are not expected to make any
major price moves in the near future but which, over the long term,
are deemed to be attractive investments for the Fund.
A call option gives the holder (buyer) the right to purchase a
security or currency at a specified price (the exercise price) at
any time until a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may be
assigned an exercise notice by the broker-dealer through whom such
option was sold, requiring him to deliver the underlying security
or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier
time at which the writer effects a closing purchase transaction by
purchasing an option identical to that previously sold. The
Manager and the Company believe that writing covered call options
is less risky than writing uncovered or "naked" options, which the
Funds will not do.
Portfolio securities or currencies on which call options may be
written will be purchased solely on the basis of investment
considerations consistent with each Fund's investment objective.
When writing a covered call option, the Fund, in return for the
premium, gives up the opportunity for profit from a price increase
in the underlying security or currency above the exercise price and
retains the risk of loss should the price of the security or
currency decline. Unlike one who owns securities or currencies
not subject to an option, the Fund has no control over when it may
be required to sell the underlying securities or currencies, since
the option may be exercised at any time prior to the option's
expiration. If a call option which the Fund has written expires,
the Fund will realize a gain in the amount of the premium; however,
such gain may be offset by a decline in the market value of the
underlying security or currency during the option period. If the
call option is exercised, the Fund will realize a gain or loss from
the sale of the underlying security or currency. The security or
currency covering the call option will be maintained in a
segregated account of the Fund's custodian.
The premium the Fund receives for writing a call option is deemed
to constitute the market value of an option. The premium the Fund
will receive from writing a call option will reflect, among other
things, the current market price of the underlying security or
currency, the relationship of the exercise price to such market
price, the implied price volatility of the underlying security or
currency, and the length of the option period. In determining
whether a particular call option should be written on a particular
security or currency, the Manager will consider the reasonableness
of the anticipated premium and the likelihood that a liquid
secondary market will exist for those options. The premium
received by the Fund for writing covered call options will be
recorded as a liability in the Fund's statement of assets and
liabilities. This liability will be adjusted daily to the option's
current market value, which will be calculated as described in
"Determination of Net Asset Value." The liability will be
extinguished upon expiration of the option or delivery of the
underlying security or currency upon the exercise of the option.
The liability with respect to a listed option will also be
extinguished upon the purchase of an identical option in a closing
transaction.
Closing transactions will be effected in order to realize a profit
or to limit losses on an outstanding call option, to prevent an
underlying security or currency from being called, or to permit the
sale of the underlying security or currency. Furthermore,
effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with
either a different exercise price, expiration date or both. If the
Fund desires to sell a particular security or currency from its
portfolio on which it has written a call option or purchases a put
option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security or currency. There is
no assurance that the Fund will be able to effect such closing
transactions at a favorable price. If the Fund cannot enter into
such a transaction, it may be required to hold a security or
currency that it might otherwise have sold, in which case it would
continue to be at market risk with respect to the security or
currency.
Transaction costs relating to options activity are normally higher
than those applicable to purchases and sales of portfolio
securities.
The exercise price of the options may be below, equal to or above
the current market values of the underlying securities or
currencies at the time the options are written. From time to time,
a Fund may purchase an underlying security or currency for delivery
in accordance with the exercise of an option, rather than
delivering such security or currency from its portfolio. In such
cases, additional costs will be incurred. A Fund will realize a
profit or loss from a closing purchase transaction if the cost of
the transaction is less or more, respectively, than the premium
received from the writing of the option. Because increases in the
market price of a call option will generally reflect increases in
the market price of the underlying security or currency, any loss
resulting from the repurchase of a call option is likely to be
offset in whole or in part by appreciation of the underlying
security or currency owned by the Fund.
Purchasing Put Options (Government Securities Fund, (Concert
Peachtree Growth Fund and Contrarian Fund) These Funds may
purchase put options. As the holder of a put option, the Fund has
the right to sell the underlying security or currency at the
exercise price at any time during the option period. The Fund may
enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
Each Fund may purchase a put option on an underlying security or
currency (a "protective put") owned by the Fund as a hedging
technique in order to protect against an anticipated decline in the
value of the security or currency. Such hedge protection is
provided only during the life of the put option when the Fund, as
the holder of the put option, is able to sell the underlying
security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's
exchange value. For example, a put option may be purchased in
order to protect unrealized appreciation of a security or currency
when the Manager deems it desirable to continue to hold the
security or currency because of tax considerations. The premium
paid for the put option and any transaction costs may reduce any
capital gain or, in the case of currency, ordinary income otherwise
available for distribution when the security or currency is
eventually sold.
Each Fund may also purchase put options at a time when the Fund
does not own the underlying security or currency. By purchasing
put options on a security or currency it does not own, the Fund
seeks to benefit from a decline in the market price of the
underlying security or currency. If the put option is not sold
when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than
the exercise price during the life of the put option, the Fund will
lose its entire investment in the put option. In order for the
purchase of a put option to be profitable, the market price of the
underlying security or currency must decline sufficiently below the
exercise price to cover the premium and transaction costs, unless
the put option is sold in a closing sale transaction.
The premium paid by a Fund when purchasing a put option will be
recorded as an asset in the Fund's statement of assets and
liabilities. This asset will be adjusted daily to the option's
current market value, as calculated by the Fund. The asset will be
extinguished upon expiration of the option or the delivery of the
underlying security or currency upon the exercise of the option.
The asset with respect to a listed option will also be extinguished
upon the writing of an identical option in a closing transaction.
Purchasing Call Options Government Securities Fund, Concert
Peachtree Growth Fund and Contrarian Fund) Each Fund may purchase
call options. As the holder of a call option, a Fund has the right
to purchase the underlying security or currency at the exercise
price at any time during the option period. The Fund may enter
into a closing sale transactions with respect to such options,
exercise them or permit them to expire. Call options may be
purchased by the Fund for the purpose of acquiring the underlying
security or currency for its portfolio. Utilized in this fashion,
the purchase of call options enables the Fund to acquire the
security or currency at the exercise price of the call option plus
the premium paid. At times the net cost of acquiring the security
or currency in this manner may be less than the cost of acquiring
the security or currency directly. This technique may also be
useful to the Fund in purchasing a large block of securities that
would be more difficult to acquire by direct market purchases. So
long as it holds such a call option rather than the underlying
security or currency itself, the Fund is partially protected from
any unexpected decline in the market price of the underlying
security or currency and in such event could allow the call option
to expire, incurring a loss only to the extent of the premium paid
for the option.
Each Fund may also purchase call options on underlying securities
or currencies it owns in order to protect unrealized gains on call
options previously written by it. A call option would be purchased
for this purpose where tax considerations make it inadvisable to
realize such gains through a closing purchase transaction. Call
options may also be purchased at times to avoid realizing losses
that would result in a reduction of the Fund's current return.
Futures Contracts (All Funds) Each Fund may enter into interest
rate or currency Futures Contracts ("Futures" or "Futures
Contracts") as a hedge against changes in prevailing levels of
interest rates or currency exchange rates in order to establish
more definitely the effective return on securities or currencies
held or committed to be acquired by the Fund. A Fund's hedging may
include holding Futures as an offset against anticipated changes in
interest or currency exchange rates. A Fund may also enter into
Futures Contracts based on financial indices including any index of
U.S. Government securities, foreign government securities or
corporate debt securities.
A Futures Contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific
financial instrument or currency for a specified price at a
designated date, time and place. The purchaser of a Futures
Contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar multiple
of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was
originally struck. No physical delivery of the debt securities
underlying the index is made. Brokerage fees are incurred when a
Futures Contract is bought or sold, and margin deposits must be
maintained at all times that the Futures Contract is outstanding.
Although techniques other than sales and purchases of Futures
Contracts could be used to reduce the Fund's exposure to interest
rate and currency exchange rate fluctuations, the Fund may be able
to hedge its exposure more effectively and at a lower cost through
using Futures Contracts.
Although Futures Contracts typically require future delivery of and
payment for financial instruments or currencies, Futures Contracts
are usually closed out before the delivery date. Closing out an
open Futures Contract sale or purchase is effected by entering into
an offsetting Futures Contract purchase or sale, respectively, for
the same aggregate amount of the identical financial instrument or
currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Fund realizes a
gain; if it is more, the Fund realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the
Fund realizes a gain; if it is less, the Fund realizes a loss. The
transaction costs must also be included in these calculations.
There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular
Futures Contract at a particular time. If the Fund is not able to
enter into an offsetting transaction, the Fund will continue to be
required to maintain the margin deposits of the underlying
financial instrument or currency on the relevant delivery date.
The Company intends to enter into Futures transactions only on
exchanges or boards of trade where there appears to be a liquid
secondary market. However, there can be no assurance that such a
market will exist for a particular contract at a particular time.
As an example of an offsetting transaction, the contractual
obligations arising from the sale of one Futures Contract of
September Treasury Bills on an exchange may be fulfilled at any
time before delivery under the Futures Contract is required (i.e.,
on a specific date in September, the "delivery month") by the
purchase of another Futures Contract of September Treasury Bills on
the same exchange. In such instance the difference between the
price at which the Futures Contract was sold and the price paid for
the offsetting purchase, after allowance for transaction costs,
represents the profit or loss to the Fund.
Persons who trade in Futures Contracts may be broadly classified as
"hedgers" and "speculators." Hedgers, whose business activity
involves investment or other commitment in securities or other
obligations, use the Futures markets to offset unfavorable changes
in value that may occur because of fluctuations in the value of the
securities and obligations held or committed to be acquired by them
or fluctuations in the value of the currency in which the
securities or obligations are denominated. Debtors and other
obligors may also hedge the interest cost of their obligations.
The speculator, like the hedger, generally expects neither to
deliver nor to receive the financial instrument underlying the
Futures Contract, but, unlike the hedger, hopes to profit from
fluctuations in prevailing interest rates or currency exchange
rates.
Each Fund's Futures transactions normally will be entered into for
traditional hedging purposes; that is, Futures Contracts will be
sold to protect against a decline in the price of securities or
currencies the Fund owns, or Futures Contracts will be purchased to
protect a Fund against an increase in the price of securities or
currencies it has committed to purchase or expects to purchase.
The Funds may, however, enter into Futures transactions for non-
hedging purposes, subject to applicable law.
"Margin" with respect to Futures Contracts is the amount of Funds
that must be deposited by the Fund with a broker in order to
initiate Futures trading and to maintain the Fund's open positions
in Futures Contracts. A margin deposit made when the Futures
Contract is entered into ("initial margin") is intended to assure
the Fund's performance of the Futures Contract. The margin
required for a particular Futures Contract is set by the exchange
on which the Futures Contract is traded, and may be significantly
modified from time to time by the exchange during the term of the
Futures Contract. Futures Contracts are customarily purchased and
sold on margins, which may be 5% or less of the value of the
Futures Contract being traded.
If the price of an open Futures Contract changes (by increase in
the case of a sale or by decrease in the case of a purchase) so
that the loss on the Futures Contract reaches a point at which the
margin on deposit does not satisfy margin requirements, the broker
will require an increase in the margin deposit ("variation
margin"). If, however, the value of a position increases because
of favorable price changes in the Futures Contract so that the
margin deposit exceeds the required margin, it is anticipated that
the broker will pay the excess to the Fund. In computing daily net
asset values, the Fund will mark to market the current value of its
open Futures Contracts. Each Fund expects to earn interest income
on its margin deposits.
Options on Futures Contracts (All Funds) Options on Futures
Contracts are similar to options on securities or currencies except
that options on Futures Contracts give the purchaser the right, in
return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short
position if the option is a put), rather than to purchase or sell
the Futures Contract, at a specified exercise price at any time
during the period of the option. Upon exercise of the 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, at exercise, 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. If an option is exercised on the last trading
day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the
securities or currencies upon which the Futures Contracts are based
on the expiration date. Purchasers of options who fail to exercise
their options prior to the exercise date suffer a loss of the
premium paid.
As an alternative to purchasing call and put options on Futures,
each Fund may purchase call and put options on the underlying
securities or currencies themselves (see "Purchasing Put Options"
and "Purchasing Call Options" above). Such options would be used
in a manner identical to the use of options on Futures Contracts.
To reduce or eliminate the leverage then employed by the Fund or to
reduce or eliminate the hedge position then held by the Fund, the
Fund may seek to close out an option position by selling an option
covering the same securities or currency and having the same
exercise price and expiration date. The ability to establish and
close out positions on options on Futures Contracts is subject to
the existence of a liquid market. It is not certain that this
market will exist at any specific time.
In order to assure that the Funds will not be deemed to be
"commodity pools" for purposes of the Commodity Exchange Act,
regulations of the Commodity Futures Trading Commission ("CFTC")
require that each Fund enter into transactions in Futures Contracts
and options on Futures Contracts only (i) for bona fide hedging
purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums
on such non-hedging positions does not exceed 5% of the liquidation
value of the Fund's assets.
Forward Currency Contracts, Options on Currency and Currency Swaps
(Government Securities Fund, Concert Peachtree Growth Fund and
Contrarian Fund) A forward currency contract is an obligation to
purchase or sell a currency against another currency at a future
date and price as agreed upon by the parties. A Fund may either
accept or make delivery of the currency at the maturity of the
forward contract or, prior to maturity, enter into a closing
transaction involving the purchase or sale of an offsetting
contract. Each of these Funds engages in forward currency
transactions in anticipation of, or to protect itself against,
fluctuations in exchange rates. A Fund might sell a particular
foreign currency forward, for example, when it holds bonds
denominated in that currency but anticipates, and seeks to be
protected against, decline in the currency against the U.S. dollar.
Similarly, a Fund might sell the U.S. dollar forward when it holds
bonds denominated in U.S. dollars but anticipates, and seeks to be
protected against, a decline in the U.S. dollar relative to other
currencies. Further, a Fund might purchase a currency forward to
"lock in" the price of securities denominated in that currency
which it anticipates purchasing.
The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will
not be precise. In addition, a Fund may not always be able to
enter into foreign currency forward contracts at attractive prices
and this will limit the Fund's ability to use such contract to
hedge or cross-hedge its assets. Also, with regard to a Fund's use
of cross-hedges, there can be no assurance that historical
correlations between the movement of certain foreign currencies
relative to the U.S. dollar will continue. Thus, at any time poor
correlation may exist between movements in the exchange rates of
the foreign currencies underlying the Fund's cross-hedges and the
movements in the exchange rates of the foreign currencies in which
the Fund's assets that are the subject of such cross-hedges are
denominated.
Forward contracts are traded in an interbank market conducted
directly between currency traders (usually large commercial banks)
and their customers. A forward contract generally has no deposit
requirement and is consummated without payment of any commission.
Each Fund, however, may enter into forward contracts with deposit
requirements or commissions.
A put option gives a Fund, as purchaser, the right (but not the
obligation) to sell a specified amount of currency at the exercise
price until the expiration of the option. A call option gives a
Fund, as purchaser, the right (but not the obligation) to purchase
a specified amount of currency at the exercise price until its
expiration. A Fund might purchase a currency put option, for
example, to protect itself during the contract period against a
decline in the value of a currency in which it holds or anticipates
holding securities. If the currency's value should decline, the
loss in currency value should be offset, in whole or in part, by an
increase in the value of the put. If the value of the currency
instead should rise, any gain to the Fund would be reduced by the
premium it had paid for the put option. A currency call option
might be purchased, for example, in anticipation of, or to protect
against, a rise in the value of a currency in which the Fund
anticipates purchasing securities.
Each Fund's ability to establish and close out positions in foreign
currency options is subject to the existence of a liquid market.
There can be no assurance that a liquid market will exist for a
particular option at any specific time. In addition, options on
foreign currencies are affected by all of those factors that
influence foreign exchange rates and investments generally.
A position in an exchange-listed option may be closed out only on
an exchange that provides a secondary market for identical options.
Exchange markets for options on foreign currencies exist but are
relatively new, and the ability to establish and close out
positions on the exchanges is subject to maintenance of a liquid
secondary market. Closing transactions may be effected with
respect to options traded in the over-the-counter ("OTC") markets
(currently the primary markets for options on foreign currencies)
only by negotiating directly with the other party to the option
contract or in a secondary market for the option if such market
exists. Although each Fund intends to purchase only those options
for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market will exist for any
particular option at any specific time. In such event, it may not
be possible to effect closing transactions with respect to certain
options, with the result that the Fund would have to exercise those
options which it has purchased in order to realize any profit. The
staff of the Securities and Exchange Commission ("SEC") has taken
the position that, in general, purchased OTC options and the
underlying securities used to cover written OTC options are
illiquid securities. However, a Fund may treat as liquid the
underlying securities used to cover written OTC options, provided
it has arrangements with certain qualified dealers who agree that
the Fund may repurchase any option it writes for a maximum price to
be calculated by a predetermined formula. In these cases, the OTC
option itself would only be considered illiquid to the extent that
the maximum repurchase price under the formula exceeds the
intrinsic value of the option.
A Fund may also enter into currency swaps. A currency swap is an
arrangement whereby each party exchanges one currency for another
on a particular date and agrees to reverse the exchange on a later
date at a specific exchange rate. Forward foreign currency
contracts and currency swaps are established in the interbank
market conducted directly between currency traders (usually large
commercial banks or other financial institutions) on behalf of
their customers.
Interest Rate Swaps, Caps and Floors (Government Securities Fund,
Concert Peachtree Growth Fund and Contrarian Fund) Among the
hedging transactions into which the Funds may enter are interest
rate swaps and the purchase or sale of interest rate caps and
floors. Each Fund expects to enter into these transactions
primarily to preserve a return or spread on a particular investment
or portion of its portfolio or to protect against any increase in
the price of securities the Fund anticipates purchasing at a later
date. A Fund intends to use these transactions as a hedge and not
as a speculative investment. Each Fund will not sell interest rate
caps or floors that it does not own. Interest rate swaps involve
the exchange by a Fund with another party of their respective
commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The purchase of an
interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive
payments of interest on a notional principal amount from the party
selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified index
falls below a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such
interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on
either an asset-based or liability-based basis, depending on
whether it is hedging its assets or its liabilities, and will
usually enter into interest rate swaps on a net basis, i.e., the
two payment streams are netted, with the Fund receiving or paying,
as the case may be, only the net amount of the two payments.
Inasmuch as these hedging transactions are entered into for good
faith hedging purposes, the Manager and the Funds believe such
obligations do not constitute senior securities and, accordingly
will not treat them as being subject to their borrowing
restrictions. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest
rate swap will be accrued on a daily basis and an amount of cash or
liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated
account by a custodian that satisfies the requirements of the 1940
Act. The Funds will not enter into any interest rate swap, cap or
floor transaction unless the unsecured senior debt or the claims-
paying ability of the other party thereto is rated in the highest
rating category of at least one nationally recognized rating
organization at the time of entering into such transaction. If
there is a default by the other party to such a transaction, a Fund
will have contractual remedies pursuant to the agreements related
to the transaction. The swap market has grown substantially in
recent years with a large number of banks and investment banking
firms acting both as principals and as agents utilizing swap
documentation. As a result, the swap market has become relatively
liquid. Caps and floors are more recent innovations for which
standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps.
New options and Futures Contracts and various combinations thereof
continue to be developed and the Funds may invest in any such
options and contracts as may be developed to the extent consistent
with their investment objectives and regulatory requirements
applicable to investment companies.
OTHER PRACTICES
Securities of Foreign Issuers (All Funds) Concert Peachtree Growth
Fund may invest up to 35% of its assets, and Contrarian Fund may
invest up to 10% of its assets, in securities of foreign issuers.
Investments in securities of foreign entities and securities
denominated in foreign currencies involve risks not typically
involved in domestic investment, including fluctuations in foreign
exchange rates, future foreign political and economic developments,
and the possible imposition of exchange controls or other foreign
or United States governmental laws or restrictions applicable to
such investments. Since each Fund may invest in securities
denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates may affect the value of
investments in the portfolio and the accrued income and unrealized
appreciation or depreciation of investments. Changes in foreign
currency rates relative to the U.S. dollar will affect the U.S.
dollar value of the Fund's assets denominated in that currency and
the Fund's yield on such assets.
Each Fund may also purchase foreign securities in the form of
American Depositary Receipts (''ADRs''). ADRs are publicly traded
on exchanges or over-the-counter in the United States and are
issued through ''sponsored'' or ''unsponsored'' arrangements. In a
sponsored ADR arrangement, the foreign issuer assumes the
obligation to pay some or all of the depositary's transaction fees,
whereas under an unsponsored arrangement, the foreign issuer
assumes no obligation and the depositary's transaction fees are
paid by the ADR holders. In addition, less information is available
in the United States about an unsponsored ADR than about a
sponsored ADR, and the financial information about a company may
not be as reliable for an unsponsored ADR as it is for a sponsored
ADR. Each Fund may invest in ADRs through both sponsored and
unsponsored arrangements.
Investment Grade Bond Fund also may purchase foreign securities in
the form of Yankee obligations. Yankee obligations are dollar
denominated obligations (bonds) issued in the U.S. capital markets
by foreign issuers. Yankee obligations are subject to certain
sovereign risks, such as the risk that a foreign government might
prevent dollar denominated Funds from flowing across its border. As
compared with obligations issued in the United States, Yankee
obligations normally carry a higher interest rate but are less
actively traded.
With respect to certain foreign countries, there is the possibility
of expropriation of assets, confiscatory taxation, political or
social instability or diplomatic developments which could affect
investment in those countries. There may be less publicly available
information about a foreign security than about a United States
security, and foreign entities may not be subject to accounting,
auditing and financial reporting standards and requirements
comparable to those of United States entities. In addition, certain
foreign investments made by the Fund may be subject to foreign
withholding taxes, which would reduce the Fund's total return on
such investments and the amounts available for distributions by the
Fund to its shareholders. Foreign financial markets, while growing
in volume, have, for the most part, substantially less volume than
United States markets, and securities of many foreign companies are
less liquid and their prices more volatile than securities of
comparable domestic companies.
The foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of
securities transactions making it difficult to conduct such
transactions. Delays in settlement could result in temporary
periods when assets of a Fund are not invested and no return is
earned thereon. The inability of each Fund to make intended
security purchases due to settlement problems could cause the Fund
to miss attractive investment opportunities. Inability to dispose
of portfolio securities due to settlement problems could result
either in losses to the Fund due to subsequent declines in value of
the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the
purchaser. Costs associated with transactions in foreign
securities, including custodial costs and foreign brokerage
commissions, are generally higher than with transactions in United
States securities. In addition, each Fund will incur cost in
connection with conversions between various currencies. There is
generally less government supervision and regulation of exchanges,
financial institutions and issuers in foreign countries than there
are in the United States. These risks may be intensified in the
case of investments in developing or emerging markets. In many
developing markets, there is less government supervision and
regulation of business and industry practices, stock exchanges,
brokers and listed companies than in the United States. The foreign
securities markets of many of the countries in which a Fund may
invest may also be smaller, less liquid, and subject to greater
price volatility than those in the United States. Finally, in the
event of a default on any such foreign debt obligations, it may be
more difficult for a Fund to obtain or to enforce a judgment
against the issuers of such securities.
A developing country generally is considered to be a country that
is in the initial stages of its industrialization cycle. Investing
in the equity and fixed-income markets of developing countries
involves exposure to economic structures that are generally less
diverse and mature, and to political systems that can be expected
to have less stability, than those of developed countries.
Historical experience indicates that the markets of developing
countries have been more volatile than the markets of the more
mature economics of developed countries; however, such markets
often have provided higher rates of return to investors.
One or more of the risks discussed above could affect adversely the
economy of a developing market or a Fund's investments in such a
market. In Eastern Europe, for example, upon the accession to power
of Communist regimes in the past, the governments of a number of
Eastern European countries expropriated a large amount of property.
The claims of many property owners against those governments were
never finally settled. There can be no assurance that any
investments that the Fund might make in such emerging markets would
not be expropriated, nationalized or otherwise confiscated at some
time in the future. In such an event, the Fund could lose its
entire investment in the market involved. Moreover, changes in the
leadership or policies of such markets could halt the expansion or
reverse the liberalization of foreign investment policies now
occurring in certain of these markets and adversely affect existing
investment opportunities.
Illiquid and Restricted Securities (Concert Peachtree Growth Fund
and Contrarian Fund) These Funds may invest in restricted
securities. As used herein, restricted securities are those that
have been sold in the United States without registration under the
Securities Act of 1933 and are thus subject to restrictions on
resale. Excluded from the limitation, however, are any restricted
securities which are eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 and which have been determined to
be liquid by the Directors or by the Manager pursuant to board-
approved guidelines. The determination of liquidity is based on the
volume of reported trading in the institutional secondary market
for each security. This investment practice could have the effect
of increasing the level of illiquidity in each Fund to the extent
qualified institutional buyers become for a time uninterested in
purchasing these restricted securities. These difficulties and
delays could result in a Fund's inability to realize a favorable
price upon disposition of restricted securities, and in some cases
might make disposition of such securities at the time desired by
the Fund impossible. Since market quotations are not readily
available for restricted securities, such securities will be valued
by a method that the Directors believe accurately reflects fair
value.
Concert Peachtree Growth Fund may invest up to 10% of its assets in
restricted and illiquid securities. Contrarian Fund may invest up
to 15% of its assets in restricted and illiquid securities, but
currently does not anticipate investing more than 5% of its assets
in these securities.
Forward Commitments (Government Securities Fund, Investment Grade
Bond Fund and Concert Peachtree Growth Fund) These Funds may
purchase or sell securities on a "when-issued" or "delayed
delivery" basis ("Forward Commitments" or "Firm Commitment
Agreements"). These transactions occur when securities are
purchased or sold by a Fund with payment and delivery taking place
in the future, frequently a month or more after such transactions.
The price is fixed on the date of the commitment, and the seller
continues to accrue interest on the securities covered by the
Forward Commitment until delivery and payment take place. At the
time of settlement, the market value of the securities may be more
or less than the purchase or sale price.
A Forward Commitment sale is covered if the Fund owns or has the
right to acquire the underlying securities subject to the Forward
Commitment. A Forward Commitment sale is for cross-hedging
purposes if it is not covered, but is designed to provide a hedge
against a decline in value of a security which the Fund owns or has
the right to acquire. In either circumstance, the Fund maintains
in a segregated account (which is marked to market daily) either
the security covered by the Forward Commitment or appropriate
securities as required by the 1940 Act (which may have maturities
which are longer than the term of the Forward Commitment) with the
Fund's custodian in an aggregate amount equal to the amount of its
commitment as long as the obligation to sell continues. By
entering into a Forward Commitment sale transaction, the Fund
forgoes or reduces the potential for both gain and loss in the
security which is being hedged by the Forward Commitment sale.
A Fund may either settle a Forward Commitment by taking delivery of
the securities or may either resell or repurchase a Forward
Commitment on or before the settlement date in which event the Fund
may reinvest the proceeds in another Forward Commitment. A Fund's
use of Forward Commitments may increase its overall investment
exposure and thus its potential for gain or loss. When engaging in
Forward Commitments, the Fund relies on the other party to complete
the transaction; should the other party fail to do so, the Fund
might lose a purchase or sale opportunity that could be more
advantageous than alternative opportunities at the time of the
failure.
Each Fund maintains a segregated account (which is marked to market
daily) of appropriate securities as required by the 1940 Act
covered by the Forward Commitment with the Fund's custodian in an
aggregate amount equal to the amount of its commitment as long as
the obligation to purchase or sell continues. The Government
Securities Fund and Investment Grade Bond Fund will not enter into
Forward Commitments for the purpose of investment leverage.
Repurchase Agreements (All Funds) Each Fund may enter into
repurchase agreements with broker-dealers or domestic banks. The
Directors will review on a continuing basis those institutions
which enter into a repurchase agreement with a Fund. A repurchase
agreement is a short-term investment in which the purchaser (i.e.,
the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price,
usually not more than seven days from the date of purchase, thereby
determining the yield during the purchaser's holding period.
Repurchase agreements are collateralized by the underlying debt
securities and may be considered to be loans under the 1940 Act.
The Fund will make payment for such securities only upon physical
delivery or evidence of book entry transfer to the account of a
custodian or bank acting as agent. The seller under a repurchase
agreement is required to maintain the value of the underlying
securities marked to market daily at not less than the repurchase
price. The underlying securities (normally securities of the U.S.
Government, or its agencies and instrumentalities), may have
maturity dates exceeding one year. The Fund does not bear the risk
of a decline in value of the underlying security unless the seller
defaults under its repurchase obligation. In the event of a
bankruptcy or other default of a seller of a repurchase agreement,
the Fund could experience both delays in liquidating the underlying
securities and loss including: (a) possible decline in the value of
the underlying security during the period while the Fund seeks to
enforce its rights thereto, (b) possible lack of access to income
on the underlying security during this period, and (c) expenses of
enforcing its rights.
For the purpose of investing in repurchase agreements, the Manager
may aggregate the cash that certain Funds advised or subadvised by
the Manager or its affiliates would otherwise invest separately
into a joint account. The cash in the joint account is then
invested in repurchase agreements and the Funds that contributed to
the joint account share pro rata in the net revenue generated. The
Manager believes that the joint account produces efficiencies and
economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater
diversity of investments for a Fund than would be available to a
Fund investing separately. The manner in which the joint account is
managed is subject to conditions set forth in an SEC exemptive
order authorizing this practice, which conditions are designed to
ensure the fair administration of the joint account and to protect
the amounts in that account.
Reverse Repurchase Agreements (All Funds) Each Fund may enter into
reverse repurchase agreements with broker/dealers and other
financial institutions. Such agreements involve the sale of
portfolio securities with an agreement to repurchase the securities
at an agreed-upon price, date and interest payment and are
considered to be borrowings by the Fund and are subject to the
borrowing limitations set forth under "Investment Restrictions."
Since the proceeds of reverse repurchase agreements are invested,
this would introduce the speculative factor known as "leverage."
The securities purchased with the Funds obtained from the agreement
and securities collateralizing the agreement will have maturity
dates no later than the repayment date. Generally, the effect of
such a transaction is that the Fund can recover all or most of the
cash invested in the portfolio securities involved during the term
of the reverse repurchase agreement, while in many cases it will be
able to keep some of the interest income associated with those
securities. Such transactions are only advantageous if the Fund
has an opportunity to earn a greater rate of interest on the cash
derived from the transaction than the interest cost of obtaining
that cash. Opportunities to realize earnings from the use of the
proceeds equal to or greater than the interest required to be paid
may not always be available, and the Fund intends to use the
reverse repurchase technique only when the Manager believes it will
be advantageous to the Fund. The use of reverse repurchase
agreements may exaggerate any interim increase or decrease in the
value of the Fund's assets. The Funds' custodian bank will
maintain a separate account for the Fund with securities having a
value equal to or greater than such commitments.
Short Sales Against the Box (All Funds) Each Fund may from time to
time make short sales of securities it owns or has the right to
acquire through conversion or exchange of other securities it owns.
A short sale is ''against the box'' to the extent that the Fund
contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short. In a short sale, the Fund
does not immediately deliver the securities sold and does not
receive the proceeds from the sale. The Fund is said to have a
short position in the securities sold until it delivers the
securities sold, at which time it receives the proceeds of the
sale. The Fund may not make short sales or maintain a short
position if to do so would cause more than 25% of its total assets,
taken at market value, to be held as collateral for such sales.
To secure its obligation to deliver the securities sold short, the
Fund will deposit in escrow in a separate account with its
custodian an equal amount of the securities sold short or
securities convertible into or exchangeable for such securities.
The Fund may close out a short position by purchasing and
delivering an equal amount of the securities sold short, rather
than by delivering securities already held by the Fund, because the
Fund may want to continue to receive interest and dividend payments
on securities in its portfolio that are convertible into the
securities sold short. However, the Fund will not purchase and
deliver new securities to satisfy its short order if such purchase
and sale would cause the Fund to derive more than 30% of its gross
income from the sale of securities held for less than three months.
Borrowing (All Funds) Each Fund may borrow up to 33% of the value
of its total assets from banks for temporary or emergency purposes,
such as to meet the Fund's redemptions.
Leverage (Government Securities Fund) The Fund may borrow from
banks, on a secured or unsecured basis, up to 25% of the value of
its assets. If the Fund borrows and uses the proceeds to make
additional investments, income and appreciation from such
investments will improve its performance if they exceed the
associated borrowing costs but impair its performance if they are
less than such borrowing costs. This speculative factor is known as
"leverage." Leverage creates an opportunity for increased returns
to shareholders of the Fund but, at the same time, creates special
risk considerations. For example, leverage may exaggerate changes
in the net asset value of the Fund's shares and in the Fund's
yield. Although the principal or stated value of such borrowings
will be fixed, the Fund's assets may change in value during the
time the borrowing is outstanding. Leverage will create interest or
dividend expenses for the Fund which can exceed the income from the
assets retained. To the extent the income or other gain derived
from securities purchased with borrowed Funds exceed the interest
or dividends the Fund will have to pay in respect thereof, the
Fund's net income or other gain will be greater than if leverage
had not been used. Conversely, if the income or other gain from the
incremental assets is not sufficient to cover the cost of leverage,
the net income or other gain of the Fund will be less than if
leverage had not been used. If the amount of income from the
incremental securities is insufficient to cover the cost of
borrowing, securities might have to be liquidated to obtain
required Funds. Depending on market or other conditions, such
liquidations could be disadvantageous to the Fund.
The Fund is required to maintain continuous asset coverage of 300%
with respect to such borrowings, and to sell (within three days)
sufficient portfolio holdings to restore such coverage, if it
should decline to less than 300% due to market fluctuations or
otherwise, even if disadvantageous from an investment standpoint.
Leveraging will exaggerate the effect of any increase or decrease
in the value of portfolio securities on the Fund's net asset value,
and money borrowed will be subject to interest costs (which may
include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the interest and
option premiums received from the securities purchased with
borrowed Funds.
Lending Portfolio Securities (All Funds) Consistent with
applicable regulatory requirements each Fund has the ability to
lend securities from its portfolio to brokers, dealers and other
financial organizations. A Fund will not lend its portfolio
securities to Salomon Smith Barney or its affiliates unless it has
applied for and received specific authority to do so from the SEC.
Loans of portfolio securities will be collateralized by cash,
letters of credit or U.S. government securities in an amount at
least equal to the current market value of the loaned securities.
From time to time, a 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, which is unaffiliated with the
Fund or with Salomon Smith Barney, and which is acting as a
"finder".
In lending its securities, a Fund can increase its income by
continuing to receive interest on the loaned securities as well as
by either investing the cash collateral in short-term instruments
or obtaining yield in the form of interest paid by the borrower
when U.S. government securities are used as collateral.
Requirements of the SEC, which may be subject to further
modifications, currently provide that the following conditions must
be met whenever a Fund's portfolio securities are loaned: (a) the
Fund must receive at least 100% cash collateral or equivalent
securities from the borrower; (b) the borrower must increase such
collateral whenever the market value of the securities loaned rises
above the level of such collateral; (c) the Fund must be able to
terminate the loan at any time; (d) the Fund must receive
reasonable interest on the loan, as well as an amount equal to
dividends, interest or other distributions on the loaned
securities, and any increase in market value; (e) the Fund may pay
only reasonable custodian fees in connection with the loan; and (f)
voting rights on the loaned securities may pass to the borrower;
provided, however, that if a material event adversely affecting the
investment in the loaned securities occurs, the Board of Directors
must terminate the loan and regain the right to vote the
securities. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delay in
receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will be made to firms deemed by
to be of good standing and will not be made unless, in the judgment
of , the consideration to be earned from such loans would justify
the risk.
RISK FACTORS
General Investors should realize that risk of loss is inherent in
the ownership of any securities and that each Fund's net asset
value will fluctuate, reflecting fluctuations in the market value
of its portfolio positions.
Fixed Income Securities Investments in fixed income securities may
subject the Funds to risks, including the following.
Interest Rate Risk. When interest rates decline, the market value
of fixed income securities tends to increase. Conversely, when
interest rates increase, the market value of fixed income
securities tends to decline. The volatility of a security's market
value will differ depending upon the security's duration, the
issuer and the type of instrument.
Default Risk/Credit Risk. Investments in fixed income securities
are subject to the risk that the issuer of the security could
default on its obligations, causing a Fund to sustain losses on
such investments. A default could impact both interest and
principal payments.
Call Risk and Extension Risk. Fixed income securities may be
subject to both call risk and extension risk. Call risk exists when
the issuer may exercise its right to pay principal on an obligation
earlier than scheduled, which would cause cash flows to be returned
earlier than expected. This typically results when interest rates
have declined and a Fund will suffer from having to reinvest in
lower yielding securities. Extension risk exists when the issuer
may exercise its right to pay principal on an obligation later than
scheduled, which would cause cash flows to be returned later than
expected. This typically results when interest rates have
increased, and a Fund will suffer from the inability to invest in
higher yield securities.
Lower Rated and Below Investment Grade Fixed Income Securities
Securities which are rated BBB by S&P or Baa by Moody's are
generally regarded as having adequate capacity to pay interest and
repay principal, but may have some speculative characteristics.
Securities rated below Baa by Moody's or BBB by S&P may have
speculative characteristics, including the possibility of default
or bankruptcy of the issuers of such securities, market price
volatility based upon interest rate sensitivity, questionable
creditworthiness and relative liquidity of the secondary trading
market. Because high yield bonds have been found to be more
sensitive to adverse economic changes or individual corporate
developments and less sensitive to interest rate changes than
higher-rated investments, an economic downturn could disrupt the
market for high yield bonds and adversely affect the value of
outstanding bonds and the ability of issuers to repay principal and
interest. In addition, in a declining interest rate market,
issuers of high yield bonds may exercise redemption or call
provisions, which may force a Fund, to the extent it owns such
securities, to replace those securities with lower yielding
securities. This could result in a decreased return.
Subsequent to its purchase by a Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. In addition, it is possible
that Moody's, S&P and other ratings agencies might not timely
change their ratings of a particular issue to reflect subsequent
events.
Foreign Securities Investments in securities of foreign issuers
involve certain risks not ordinarily associated with investments in
securities of domestic issuers. Such risks include fluctuations in
foreign exchange rates, future political and economic developments,
and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. Changes in foreign currency
exchange rates will, to the extent a Fund does not adequately hedge
against such fluctuations, affect the value of securities in its
portfolio and the unrealized appreciation or depreciation of
investments so far as U.S. investors are concerned. In addition,
with respect to certain countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect
investments in those countries.
There may be less publicly available information about a foreign
company than about a U.S. company, and foreign companies may not be
subject to accounting, auditing, and financial reporting standards
and requirements comparable to or as uniform as those of U.S.
companies. Foreign securities markets, while growing in volume,
have, for the most part, substantially less volume than U.S.
markets, and securities of many foreign companies are less liquid
and their price more volatile than securities of comparable U.S.
companies. Transaction costs on foreign securities markets are
generally higher than in the U.S. There is generally less
government supervision and regulation of exchanges, brokers and
issuers than there is in the U.S. A Fund might have greater
difficulty taking appropriate legal action in foreign courts.
Dividend and interest income from foreign securities will generally
be subject to withholding taxes by the country in which the issuer
is located and may not be recoverable by the Fund or the investors.
Capital gains are also subject to taxation in some foreign
countries.
Currency Risks The U.S. dollar value of securities denominated in
a foreign currency will vary with changes in currency exchange
rates, which can be volatile. Accordingly, changes in the value of
the currency in which a Fund's investments are denominated relative
to the U.S. dollar will affect the Fund's net asset value.
Exchange rates are generally affected by the forces of supply and
demand in the international currency markets, the relative merits
of investing in different countries and the intervention or failure
to intervene of U.S. or foreign governments and central banks.
However, currency exchange rates may fluctuate based on factors
intrinsic to a country's economy. Some emerging market countries
also may have managed currencies, which are not free floating
against the U.S. dollar. In addition, emerging markets are subject
to the risk of restrictions upon the free conversion of their
currencies into other currencies. Any devaluations relative to the
U.S. dollar in the currencies in which a Fund's securities are
quoted would reduce the Fund's net asset value per share.
Special Risks of Countries in the Asia Pacific Region Certain of
the risks associated with international investments are heightened
for investments in these countries. For example, some of the
currencies of these countries have experienced devaluations
relative to the U.S. dollar, and adjustments have been made
periodically in certain of such currencies. Certain countries,
such as Indonesia, face serious exchange constraints.
Jurisdictional disputes also exist, for example, between South
Korea and North Korea. In addition, Hong Kong reverted to Chinese
administration on July 1, 1997. The long-term effects of this
reversion are not known at this time.
Securities of Developing/Emerging Markets Countries. A developing
or emerging markets country generally is considered to be a country
that is in the initial stages of its industrialization cycle.
Investing in the equity markets of developing countries involves
exposure to economic structures that are generally less diverse and
mature, and to political systems that can be expected to have less
stability, than those of developed countries. Historical experience
indicates that the markets of developing countries have been more
volatile than the markets of the more mature economies of developed
countries; however, such markets often have provided higher rates
of return to investors.
One or more of the risks discussed above could affect adversely the
economy of a developing market or a Fund's investments in such a
market. In Eastern Europe, for example, upon the accession to
power of Communist regimes in the past, the governments of a number
of Eastern European countries expropriated a large amount of
property. The claims of many property owners against those of
governments may remain unsettled. There can be no assurance that
any investments that a Fund might make in such emerging markets
would not be expropriated, nationalized or otherwise confiscated at
some time in the future. In such an event, the Fund could lose its
entire investment in the market involved. Moreover, changes in the
leadership or policies of such markets could halt the expansion or
reverse the liberalization of foreign investment policies now
occurring in certain of these markets and adversely affect existing
investment opportunities.
Many of a Fund's investments in the securities of emerging markets
may be unrated or rated below investment grade. Securities rated
below investment grade (and comparable unrated securities) are the
equivalent of high yield, high risk bonds, commonly known as "junk
bonds." Such securities are regarded as predominantly speculative
with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations and
involve major risk exposure to adverse business, financial,
economic, or political conditions.
Derivative Instruments In accordance with its investment policies,
each Fund may invest in certain derivative instruments which are
securities or contracts that provide for payments based on or
"derived" from the performance of an underlying asset, index or
other economic benchmark. Essentially, a derivative instrument is
a financial arrangement or a contract between two parties (and not
a true security like a stock or a bond). Transactions in
derivative instruments can be, but are not necessarily, riskier
than investments in conventional stocks, bonds and money market
instruments. A derivative instrument is more accurately viewed as
a way of reallocating risk among different parties or substituting
one type of risk for another. Every investment by a Fund,
including an investment in conventional securities, reflects an
implicit prediction about future changes in the value of that
investment. Every Fund investment also involves a risk that the
portfolio Manager's expectations will be wrong. Transactions in
derivative instruments often enable a Fund to take investment
positions that more precisely reflect the portfolio Manager's
expectations concerning the future performance of the various
investments available to the Fund. Derivative instruments can be a
legitimate and often cost-effective method of accomplishing the
same investment goals as could be achieved through other investment
in conventional securities.
Derivative contracts include options, Futures Contracts, forward
contracts, forward commitment and when-issued securities
transactions, forward foreign currency exchange contracts and
interest rate, mortgage and currency swaps. The following are the
principal risks associated with derivative instruments.
Leverage and associated price volatility: Leverage causes
increased volatility in the price and magnifies the impact of
adverse market changes, but this risk may be consistent with the
investment objective of even a conservative Fund in order to
achieve an average portfolio volatility that is within the expected
range for that type of Fund.
Credit risk: The issuer of the instrument may default on its
obligation to pay interest and principal.
Liquidity and valuation risk: Many derivative instruments are
traded in institutional markets rather than on an exchange.
Nevertheless, many derivative instruments are actively traded and
can be priced with as much accuracy as conventional securities.
Derivative instruments that are custom designed to meet the
specialized investment needs of a relatively narrow group of
institutional investors such as the Funds are not readily
marketable and are subject to a Fund's restrictions on illiquid
investments.
Correlation risk: There may be imperfect correlation between the
price of the derivative and the underlying asset. For example,
there may be price disparities between the trading markets for the
derivative contract and the underlying asset.
Each derivative instrument purchased for a Fund's portfolio is
reviewed and analyzed by the Fund's portfolio Manager to assess the
risk and reward of such instrument in relation the Fund's portfolio
investment strategy. The decision to invest in derivative
instruments or conventional securities is made by measuring the
respective instrument's ability to provide value to the Fund and
its shareholders.
Special Risks of Using Futures Contracts and Options on Futures
Contracts The prices of Futures Contracts are volatile and are
influenced by, among other things, actual and anticipated changes
in interest rates, which in turn are affected by fiscal and
monetary policies and national and international political and
economic events.
At best, the correlation between changes in prices of Futures
Contracts and of the securities or currencies being hedged can be
only approximate. The degree of imperfection of correlation
depends upon circumstances such as: variations in speculative
market demand for Futures and for debt securities or currencies,
including technical influences in Futures trading; and differences
between the financial instruments being hedged and the instruments
underlying the standard Futures Contracts available for trading,
with respect to interest rate levels, maturities, and
creditworthiness of issuers. A decision of whether, when, and how
to hedge involves skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of unexpected
market behavior or interest rate trends.
Because of the low margin deposits required, Futures trading
involves an extremely high degree of leverage. As a result, a
relatively small price movement in a Futures Contract may result in
immediate and substantial loss or gain, to the investor. For
example, if at the time of purchase, 10% of the value of the
Futures Contract is deposited as margin, a subsequent 10% decrease
in the value of the Futures Contract would result in a total loss
of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit, if
the Futures Contract were closed out. Thus, a purchase or sale of
a Futures Contract may result in losses in excess of the amount
invested in the Futures Contract. A Fund, however, would
presumably have sustained comparable losses if, instead of the
Futures Contract, it had invested in the underlying financial
instrument and sold it after the decline. Where a Fund enters into
Futures transactions for non-hedging purposes, it will be subject
to greater risks and could sustain losses which are not offset by
gains on other Fund assets.
In order to be certain that each Fund has sufficient assets to
satisfy its obligations under a Futures Contract, the Fund
segregates and commits to back the Futures Contract an amount of
cash and liquid securities equal in value to the current value of
the underlying instrument less the margin deposit.
Most U.S. Futures exchanges limit the amount of fluctuation
permitted in Futures Contract prices during a single trading day.
The daily limit establishes the maximum amount that the price of a
Futures Contract may vary either up or down from the previous day's
settlement price at the end of a trading session. Once the daily
limit has been reached in a particular type of Futures Contract, no
trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the
limit may prevent the liquidation of unfavorable positions.
Futures Contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of Futures positions and
subjecting some Futures traders to substantial losses.
As with options on debt securities, the holder of an option may
terminate his position by selling an option of the same series.
There is no guarantee that such closing transactions can be
effected. The Fund will be required to deposit initial margin and
maintenance margin with respect to put and call options on Futures
Contracts described above, and, in addition, net option premiums
received will be included as initial margin deposits.
In addition to the risks which apply to all option transactions,
there are several special risks relating to options on Futures
Contracts. The ability to establish and close out positions on
such options will be subject to the development and maintenance of
a liquid secondary market. It is not certain that this market will
develop. The Fund will not purchase options on Futures Contracts
on any exchange unless and until, in the Manager's opinion, the
market for such options had developed sufficiently that the risks
in connection with options on Futures Contracts are not greater
than the risks in connection with Futures Contracts. Compared to
the use of Futures Contracts, the purchase of options on Futures
Contracts involves less potential risk to the Fund because the
maximum amount of risk is the premium paid for the options (plus
transaction costs). Writing an option on a Futures Contract
involves risks similar to those arising in the sale of Futures
Contracts, as described above.
Portfolio Turnover Each Fund may purchase or sell securities
without regard to the length of time the security has been held and
thus may experience a high rate of portfolio turnover. A 100%
turnover rate would occur, for example, if all the securities in a
portfolio were replaced in a period of one year. Under certain
market conditions a Fund may experience a high rate of portfolio
turnover. The rate of portfolio turnover is not a limiting factor
when the Manager deems it desirable to purchase or sell securities
or to engage in options transactions. High portfolio turnover
involves correspondingly greater transaction costs, including any
brokerage commissions, which are borne directly by the respective
Fund and may increase the recognition of short-term, rather than
long-term, capital gains if securities are held for one year or
less and may be subject to applicable income taxes.
Other Risks. In the event of a shortage of the underlying
securities deliverable on exercise of an option, the Options
Clearing Corporation has the authority to permit other, generally
comparable securities to be delivered in fulfillment of option
exercise obligations. If the Options Clearing Corporation
exercises its discretionary authority to allow such other
securities to be delivered it may also adjust the exercise prices
of the affected options by setting different prices at which
otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options
Clearing Corporation may impose special exercise settlement
procedures.
The hours of trading for options on U.S. government securities may
not conform to the hours during which the underlying securities are
traded. To the extent that the options markets close before the
markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be
reflected in the options markets.
Options are traded on exchanges on only a limited number of U.S.
government securities, and exchange regulations limit the maximum
number of options which may be written or purchased by a single
investor or a group of investors acting in concert. The Company
and other clients advised by affiliates of Salomon Smith Barney may
be deemed to constitute a group for these purposes. In light of
these limits, the Board of Directors may determine at any time to
restrict or terminate the public offering of the Fund's shares
(including through exchanges from the other Funds).
Exchange markets in options on U.S. government securities are a
relatively new and untested concept. It is impossible to predict
the amount of trading interest that may exist in such options, and
there can be no assurance that viable exchange markets will develop
or continue.
INVESTMENT RESTRICTIONS tc \l1 "INVESTMENT RESTRICTIONS
The Fund's investment objectives and investment restrictions 1-7
set forth below are Fundamental policies of each Fund (except as
otherwise indicated), i.e., they may not be changed with respect to
a Fund without a majority vote of the outstanding shares of that
Fund. Investment Restrictions 8 through 13 may be changed by the
Board of Directors without the approval of shareholders. (All other
investment practices described in the Prospectuses and this
Statement of Additional Information may be changed by the Board of
Directors without the approval of shareholders.)
Unless otherwise indicated, all percentage limitations apply to
each Fund on an individual basis, and apply only at the time a
transaction is entered into. (Accordingly, if a percentage
restriction is complied with at the time of investment, a later
increase or decrease in the percentage which results from a
relative change in values or from a change in the Fund's net assets
will not be considered a violation.)
Restrictions Applicable to All Funds. No Fund may:
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. 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
Funds' investment objective and policies); or (d) investing in real
estate investment trust securities.
3. 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.
4. Invest more than 25% of its total assets in securities, the
issuers of which conduct their principal business activities in the
same industry. For purposes of this limitation, securities of the
U.S. government (including its agencies and instrumentalities) and
securities of state or municipal governments and their political
subdivisions are not considered to be issued by members of any
industry.
5. 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.
6. Restriction Applicable to all Funds except Government
Securities Fund. The Funds may not: Borrow money, except that (a)
the Fund may borrow from banks for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests
which might otherwise require the untimely disposition of
securities, and (b) the Fund may, to the extent consistent with its
investment policies, enter into reverse repurchase agreements,
forward roll transactions and similar investment strategies and
techniques. To the extent that it engages in transactions
described in (a) and (b), the Fund will be limited so that no more
than 33-l/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.
7. Restriction Applicable to all Funds except Concert Peachtree
Growth Fund and Contrarian Fund. The Funds may not: Act as an
underwriter of securities.
8. Invest in oil, gas or other mineral exploration or
development programs
9. Make investments in securities for the purpose of exercising
control over or management of the issuer;
10. Purchase any securities on margin (except for such short-
term credits as are necessary for the clearance of purchases and
sales of portfolio securities) or sell any securities short (except
"against the box"). For purposes of this restriction, the deposit
or payment by the Fund of underlying securities and other assets in
escrow and collateral agreements with respect to initial or
maintenance margin in connection with Futures Contracts and related
options and options on securities, indexes or similar items is not
considered to be the purchase of a security on margin;
11. Invest in securities of an issuer which, together with any
predecessor, has been in operation for less than three years if, as
a result, more than 5% of the total assets of the Fund would then
be invested in such securities (for purposes of this restriction,
issuers include predecessors, sponsors, controlling persons,
general guarantors and originators of underlying assets);
12. Purchase or otherwise acquire any security if, as a result,
more than 15% of its net assets would be invested in securities
that are illiquid;
13. Restrictions Applicable to all Funds except Government
Securities Fund. The Funds may not: Write, purchase or sell puts,
calls, straddles, spreads or any combinations thereof (the
Contrarian Fund and the Concert Peachtree Growth Fund each may
write or purchase puts, calls, straddles, spreads and any
combination thereof up to 5% of their assets).
BROKERAGE
In selecting brokers or dealers to execute securities transactions
on behalf of a Fund, SSB Citi seeks the best overall terms
available. In assessing the best overall terms available for any
transaction, will consider the factors that it deems relevant,
including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of
the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis. In
addition, each investment advisory agreement authorizes SSB Citi,
in selecting brokers or dealers to execute a particular transaction
and in evaluating the best overall terms available, to consider the
brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to
the Company, the other Funds and other accounts over which or its
affiliates exercise investment discretion. For the fiscal year
ended December 31, 1999 the Contrarian Fund and the Concert
Peachtree Growth Fund directed brokerage transactions totaling
approximately $ 882,691,643 and $ 673,820,244, respectively, to
brokers because of research services provided. The amount of
brokerage commissions paid on such transactions for the Contrarian
Fund and the Concert Peachtree Growth Fund total approximately
$1,434,411 and $408,613, respectively. The fees under the
investment advisory agreements and the administration agreement
between the Company and SSB Citi are not reduced by reason of their
receiving such brokerage and research services. The Board of
Directors periodically will review the commissions paid by the
Funds to determine if the commissions paid over representative
periods of time were reasonable in relation to the benefits inuring
to the Company. SEC rules require that commissions paid to Salomon
Smith Barney by a Fund on exchange transactions not exceed "usual
and customary brokerage commissions." The rules define "usual and
customary" commissions to include amounts which are "reasonable and
fair compared to the commission, fee or other remuneration received
or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold
on a securities exchange during a comparable period of time." The
Board of Directors, particularly the Independent Directors of the
Company (as defined in the 1940 Act), has adopted procedures for
evaluating the reasonableness of commissions paid to Salomon Smith
Barney and reviews these procedures periodically. In addition,
under rules adopted by the SEC, Salomon Smith Barney may directly
execute transactions for a Fund on the floor of any national
securities exchange, provided: (a) the Board of Directors 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.
To the extent consistent with applicable provisions of the 1940 Act
and the rules and exemptions adopted by the SEC thereunder, the
Board of Directors has determined that transactions for a Fund may
be executed through Salomon Smith Barney and other affiliated
broker-dealers if, in the judgment ofSSB Citi, the use of such
broker-dealer is likely to result in price and execution at least
as favorable as those of other qualified broker-dealers, and if, in
the transaction, such broker-dealer charges the Fund a rate
consistent with that charged to comparable unaffiliated customers
in similar transactions.
Portfolio securities are not purchased from or through Salomon
Smith Barney or any affiliated person of Salomon Smith Barney
where such entities are acting as principal, except pursuant to the
terms and conditions of exemptive rules or orders promulgated by
the SEC. Pursuant to conditions set forth in rules of the SEC, the
Company may purchase securities from an underwriting syndicate of
which Salomon Smith Barney is a member (but not from Salomon Smith
Barney). Such conditions relate to the price and amount of the
securities purchased, the commission or spread paid, and the
quality of the issuer. The rules further require that such
purchases take place in accordance with procedures adopted and
reviewed periodically by the Board of Directors, particularly those
Directors who are not interested persons of the Company.
The Funds may use Salomon Smith Barney as a commodities broker in
connection with entering into Futures Contracts and commodity
options. Salomon Smith Barney has agreed to charge the Funds
commodity commissions at rates comparable to those charged by
Salomon Smith Barney to its most favored clients for comparable
trades in comparable amounts.The following table sets forth certain
information regarding each Fund's payment of brokerage commissions
to Salomon Smith Barney:
Fiscal Year
Ended
December 31,
Contrarian
Fund
Concert Peachtree
Growth Fund
Total Brokerage Commissions
1997
$
658,099
891,375
1998
2,483,848
430,920
1999
1,434,411
408,613
Commissions paid to
1997
$167,712
20,784
Salomon Smith Barney
1998
72,150
0
1999
23,145
0
% of Total Brokerage
Commissions paid to
Salomon Smith Barney
1999
1.61%
0
% of Total Transactions
Involving Commissions paid
to Salomon Smith Barney
1999
1.09%
0
No commissions were paid by the Investment Grade Bond Fund and
Government Securities Fund.
PORTFOLIO TURNOVER
For reporting purposes, a Fund's portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of
portfolio securities for the fiscal year by the monthly average of
the value of the portfolio securities owned by the Fund during the
fiscal year. In determining such portfolio turnover, all
securities whose maturities at the time of acquisition were one
year or less are excluded. A 100% portfolio turnover rate would
occur, for example, if all of the securities in the Fund's
investment portfolio (other than short-term money market
securities) were replaced once during the fiscal year.
Investment Grade Bond Fund will not normally engage in the trading
of securities for the purpose of realizing short-term profits, but
it will adjust its portfolio as considered advisable in view of
prevailing or anticipated market conditions. Portfolio turnover
will not be a limiting factor should SSB Citi deem it advisable to
purchase or sell securities.
For the fiscal years ended December 31, 1997,1998 and 1999, the
portfolio turnover rates were as follows:
Fund
1997
1998
1999
Investment Grade Bond Fund
39%
32%
147%
Government Securities Fund
274%
334%
161%
Contrarian Fund
35%
157%
89%
Concert Peachtree Growth Fund
227%
77%
94%
Increased portfolio turnover necessarily results in correspondingly
greater brokerage commissions which must be paid by the Fund. To
the extent portfolio trading results in realization of net short-
term capital gains, shareholders will be taxed on such gains at
ordinary tax rates (except shareholders who invest through IRAs and
other retirement plans which are not taxed currently on
accumulations in their accounts).
SSB Citi manages a number of private investment accounts on a
discretionary basis and it is not bound by the recommendations of
the Salomon Smith Barney research department in managing the Funds.
Although investment decisions are made individually for each
client, at times decisions may be made to purchase or sell the same
securities for one or more of the Funds and/or for one or more of
the other accounts managed by SSB Citi. When two or more such
accounts simultaneously are engaged in the purchase or sale of the
same security, transactions are allocated in a manner considered
equitable to each, with emphasis on purchasing or selling entire
orders wherever possible. In some cases, this procedure may
adversely affect the price paid or received by the Fund or the size
of the position obtained or disposed of by the Fund.
PURCHASE OF SHARES
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:
Government Securities Fund
and Investment Grade Bond Fund
Concert Peachtree Growth Fund,
and Contrarian Fund
Amount of
Investment
Sales Charge as %
of
Offering Price
Sales Charge as
% of Amount Invested
Sales Charge as % of
Offering Price
Sales Charge
as
% of Amount
Invested
Less than $25,000
4.50%
4.71%
5.00%
5.26%
$ 25,000 - 49,999
4.00
4.17
4.00
4.17
50,000 - 99,999
3.50
3.63
3.50
3.63
100,000 - 249,999
2.50
2.56
3.00
3.09
250,000 - 499,999
1.50
1.52
2.00
2.04
500,000 and over
- -0-
- -0-
- -0-
- -0-
* Purchases of Class A shares of $500,000 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 and other dealers
whose clients make purchases of $500,000 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 "Purchase of Shares-Deferred Sales Charge
Alternatives" and "Purchase of Shares-Waivers of Deferred Sales
Charge."
Members of a selling group may receive up to 90% of the sales
charge and may be deemed to be underwriters of a Fund as defined in
the Securities Act of 1933. The reduced sales charges shown above
apply to the aggregate of purchases of Class A shares of a Fund
made at one time by "any person," which includes an individual and
his or her immediate family, or a director 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 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 Concert Allocation Series Inc., for which
there is no minimum purchase amount).
General
Investors may purchase shares from a Salomon Smith Barney Financial
Consultant or a Dealer Representative. In addition, certain
investors, including qualified retirement plans purchasing through
certain Dealer Representatives, may purchase shares directly from a
Fund. When purchasing shares of a Fund, investors must specify
which class is being purchased. Salomon Smith Barney and Dealer
Representatives 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 PFPC Global Fund Services ("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 a Fund by making an initial investment of at least
$1,000 for each account, 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 shareholders purchasing shares of a 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 a 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 sub-transfer agent. Share
certificates are issued only upon a shareholder's written request
to 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
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 a Fund
calculates its net asset value, are priced according to the net
asset value determined on that day, provided the order is received
by a 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 your 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 PFS
Investments ("PFSI") or Citicorp Investment Services. 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 Salomon Smith Barney
Financial Consultant or a Dealer Representative, your Service Agent
or a PFSI Registered Representative.
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, Citibank
Service Agent or a PFS Registered Representative (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, Citibank Service Agent's or a PFS
Registered Representative'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) purchases by a separate account used
to Fund certain unregistered variable annuity contracts; (g)
investments of distributions from or proceeds from a sale of a UIT
sponsored by Salomon Smith Barney; and (h) purchases by investors
participating in a Salomon Smith Barney fee-based arrangement. 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 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 PFPC Global Fund Services 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 Concert 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 thirteen months from the date of the Letter. If a
total investment of $15,000,000 is not made within the 13-month
period, as applicable, 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 time of redemption.
Deferred Sales Charge Shares that are redeemed will not be subject
to a deferred sales charge to the extent 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.
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.
The length of time Deferred Sales Charge Shares acquired through an
exchange have been held will be calculated from the date 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") (however, 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 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.
Volume Discounts
The schedule of sales charges on Class A shares described in the
prospectus applies to purchases made by any purchaser, which is
defined to include the following: (a) an individual; (b) an
individual's spouse and his or her children purchasing shares for
their own account; (c) a director or other fiduciary purchasing
shares for a single trust estate or single fiduciary account; and
(d) a director or other professional fiduciary (including a bank,
or an investment adviser registered with the SEC under the
Investment Advisers Act of 1940, as amended) purchasing shares of
the Fund for one or more trust estates or fiduciary accounts.
Purchasers who wish to combine purchase orders to take advantage of
volume discounts on Class A shares should contact a Salomon Smith
Barney Financial Consultant.
Determination of Public Offering Price
Each Fund offers its shares to the public on a continuous basis.
The public offering price for a Class A, and Class Y share of the
Fund is equal to the net asset value per share at the time of
purchase, plus for Class A shares an initial sales charge based on
the aggregate amount of the investment. The public offering price
for a Class L share includes a 1.00% initial sales charge. Class A
share purchases, including applicable rights of accumulation,
equaling or exceeding $500,000 is equal to the net asset value per
share at the time of purchase and no sales charge is imposed at the
time of purchase. A Deferred Sales Charge ("DSC"), 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 the Fund's
financial statements, incorporated by reference in their entirety
into this SAI.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of payment
postponed (a) for any period during which the New York Stock
Exchange, Inc. ("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 net asset value is not reasonably practicable
or (c) for such other periods as the SEC by order may permit for
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 the sub-transfer
agent together with the redemption request. Any signature
appearing on a share certificate, stock power or written redemption
request in excess of $10,000 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 $10,000 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, directors 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, form 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.
Distributions in Kind
If the Board of Directors of a Fund determines that it would be
detrimental to the best interests of the remaining shareholders to
make a redemption payment wholly in cash, a 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 Fund securities in lieu of cash. Securities
issued as a distribution in kind may incur brokerage commissions
when shareholders subsequently sell those securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the "Withdrawal Plan") is
available to shareholders who own shares with a value of at least
$10,000 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 CDSC 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 CDSC will be waived on amounts withdrawn that
do not exceed 2.00% per month of the value of the shareholder's
shares that are subject to a CDSC). To the extent withdrawals
exceed dividends, distributions and appreciation of a shareholder's
investment in the Fund, there will be a reduction in the value of
the shareholder's investment, and continued withdrawal payments may
reduce the shareholder's investment and ultimately exhaust it.
Withdrawal payments should not be considered as income from
investment in the Fund. Furthermore, as it generally would not be
advantageous to a shareholder to make additional investments in the
Fund at the same time he or she is participating in the Withdrawal
Plan, purchases by such shareholder in amounts of less than $5,000
ordinarily will not be permitted.
Shareholders who wish to participate in the Withdrawal Plan and who
hold their shares in certificate form must deposit their share
certificates with the sub-transfer agent as agent for Withdrawal
Plan members. For additional information, shareholders should
contact a Salomon Smith Barney Financial Consultant or their Dealer
Representaive. A shareholder who purchases shares directly through
the sub-transfer agent may continue to do so and applications for
participation in the Withdrawal Plan must be received by the sub-
transfer agent no later than the eighth day of the month to be
eligible for participation beginning with that month's withdrawal.
VALUATION OF SHARES
The prospectus states that the net asset value of the Fund's
Classes of shares will be determined on any date that the New York
Stock Exchange ("NYSE") is open. The NYSE is closed on the
following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
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
on the basis of the bid price at the close of business on each day,
or, if market quotations for these securities are not readily
available, at fair value, as determined in good faith by the Fund's
Board of Directors. Short-term obligations with maturities of 60
days or less are valued at amortized cost, which constitutes fair
value as determined by the Fund's Board of Directors. Amortized
cost involves valuing an instrument at its original cost to the
Fund and thereafter assuming a constant amortization to maturity of
any discount or premium, regardless of the effect of fluctuating
interest rates on the market value of the instrument. All other
securities and other assets of the Fund will be valued at fair
value as determined in good faith by the Fund's Board of Directors.
EXCHANGE PRIVILEGE
Except as noted below, shareholders of certain Smith Barney Mutual
Funds may exchange all or part of their shares for shares of the
same class of other Smith Barney Mutual Funds, to the extent such
shares are offered for sale in the shareholder's state of
residence, on the basis of relative net asset value per share at
the time of exchange as follows:
A. Class A and Class Y shareholders of the Fund who
wish to exchange all or a portion of their shares for shares of the
respective Class in any of the Funds of the Smith Barney Mutual
Fund Complex may do so without imposition of any charge.
B. Class B shares of the Fund exchanged for Class B
shares of another Fund will be subject to the higher applicable
CDSC of the two Funds. Upon an exchange, the new Class B shares
will be deemed to have been purchased on the same date as the Class
B shares of the Fund that have been exchanged.
C. Upon exchange, new Class L shares will be deemed to
have been purchased on the same date as the Class L shares of the
Fund that have been exchanged.
The exchange privilege enables shareholders to acquire shares of
the same Class in a Fund with different investment objectives when
they believe that a shift between Funds is an appropriate
investment decision. This privilege is available to shareholders
residing in any state in which 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 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 DSC, the
proceeds immediately invested, at a price as described above, in
shares of the Fund being acquired. 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 a 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, each 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.
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.
DISTRIBUTOR
CFBDS serves as the Company's distributor on a best efforts basis
pursuant to a distribution agreement (the "Distribution Agreement")
dated October 8, 1998 which was most recently approved by the
Company's Board of Directors on July 22, 1999. Prior to October 8,
1998, Salomon Smith Barney served as the Company's distributor.
Prior to October 8, 1998 PFS served as one of the Company's
distributors with respect to the Concert Peachtree Growth Fund and
Investment Grade Bond Fund.
Salomon Smith Barney continues to sell the Funds shares as part of
the selling group.
For the fiscal year ended December 31, 1999, CFBDS and its
predecessor, Salomon Smith Barney and/or PFS Distributors ,
incurred following distribution expenses for the Funds:
Fund
Advertisin
g
Printing
and Mailing
of
Prospectuse
s
Support
Services
Salomon
Smith
Barney
Financial
Consultants
Interest
Expense
Total
Concert Peachtree
Growth
$1,775
$360
$34,335
$2,555,364
$84,631
2,676,465
Government Securities
82,442
5,772
979,246
821,281
18,277
1,907018
Contrarian
48,368
15,389
753,089
(399,142)
(25,523)
392,181
Investment Grade Bond
114,592
15,548
1,271,247
1,616,493
52,698
3,070578
Distribution Arrangements
To compensate Salomon Smith Barney , PFS Investments or Citicorp
Investment Services ("CIS"). As the case may be, for the services
it provides and for the expense it bears under the Distribution
Agreement, the Company has adopted a services and distribution plan
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the
Plan, each Fund pays Salomon Smith Barney and, with respect to the
Class A and Class B shares of Concert Peachtree Growth Fund and
Investment Grade Bond Fund, PFS, and with respect to Class B shares
of Concert Peachtree Growth Fund, CIS, a service fee, accrued daily
and paid monthly, calculated at the annual rate of 0.25% of the
value of each Fund's average daily net assets attributable to the
Class A, Class B and Class L shares. In addition, the Fund pays
Salomon Smith Barney, and with respect to the Class B shares of
Concert Peachtree Growth Fund and Investment Grade Bond Fund, PFS,
and with respect to Class B shares of Concert Peachtree Growth
Fund, CIS, a distribution fee with respect to the Class B and Class
L shares primarily intended to compensate Salomon Smith Barney PFS
and/or CIS for its initial expense of paying Financial Consultants
and Registered Representatives, respectively, a commission upon
sales of those shares. Such shares' distribution fees, which are
accrued daily and paid monthly, are calculated at the annual rate
of 0.75% of the value of average daily net assets attributable to
the Class B and Class L shares with respect to Contrarian Fund and
Concert Peachtree Growth Fund, and 0.50% of the value of average
daily net assets attributable to the Class B shares and 0.45% of
the value of average daily net assets attributable to Class L
shares, with respect to Government Securities Fund and Investment
Grade Bond Fund.
The payments to Salomon Smith Barney Financial Consultants for
selling shares of a Class include a commission or fee paid by the
investor or Salomon Smith Barney/PFS at the time of sale and, with
respect to Class A, Class B and Class L shares, a continuing fee
for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. Salomon Smith Barney Financial
Consultants or PFS Investment Registered Representatives may
receive different levels of compensation for selling different
Classes of shares.
Payments under each Plan with respect to Class B and Class L shares
are not tied exclusively to the distribution and shareholder
services expenses actually incurred and the payments may exceed
distribution expenses actually incurred. The Company's Board of
Directors will evaluate the appropriateness of each Plan and its
payment terms on a continuing basis and in so doing will consider
all relevant factors, including expenses borne by Salomon Smith
Barney, amounts received under the Plan and proceeds of the DSC.
With respect to Smith Barney Investment Grade Bond Fund and Concert
Peachtree Growth Fund, The fees are paid to PFS Distributors, which
in turn, pays PFS Investments Inc. ("PFS Investments") to pay its
PFS Investment 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.
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.
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 $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
(ACH).
Commissions on Class A Shares: For the 1997 fiscal year, the
aggregate dollar amount of commissions on Class A shares, all of
which was paid to Salomon Smith Barney, were as follows:
Class A
Name of Fund
Fiscal Year
Ended 12/31/97
Investment Grade Bond
$ 122,000
Government Securities Fund
50,000
Special Equities Fund
381,000
Contrarian Fund
608,000
Concert Peachtree Growth Fund
4,000
For the period January 1, 1998 through October 7, 1998 and for the
period October 8, 1998 through December 31, 1998, the aggregate
dollar amounts of commissions on Class A shares, were as follows:
Class A
Name of Fund
1/1/98 through
10/07/98*
10/8/98 through
12/31/98**
1999
Investment Grade Bond
239,000
75,000
$190,000
Government Securities Fund
91,000
49,000
173,000
Contrarian Fund
39,000
9,000
21,000
Concert Peachtree Growth Fund
3,000
1,000
12,000
* The entire amount was paid to Salomon Smith Barney.
** The following amounts were paid to Salomon Smith Barney:
$67,500, 44,100, $45,000, 8,100 and 900, respectively.
Commissions of Class L shares. For the period June 12, 1998
through October 7, 1998 and for the period from October 8, 1998
through December 31, 1998, the aggregate dollar amounts of
commission on Class L share were as follows:
Class L
(On June 12, 1998, Class C shares
were renamed Class L Shares)
Name of Fund
1/1/98 through
10/07/98*
10/8/98 through
12/31/98**
1999
Investment Grade Bond
$39,000
$39,000
$74,000
Government Securities Fund
7,000
10,000
62,000
Contrarian Fund
2,000
0
1,000
Concert Peachtree Growth Fund
0
0
3,000
* The entire amount was paid to Salomon Smith
Barney.
** The following amounts were paid to Salomon Smith
Barney: $35,100, $9,000, $0, $0 and $0, respectively.
DSC paid to Smith Barney
Class B Shares
Name of Fund
Fiscal Year Ended
12/31/97
Fiscal Year Ended
12/31/98*
Fiscal Year Ended
12/31/99**
Investment Grade Bond Fund*
$ 422,000
$ 224,000
$352,000
Government Securities Fund
305,000
87,000
105,000
Contrarian Fund*
1,112,000
1,214,000
929,000
Concert Peachtree Growth Fund
3,000
6,000
3,000
* For the fiscal year ended December 31, 1998, the Investment
Grade Bond Fund, Government Securities Fund and the
Contrarian Fund Class A shares paid a CDSC of $20,000,
$6,000 and $2,000, respectively.
** For the fiscal year ended December 31, 1999, the Investment
Grade Bond Fund, Government Securities Fund and the
Contrarian Fund Class A shares paid a CDSC of $12,000,
$6,000 and $ , respectively.
Class L Shares (formerly designated as Class C shares)
Name of Fund
Fiscal Year Ended
12/31/97
Fiscal Year Ended
12/31/98
Fiscal Year Ended
12/31/99
Investment Grade Bond Fund
$ 1,000
$5,000
$12,000
Government Securities Fund
- -
1,000
3,000
Contrarian Fund
9,000
3,000
0
Concert Peachtree Growth Fund
- -
0
0
Distribution Plan Fees
Class A Shares
Name of Fund
Fiscal Year Ended
12/31/97
Fiscal Year Ended
12/31/98
Fiscal Year Ended
12/31/99
Investment Grade Bond Fund
$ 508,201
$597,417
$591,545
Government Securities Fund
920,147
883,941
798,545
Contrarian Fund
581,527
445,269
211,338
Concert Peachtree Growth Fund
175,590
179,750
251,543
Class B Shares
Name of Fund
Fiscal Year Ended
12/31/97
Fiscal Year Ended
12/31/98
Fiscal Year Ended
12/31/99
Investment Grade Bond Fund
$1,813,383
$1,886,202
$1,694,973
Government Securities Fund
326,793
690,191
595,854
Contrarian Fund
5,310,433
4,387,199
2,067,789
Concert Peachtree Growth Fund
423,160
469,725
737,429
Class L Shares (formerly designated as Class C shares)
Name of Fund
Fiscal Year Ended
12/31/97
Fiscal Year Ended
12/31/98
Fiscal Year Ended
12/31/99
Investment Grade Bond Fund
$ 53,111
$ 91,306
$135,473
Government Securities Fund
12,112
19,664
43,960
Contrarian Fund
747,010
569,578
231,915
Concert Peachtree Growth Fund
1,779
1,883
4,846
Under its terms, the Plan continues from year to year, provided
such continuance is approved annually by vote of the Board of
Directors, including a majority of the Independent Directors. The
Plan may not be amended to increase the amount to be spent for the
services provided by Salomon Smith Barney or PFS without
shareholder approval, and all amendments of the Plan also must be
approved by the Directors in the manner described above. The Plan
may be terminated at any time, without penalty, by vote of a
majority of the Independent Directors or by a vote of a majority of
the outstanding voting securities of the Company (as defined in the
1940 Act). Pursuant to the Plan, Salomon Smith Barney and PFS will
provide the Board of Directors periodic reports of amounts expended
under the Plan and the purpose for which such expenditures were
made.
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 the
sub-transfer agent, P.O Box 105033 Atlanta, Georgia, GA 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 the 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 the
sub-transfer agent. Share certificates are issued only upon a
shareholder's written request to the sub-transfer agent. A
shareholder that has insufficient Funds to complete any purchase
will be charged a fee up to $30.00 per returned purchase by PFS.
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, initial purchases of
Fund shares may be made by wire. The minimum investment that can
be made by wire is $10,000. Before sending the wire, the PFS
Investments Registered Representative must contact the sub-transfer
agent at (800) 665-8677 to obtain proper wire instructions. Once
an account is open, a shareholder may make additional investments
by wire. The shareholder should contact the sub-transfer agent at
(800) 544-5445 to obtain proper wire instructions.
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. Shareholders should contact the 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 the 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 $30.00 by
PFS or the 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 $30.00
by PFS or the sub-transfer agent. Subsequent investments by
telephone may not be available if the shareholder cannot reach the
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.
Additional information regarding the sub-transfer agent's services
may be obtained by contacting the Client Services Department at
(800) 544-5445.
CITI ACCOUNTS
Each Fund offers two Classes of shares to investors purchasing
through Other Accounts: Class A shares and Class B shares.
Each Service Agent has agreed to transmit to its customers who are
shareholders of the Fund appropriate prior written disclosure of
any fees that it may charge them directly. Each Service Agent is
responsible for transmitting promptly orders of its customers.
Your Service agent is the shareholder of record for the shares of
the Fund you own.
For Citi Accounts, Class A and Class B shares of the Fund may be
exchanged for shares of the same class of CitiFunds Cash Reserves
and the following funds:
Concert Investment Series - Emerging Growth Fund
Concert Investment Series - Government Fund
Concert Investment Series - Growth and Income Fund
Concert Investment Series - Growth Fund
Concert Investment Series - International Equity Fund
Concert Investment Series - Mid Cap Fund
Concert Investment Series - Municipal Bond Fund
Concert Peachtree Growth Fund
Smith Barney Concert Allocation Series Inc. - Balanced
Portfolio
Smith Barney Concert Allocation Series Inc. - Conservative
Portfolio
Smith Barney Concert Allocation Series Inc. - Growth
Portfolio
Smith Barney Concert Allocation Series Inc. - High Growth
Portfolio
Smith Barney Concert Allocation Series Inc. - Income
Portfolio
Each Service Agent has agreed to transmit to its customers who are
shareholders of the Fund appropriate prior written disclosure of
any fees that it may charge them directly. Each Service Agent is
responsible for transmitting promptly orders for its customers.
Shareholders may redeem or exchange Fund shares by telephone, if
their account applications so permit, by calling the transfer agent
or, if they are customers of a Service Agent, their Service Agent.
During periods of drastic economic or market changes or severe
weather or other emergencies, shareholders may experience
difficulties implementing a telephone exchange or redemption. In
such an event, another method of instruction, such as a written
request sent via an overnight delivery service, should be
considered. The Fund, the transfer agent and each Service Agent
will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures may include
recording of the telephone instructions and verification of a
caller's identity by asking for his or her name, address,
telephone, Social Security number, and account number. If these or
other reasonable procedures are not followed, the Fund, the
transfer agent or the Service Agent may be liable for any losses to
a shareholder due to unauthorized or fraudulent instructions.
Otherwise, the shareholder will bear all risk of loss relating to a
redemption or exchange by telephone.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund normally is determined
as of the close of regular trading on the NYSE on each day that the
NYSE is open, by dividing the value of the Fund's net assets
attributable to each Class by the total number of shares of the
Class outstanding. If the NYSE closes early, the Fund accelerates
the calculation of its net asset value to the actual closing time.
The NYSE is closed for the following holidays: New Year's Day,
Martin Luther King Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Securities for which market quotations are readily available are
valued at current market value or, in their absence, at fair value.
Securities traded on an exchange are valued at last sales prices on
the principal exchange on which each such security is traded, or if
there were no sales on that exchange on the valuation date, the
last quoted sale, up to the time of valuation, on the other
exchanges. If instead there were no sales on the valuation date
with respect to these securities, such securities are valued at the
mean of the latest published closing bid and asked prices. Over-
the-counter securities are valued at last sales price or, if there
were no sales that day, at the mean between the bid and asked
prices. Options, Futures Contracts and options thereon that are
traded on exchanges are also valued at last sales prices as of the
close of the principal exchange on which each is listed or if there
were no such sales on the valuation date, the last quoted sale, up
to the time of valuation, on the other exchanges. In the absence of
any sales on the valuation date, valuation shall be the mean of the
latest closing bid and asked prices. Securities with a remaining
maturity of 60 days or less are valued at amortized cost where the
Board of Directors has determined that amortized cost is fair
value. Premiums received on the sale of call options will be
included in the Fund's net assets, and current market value of such
options sold by the Fund will be subtracted from the Fund's net
assets. Any other investments of the Fund, including restricted
securities and listed securities for which there is a thin market
or that trade infrequently (i.e., securities for which prices are
not readily available), are valued at a fair value determined by
the Board of Directors in good faith. This value generally is
determined as the amount that the Fund could reasonably expect to
receive from an orderly disposition of these assets over a
reasonable period of time but in no event more than seven days. The
value of any security or commodity denominated in a currency other
than U.S. dollars will be converted into U.S. dollars at the
prevailing market rate as determined by the Manager.
Foreign securities trading may not take place on all days on which
the NYSE is open. Further, trading takes place in various foreign
markets on days on which the NYSE is not open. Accordingly, the
determination of the net asset value of the Fund may not take place
contemporaneously with the determination of the prices of
investments held by such Fund. Events affecting the values of
investments that occur between the time their prices are determined
and 4:00 P.M. on each day that the NYSE is open will not be
reflected in the Fund's net asset value unless the Manager, under
the supervision of the Company's Board of Directors, determines
that the particular event would materially affect net asset value.
As a result, a Fund's net asset value may be significantly affected
by such trading on days when a shareholder has no access to that
Fund.
PERFORMANCE DATA
From time to time, a Fund may quote its yield or total return in
advertisements or in reports and other communications to
shareholders. The Fund may include comparative performance
information in advertising or marketing the Fund's shares. Such
performance information may include the following industry and
financial publications: Barron's, Business Week, CDA Investment
Technologies, Inc., Changing Times, Forbes, Fortune, Institutional
Investor, Investors Daily, Money, Morningstar Mutual Fund Values,
The New York Times, USA Today and The Wall Street Journal. To the
extent any advertisement or sales literature of a Fund describes
the expenses or performance of a Class, it will also disclose such
information for the other Classes.
Yield
A Fund's 30-day yield figure described below is calculated
according to a formula prescribed by the SEC. The formula can be
expressed as follows:
YIELD = 2[(a-b + 1)6 - 1]
cd
Where:
a =
Dividends and interest earned during the period.
b =
Expenses accrued for the period (net of reimbursement).
c =
the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d =
the maximum offering price per share on the last day of the
period.
For the purpose of determining the interest earned (variable "a" in
the formula) on debt obligations purchased by the Fund at a
discount or premium, the formula generally calls for amortization
of the discount or premium; the amortization schedule will be
adjusted monthly to reflect changes in the market values of the
debt obligations.
Investors should recognize that in periods of declining interest
rates a Fund's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates,
the Fund's yield will tend to be somewhat lower. In addition, when
interest rates are falling, the inflow of net new money to the Fund
from the continuous sales of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of
the Fund's investments, thereby reducing the current yield of the
Fund. In periods of rising interest rates, the opposite can be
expected to occur.
The yields for the 30-day period ended January 31, 1999 for
Government Securities Fund's Class A, Class B, Class L and Class Y
Shares were 4.81%, 4.53%, 4.52% and 5.38%, respectively.
The yields for the 30-day period ended January 31, 1999 for
Investment Grade Bond Fund's Class A, Class B, Class L and Class Y
Shares were 5.32%, 5.08%, 5.09% and 5.92%, respectively.
Average Annual Total Return
"Average annual total return" figures, as described below, are
computed according to a formula prescribed by the SEC. The formula
can be expressed as follows:
P(1+T)n = ERV
Where:
P =
a hypothetical initial payment of $1,000.
T =
Average annual total return.
n =
Number of years.
ERV
=
Ending Redeemable Value of a hypothetical $1,000 investment made at the
beginning of a 1-, 5- or 10-year period at the end of the 1-5- or 10-
year period (or fractional portion thereof), assuming reinvestment of all
dividends and distributions. A Class' total return figures calculated in
accordance with the above formula assume that the maximum applicable
sales charge or maximum applicable CDSC, as the case may be, has been
deducted from the hypothetical $1,000 initial investment at the time of
purchase or redemption, as applicable.
Aggregate Total Return
Aggregate total return figures, as described below, represent the
cumulative change in the value of an investment in the Class during
of the specified period and are computed by the following formula:
AGGREGATE TOTAL RETURN = ERV-P
P
Where:
P =
a hypothetical initial payment of $1,000.
ERV =
Ending Redeemable Value of a hypothetical $10,000 investment made
at the beginning of a 1-, 5- or 10-year period (or fractional
portion thereof) at the end of the 1-5- or 10- year period (or
fractional portion thereof), assuming reinvestment of all
dividends and distributions.
The total returns below show what an investment in each the Fund
would have earned over a specified period of time (one, five or ten
years or since inception) without assuming the payment of the
maximum sales load when the investment was first made and that all
distributions and dividends by the Fund were invested on the
reinvestment dates during the period, less all recurring fees. The
following chart reflects the financial performance of the Funds
through the period ended December 31, 1999 for the one, five, and
ten year periods and since inception:
Total Returns
5 Year
Since
Inception
Since
Class
1 Year
Average
Annual
5 Year
Cumulative
Average
Annual
Inception
Cumulative
Contrarian Fund
Inception: 06/30/95
A
(5.27)%
N/A
N/A
5.22%
25.81%
Inception: 06/30/95
B
(5.99)
N/A
N/A
4.44
21.62
Inception: 06/30/95
L
(5.82)
N/A
N/A
4.47
21.82
Inception: 01/31/96
Y
(4.89)
N/A
N/A
5.63
23.97
Concert Peachtree Fund
Inception: 07/03/95
A
19.88
N/A
N/A
19.06
119.24
Inception: 07/03/95
B
18.88
N/A
N/A
18.15
111.73
Inception: 08/08/95
L
18.67
N/A
N/A
16.96
97.28
Inception: 09/15/97
Y
20.41
N/A
N/A
22.73
57.28
Investment Grade Bond
Fund
Inception:11/6/92
A
(9.09)
9.19%
55.24%
7.95
72.83
Inception: 1/4/82
B*
(9.44)
8.67
51.55
10.61
514.58
Inception: 2/26/93
L
(9.44)
8.72
51.89
6.29
51.85
Inception: 2/7/96
Y
(8.68)
N/A
N/A
4.27
17.72
Government Securities
Fund
Inception: 11/06/92
A
(4.96)
5.94
33.45
5.58
47.45
Inception: 3/20/84
B**
(5.35)
5.41
30.14
7.27
202.77
Inception: 2/4/93
L
(5.41)
5.46
30.48
4.52
35.67
Inception: 2/7/96
Y
(4.61)
N/A
N/A
4.38
18.21
* The ten average annual return was 8.28% and the ten year
cumulative total return was 121.51 % for class B shares
** The ten average annual return was 6.20% and the ten year
cumulative total return was 82.57% for class B shares
The total returns below show what an investment in each Fund would
have earned over a specified period of time (one, five or ten years
or since inception) assuming the payment of the maximum sales load
when the investment was first made and that all distributions and
dividends by the Fund were invested on the reinvestment dates
during the period, less all recurring fees. The average annual
total return is derived from this total return, which provides the
ending redeemable value. The following chart reflects the
financial performance of the Funds through the period ended
December 31, 1999 for the one, and five year periods and since
inception:
Total Returns
5 Year
Since
Inception
Since
Class
1 Year
Average
Annual
5 Year
Cumulative
Average
Annual
Inception
Cumulative
Contrarian Fund
Inception: 06/30/95
A
(10.02)%
N/A
N/A
4.04%
19.53%
Inception: 06/30/95
B
(10.14)
N/A
N/A
4.26
20.69
Inception: 06/30/95
L
(7.62)
N/A
N/A
4.24
20.62
Inception: 01/31/96
Y
(4.89)
N/A
N/A
5.63
23.97
Concert Peachtree Fund
Inception: 07/03/95
A
(13.90)
N/A
N/A
17.72
108.32
Inception: 07/03/95
B
13.88
N/A
N/A
18.02
110.73
Inception: 08/08/95
L
16.45
N/A
N/A
16.96
97.28
Inception: 09/15/97
Y
20.41
N/A
N/A
22.73
57.28
Investment Grade Bond
Fund
Inception: 11/6/92
A
(13.20)
8.20%
48.29%
7.26
65.05
Inception: 1/4/82
B**
(13.30)
8.53
50.55
10.61
514.58
Inception: 2/26/93
L
(11.18)
8.50
50.34
6.13
50.30
Inception: 2/7/96
Y
(8.68)
N/A
N/A
4.27
17.72
Government Securities
Fund
Inception: 11/06/92
A
(9.24)
4.97
27.47
4.90
40.82
Inception: 12/31/82
B***
(9.42)
5.25
29.16
7.27
202.77
Inception: 10/18/93
L
(7.24)
5.26
29.21
4.36
34.31
Inception: 01/31/96
Y
(4.61)
N/A
N/A
4.38
18.21
* The ten average annual return was 8.28% and the ten year
cumulative total return was 121.51 % for class B shares
** The ten average annual return was 6.20% and the ten year
cumulative total return was 82.57% for class B shares
It is important to note that the yield and total return figures set
forth above are based on historical earnings and are not intended
to indicate future performance. A Class' performance will vary
from time to time depending upon market conditions, the composition
of the Fund's investment 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' 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 the Class' performance with that of
other mutual Funds should give consideration to the quality and
maturity of the respective investment companies' portfolio
securities.
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 of the Company. 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 Statement of Additional Information, which are
subject to change.
The Funds and Their Investments
Each Fund intends to qualify to be treated as a regulated
investment company each taxable year under the Internal Revenue
Code of 1986, as amended (the "Code"). To so qualify, a 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 or 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 a
Fund's taxable year, (i) at least 50% of the market value of a
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 a 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 a Fund controls
and are determined to be engaged in the same or similar trades or
businesses or related trades or businesses.
As a regulated investment company, each 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- and short-term
capital gains) and its net realized long- and short-term capital
gains, if any, that it distributes to its shareholders, provided
that an amount equal to at least 90% of the sum 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, but will be subject to tax at regular
corporate rates on any taxable income or gains that it does not
distribute. Furthermore, each Fund will be subject to a United
States corporate income tax with respect to such distributed
amounts in any year that it fails to qualify as a regulated
investment company or fails to meet this distribution requirement.
The Code imposes a 4% nondeductible excise tax on each Fund to the
extent a Fund does not distribute by the end of any calendar year
at least 98% of its net investment income for that year and 98% of
the net amount of its capital gains (both long-and short-term) for
the one-year period ending, as a general rule, on October 31 of
that year. For this purpose, however, any income or gain retained
by a 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. Each Fund anticipates that it will pay such
dividends and will make such distributions as are necessary in
order to avoid the application of this tax.
If, in any taxable year, a 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 a Fund in computing its taxable income. In addition,
in the event of a failure to qualify, a Fund's distributions, to
the extent derived from a 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. If a 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, if a Fund failed to
qualify as a regulated investment company for a period greater than
one taxable year, a Fund may be required to recognize any net
built-in gains (the excess of the aggregate gains, including items
of income, over aggregate losses that would have been realized if
it had been liquidated) in order to qualify as a regulated
investment company in a subsequent year.
The Government Securities Fund may invest in zero coupons
securities having an original issue discount (that is, the discount
represented by the excess of the stated redemption price at
maturity over the issue price). Each year, each Fund will be
required to accrue as income a portion of this original issue
discount even though the Fund will receive no cash payment of
interest with respect to these securities. In addition, if the
Fund acquires a security after its initial issuance at a discount
that resulted from fluctuations in prevailing interest rates
("market discount"), the Fund may elect to include in income each
year a portion of this market discount.
Each Fund will be required to distribute substantially all of its
income (including accrued original issue and recognized market
discount) in order to qualify for "pass-through" federal income tax
treatment and also in order to avoid the imposition of 4% excise
tax referred to above. Therefore, a Fund may be required in some
years to distribute an amount greater than the total cash income
the Fund actually receives. In order to make the required
distribution in such a year, a Fund may be required to borrow or to
liquidate securities. The amount of cash that a Fund would have to
distribute, and thus the degree to which securities would need to
be liquidated or borrowing made would depend upon the number of
shareholders who chose not to have their dividends reinvested.
A Fund's transactions in options and futures, 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 a Fund
(i.e., may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to a 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 a Fund to mark-to-market certain types of the positions in
its Fund (i.e., treat them as if they were closed out) and (b) may
cause a 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. Each 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 option, Futures
Contract or hedged investment in order to mitigate the effect of
these rules and prevent disqualification of a Fund as a regulated
investment company.
A Fund's investment in Section 1256 contracts, such as regulated
Futures Contracts and options on most stock indices, are subject to
special tax rules. All section 1256 contracts held by a 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 a 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. A Fund will not be eligible to elect to treat any
foreign taxes it pays 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 a Fund will reduce the return from
its investments.
Taxation of United States Shareholders
Dividends and Distributions. Any dividend declared by a 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 a Fund not later than
such December 31, provided that such dividend is actually paid by a
Fund during January of the following calendar year. Each 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). Each Fund
currently expects to distribute any excess annually to its
shareholders. However, if a 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, a 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
a Fund upon filing appropriate returns or claims for reFund with
the Internal Revenue Service (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-long-term capital gains, if any, that a 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 a Fund. Dividends and
distributions paid by a Fund (except for the portion thereof, if
any, attributable to dividends on stock of U.S. corporations
received by a Fund) will not qualify for the deduction for
dividends received by corporations. Distributions in excess of a
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 a Fund, and as
a capital gain thereafter (if the shareholder holds his shares of a
Fund as capital assets).
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 a 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 a 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 a Fund acquired such stock.
Accordingly, in order to satisfy its income distribution
requirements, a 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 a 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.
Backup Withholding. Each Fund may be required to withhold, for
United States federal income tax purposes, 31% of the dividends and
distributions payable to shareholders who fail to provide a 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 a 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 "Dividends and
Distributions") made by a Fund to its shareholders. Furthermore,
shareholders will also receive, if appropriate, various written
notices after the close of a 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 a Fund to its shareholders during
the preceding taxable year.
CLASS Z SHARES
Qualified plan participants should consult their plan document or
tax advisors about the tax consequences of participating in a
Qualified Plan. In addition to the considerations described below,
there may be other federal, state, local, and/or foreign tax
applications to consider. Provided a Qualified Plan has not
borrowed to finance its investment in the Fund, it will not be
taxable on the receipt of dividends and distributions from the
Fund. Qualified plan participants should consult their plan
document or tax advisors about the tax consequences of
participating in a Qualified Plan.
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 Funds and their shareholders.
Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment
in the Funds
IRA AND OTHER PROTOTYPE RETIREMENT PLANS tc \l1 "IRA AND OTHER
PROTOTYPE RETIREMENT PLANS
Copies of the following plans with custody or trust agreements have
been approved by the Internal Revenue Service and are available
from the Company or Salomon Smith Barney; investors should consult
with their own tax or retirement planning advisors prior to the
establishment of a plan.
IRA, Rollover IRA and Simplified Employee Pension - IRA
The Small Business Job Protection Act of 1996 changed the
eligibility requirements for participants in Individual Retirement
Accounts ("IRAs"). Under these new provisions, if you or your
spouse have earned income, each of you may establish an IRA and
make maximum annual contributions equal to the lesser of earned
income or $2,000. As a result of this legislation, married couples
where one spouse is non-working may now contribute a total of
$4,000 annually to their IRAs.
The Taxpayer Relief Act of 1997 has changed the requirements for
determining whether or not you are eligible to make a deductible
IRA contribution. Under the new rules effective beginning January
1, 1998, if you are considered an active participant in an
employer-sponsored retirement plan, you may still be eligible for a
full or partial deduction depending upon your combined adjusted
gross income ("AGI"). For married couples filing jointly for 1998,
a full deduction is permitted if your combined AGI is $50,000 or
less ($30,000 for unmarried individuals); a partial deduction will
be allowed when AGI is between $50,000-$60,000 ($30,000-$40,000 for
an unmarried individual); and no deduction when AGI is above
$60,000 ($40,000 for an unmarried individual). However, if you are
married and your spouse is covered by a employer-sponsored
retirement plan, but you are not, you will be eligible for a full
deduction if your combined AGI is $150,000 or less. A partial
deduction is permitted if your combined AGI is between $150,000-
$160,000 and no deduction is permitted after $160,000.
The rules applicable to so-called "Roth IRAs" differ from those
described above.
A Rollover IRA is available to defer taxes on lump sum payments and
other qualifying rollover amounts (no maximum) received from
another retirement plan.
An employer who has established a Simplified Employee Pension - IRA
("SEP-IRA") on behalf of eligible employees may make a maximum
annual contribution to each participant's account of 15% (up to
$24,000) of each participant's compensation. Compensation is
capped at $160,000 for 1998.
Paired Defined Contribution Prototype
Corporations (including Subchapter S corporations) and non-
corporate entities may purchase shares of the Company through the
Salomon Smith Barney Prototype Paired Defined Contribution Plan
(the "Prototype"). The Prototype permits adoption of profit-
sharing provisions, money purchase pension provisions, or both, to
provide benefits for eligible employees and their beneficiaries.
The Prototype provides for a maximum annual tax deductible
contribution on behalf of each Participant of up to 25% of
compensation, but not to exceed $30,000 (provided that a money
purchase pension plan or both a profit-sharing plan and a money
purchase pension plan are adopted thereunder).
ADDITIONAL INFORMATION tc \l1 "ADDITIONAL INFORMATION
The Company was incorporated on September 29, 1981 under the name
Hutton Investment Series Inc. The Company's corporate name was
changed on December 29, 1988, July 30, 1993 and October 28, 1994,
to SLH Investment Portfolios Inc., Smith Barney Shearson Investment
Funds Inc., and Smith Barney Investment Funds, Inc., respectively.
PNC Bank, National Association located at 17th and Chestnut
Streets, Philadelphia, Pennsylvania 19103, serves as the custodian
of the Company. Under its custody agreement with the Company, PNC
Bank holds each Funds portfolio securities and keeps all necessary
accounts and records. For its services, PNC Bank receives a
monthly fee based upon the month-end market value of securities
held in custody and also receives transaction charges. PNC bank is
authorized to establish separate accounts for foreign securities
owned by the Company to be held with foreign branches of other
domestic banks as well as with certain foreign banks and securities
depositories. The assets of the Company are held under bank
custodianship in compliance with the 1940 Act.
Smith Barney Private Trust Company, located at 388 Greenwich
Street, New York, NY 10013 serves as the Transfer Agent and
shareholder services agent of the Fund. PFPC Global Fund Services,
located at P.O Box 9699 Providence, RI 02940-9699 serves as the
Fund's sub-transfer agent to render certain shareholder record
keeping and accounting services functions.
The Fund has engaged the services of PFS Shareholder Services as
the subtransfer agent for PFS Accounts ("sub-transfer agent"). The
subtransfer agent is located at 3100 Breckinridge Blvd, Bldg 200,
Duluth, Georgia 30099-0062.
FINANCIAL STATEMENTS tc \l1 "FINANCIAL STATEMENTS
The Annual Reports for each Fund for the fiscal year ended December
31, 1999 are incorporated herein by reference in their entirety
(filed on March , 2000; accession number 0000091155-00-000 )
OTHER INFORMATION
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.
Style Pure Series
Our Style Pure Series Funds stay fully invested within their
asset class and investment style, enabling investors to make
asset allocation decisions in conjunction with their Salomon
Smith Barney Financial Consultant.
Classic Investor Series
Our Classic Investor Series Funds offer a range of equity
and fixed income strategies that seek to capture
opportunities across asset classes and investment styles
using disciplined investment approaches.
The Concert Allocation Series
As a Fund of Funds, investors can select a Concert Portfolio
that may help their investment needs. As needs change,
investors can easily choose another long-term, diversified
investment from our Concert family.
Special Discipline Series
Our Special Discipline Series Funds are designed for
investors who are looking beyond more traditional market
categories: from natural resources to a roster of state-
specific municipal Funds.
APPENDIX tc \l1 "APPENDIX
BOND (AND NOTE) RATINGS
Moody's Investors Service, Inc. ("Moody's")
Aaa - Bonds that are rated "Aaa" are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the Fundamentally strong position of such
issues.
Aa - Bonds that are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group they comprise what
are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as
in "Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present that make
the long term risks appear somewhat larger than in "Aaa"
securities.
A - Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present that suggest a
susceptibility to impairment sometime in the future.
Baa - Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba - Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds
in this class.
B - Bonds that are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. These issues
may be in default or present elements of danger may exist with
respect to principal or interest.
Ca - Bonds that are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C - Bonds that are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B. The modifier 1 indicates
that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
Standard & Poor's Ratings Group ("Standard & Poors")
AAA - Debt rated "AAA" has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in
small degree.
A - Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB - Debt rated "BBB" is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
BB, B and CCC - Bonds rated BB and B are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB represents a lower degree of speculation than B and CCC the
highest degree of speculation. While such bonds will likely have
some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse
conditions.
C - The rating C is reserved for income bonds on which no interest
is being paid.
D - Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the
major rating categories, except in the AAA category.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.
Issuers rated "Prime-1" (or related supporting institutions) have a
superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced
by the following characteristics: leading market positions in well-
established industries; high rates of return on Funds employed;
conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage
of fixed financial charges and high internal cash generation; well-
established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated "Prime-2" (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is
maintained.
Standard & Poor's Ratings Group
A-1 - This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics will be
denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation
is strong. However, the relative degree of safety is not as high
as for issues designated A-1.
52
A-1
PART C - OTHER INFORMATION
Item 23. Exhibits
All references are to the Registrant's registration
statement on Form N-1A (the "Registration Statement")
as filed with the SEC on October 2, 1981(File Nos. 2-
74288 and 811-3275).
(a) Articles of Restatement dated September 17, 1993
to Registrant's Articles of Incorporation dated
September 28, 1981, Articles of Amendment dated
October 14, 1994, Articles Supplementary, Articles of
Amendment dated October 14, 1994, Articles
Supplementary, Articles of Amendments and Certificates
of Correction dated November 7, 1994, are incorporated
by reference to Post-Effective Amendment No. 37 to the
Registration Statement filed on November 7, 1994.
Articles of Amendment dated October 23, 1997 are
incorporated by reference to Post-Effective Amendment
No. 46 filed on October 23, 1997("Post-Effective
Amendment No.46"). Articles of Amendment dated
February 27, 1998 are incorporated by reference
to Post-Effective Amendment No. 48 dated April 29, 1998.
Articles of Amendment dated June 1, 1998 are incorporated
by reference to Post-Effective Amendment No. 49 filed on
July
16, 1998 ("Post-Effective Amendment No. 49").
(b) Registrant's By-Laws, as amended on September 30,
1992 are incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement filed
on April 30, 1993.
(c) Registrant's form of stock certificate for Smith
Barney Hansberger Global Value Fund ("Global Value
Fund") and Smith Barney Hansberger Global Value Small
Cap Fund ("Small Cap Fund") is incorporated by
reference to Post Effective Amendment 46.
(d)(1) Investment Advisory Agreement dated July 30,
1993, between the Registrant on behalf of Smith Barney
Investment Grade Bond Fund, Smith Barney Government
Securities Fund and Smith Barney Special Equities
Fund and Greenwich Street Advisors is incorporated by
reference to the Registration Statement filed on Form
N-14 on September 2, 1993, File No. 33-50153.
(d)(2) Investment Advisory Agreements on behalf of
Smith Barney Growth Opportunity Fund and Smith Barney
Managed Growth Fund is incorporated by reference to
Post-Effective Amendment No. 40 filed on June 27,
1995. ("Post-Effective Amendment No.40")
(d)(3) Investment Management Agreements on behalf of
Global Value Fund and Global Small Cap Fund between
Registrant and Smith Barney Mutual Funds Management
Inc. is incorporated by reference to Post-Effective
Amendment No. 46.
(d)(4) Sub-Advisory Agreement on behalf of Global
Value Fund and Global Small Cap Fund between MMC and
Hansberger Global Investors Inc. is
incorporated by reference to Post-Effective
Amendment No. 46.
(d)(5)Investment Management Agreements on behalf of
Smith Barney Small Cap Growth Fund and Smith Barney
Small Cap Value Fund between Registrant and
Mutual Management Corp. is incorporated by reference
To Post-Effective Amendment No. 49.
(e)(1) Distribution Agreement dated July 30, 1993,
between the Registrant and Smith Barney Shearson Inc.
is incorporated by reference to the registration
statement filed on Form N-14 on September 2, 1993.
File 33-50153.
(e)(2) Form of Distribution Agreement between the
Registrant and PFS Distributors on behalf of Smith
Barney Investment Funds Inc. is incorporated by
reference to Post-Effective Amendment No. 40 filed on
June 27, 1995.
(e)(3) Form of Distribution Agreement between the
Registrant and CFBDS, Inc. is incorporated by reference
to Post-Effective Amendment No. 49.
(e)(4) Selling Group Agreement
is incorporated by reference
to Post-Effective Amendment No.56 filed on
February 26, 1999.
(f) Not Applicable.
(g)(1) Custodian Agreement with PNC Bank, National
Association is incorporated by reference to Post -
Effective Amendment No. 44 filed on April 29, 1997.
(g)(2) Custodian Agreement with Chase Manhattan Bank
is incorporated by reference to Post-Effective
Amendment No. 46.
(h)(1) Transfer Agency and Registrar Agreement dated
August 5, 1993 with First Data Investor Services
Group, Inc. (formerly The Shareholder Services Group,
Inc.) is incorporated by reference to Post-Effective
Amendment No. 31 as filed on December 22, 1993 (Post-
Effective Amendment No. 31").
(h)(2)Sub-Transfer Agency Agreement between the
Registrant and PFS Shareholders Services on behalf of
Smith Barney Investment Funds Inc. is incorporated by
reference to Post-Effective Amendment No. 40.
(i) Opinion of Robert A. Vegliante, Deputy General
Counsel of Smith Barney Mutual Funds Management Inc.
filed with the Registrant's rule 24-f2 Notice
(Accession No. 000091155-97-000104) is incorporated by
reference.
(j) Auditor's consent filed herewith.
(k) Not Applicable
(l) Not Applicable
(m)(1) Amended Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on behalf
of Smith Barney Investment Grade Bond Fund, Smith
Barney Government Securities Fund, Smith Barney Special
Equities Fund and Smith Barney European Fund and Smith
Barney, Inc. ("Smith Barney") are incorporated by
reference to Post-Effective Amendment No. 37 filed on
November 3, 1994 ("Post-Effective Amendment No. 37")
(m)(2) Form of Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on
behalf of Smith Barney Growth Opportunity Fund and
Smith Barney Managed Growth Fund is incorporated by
reference to Post-Effective Amendment No. 40.
(m)(3) Form of Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on
behalf of the Global Value Fund and Small Cap Fund is
incorporated by reference to Post-Effective Amendment
No. 46.
(m)(4) Form of Amended and Restated Shareholder Services
and
Distribution Plan pursuant to Rule 12b-1 between
the Registrant on behalf of each of its series
is incorporated by reference to Post-Effective Amendment
No. 49.
(n) Financial Data Schedule filed herewith.
(o) Form of Plan pursuant to Rule 18f-3 is incorporated by
reference to Post-Effective Amendment No.50 to
Registration Statement.
(p) Code of Ethics is incorporated by
reference to Post-Effective Amendment No. 69.
Item 24.
None.
Item 25. Indemnification
The response to this item is incorporated by
reference to Pre-Effective Amendment No. 1 to the
registration statement filed on Form N-14 on October
8, 1993 (File No. 33-50153).
Item 26. Business and Other Connections of Investment Adviser
Investment Adviser - - SSB Citi Fund Management LLC ("SSB Citi")
formerly known as SSBC Fund Management Inc. ("SSBC")
SSBC was incorporated in December 1968 under the laws
of the State of Delaware. On September 21, 1999, SSBC
was converted into a Delaware Limited Liability Company.
SSB Citi is a wholly owned subsidiary of Salomon Smith Barney
Holdings Inc. ("Holdings") (formerly known as Smith Barney
Holdings Inc.) which in turn is a wholly owned subsidiary
of Citigroup Inc. ("Citigroup"). SSB Citi is registered
as an investment adviser under the Investment Advisers Act
of 1940 (the "Advisers Act").
The list required by this Item 26 of officers and
directors of 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 years, is incorporated by reference to Schedules A and D
of FORM ADV filed by SSBC pursuant to the Advisers Act
(SEC File No. 801-8314).
Item 27. Principal Underwriters
(a) CFBDS, Inc. the Registrant's Distributor, is also
the distributor for
CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Equity Portfolio, CitiFundsSM
Large Cap
Growth
Portfolio, CitiFundsSM Intermediate Income Portfolio,
CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM Emerging Asian Markets Equity Portfolio,
CitiFundsSM U.S. Treasury Reserves, CitiFundsSM Cash
Reserves,
CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves, CitiFundsSM
Institutional U.S.
Treasury Reserves, CitiFundsSM Institutional Liquid
Reserves,
SM Institutional Cash Reserves, CitiFundsSM Tax Free
Reserves,
CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves,
CitiFundsSM New York Tax Free Reserves, CitiFundsSM
Balanced Portfolio,
CitiFundsSM Small Cap Value Portfolio, CitiFundsSM Growth &
Income
Portfolio,
CitiFundsSM Small Cap Growth Portfolio, CitiFundsSM
National
Tax Free Income Portfolio, CitiFundsSM New York Tax Free
Income
Portfolio,
CitiSelect VIP Folio 200, Citiselect VIP Folio 300,
CitiSelect (VIP Folio 400, CitiSelect (VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect
(Folio 200,
CitiSelect (Folio 300, CitiSelect (Folio 400, and
CitiSelect (Folio
500.
CFBDS is also the placement agent for Large Cap Value
Portfolio,
International Portfolio, Foreign Bond Portfolio,
Intermediate Income Portfolio, Short-Term Portfolio,
Growth & Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio, Emerging
Asian Markets Equity Portfolio, Tax Free Reserves
Portfolio,
Cash Reserves Portfolio and U.S. Treasury Reserves
Portfolio.
CFBDS, Inc. is also the distributor for the following
Smith Barney Mutual Fund registrants:
Concert Investment Series
Consulting Group Capital Markets Funds
Greenwich Street Series Fund
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Institutional Cash Management Fund, Inc.
Smith Barney Investment Trust
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney Variable Account Funds
Smith Barney World Funds, Inc.
Travelers Series Fund Inc.
And various series of unit investment trusts.
CFBDS, Inc. is also the distributor for the following
Salomon Brothers funds;
Salomon Brothers Opportunity Fund Inc
Salomon Brothers Investors Fund Inc
Salomon Brothers Capital Fund Inc
Salomon Brothers Series Funds Inc
Salomon Brothers Institutional Series Funds Inc
Salomon Brothers Variable Series Funds Inc
The information required by this Item 27 with respect
to each director, officer and partner of CFBDS, Inc.
is incorporated by reference to Schedule A of Form BD
filed by CFBDS, Inc. pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-32417).
Item 28. Location of Accounts and Records
(1) Smith Barney Investment Funds Inc.
388 Greenwich Street
New York, New York 10013
(2) SSB Citi Fund Management LLC
388 Greenwich Street
New York, New York 10013
(3) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA
(4) The Chase Manhattan Bank
Chase Metrotech Center
Brooklyn, New York 11245
(5) Smith Barney Private Trust Company
388 Greenwich Street
New York, New York 10013
(6) PFPC Global Fund Services
Exchange Place
Boston, Massachusetts 02109
(7) CFBDS Inc.
21 Milk Street, 5th floor
Boston, Massachusetts 02109
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of
1940, as amended, the Registrant, SMITH BARNEY
INVESTMENT FUNDS INC., has duly caused this Amendment
to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized,
all in the City of New York, State of New York on the
13th day of March, 2000.
SMITH BARNEY INVESTMENT FUNDS INC.
By: /s/ Heath B. McLendon*
Heath B. McLendon
Chief Executive Officer
WITNESS our hands on the date set forth below.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Post-Effective Amendment
to the Registration Statement has been signed below by
the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/ Heath B. McLendon Chairman of the Board 3/13/00
Heath B. McLendon (Chief Executive Officer)
/s/ Lewis E. Daidone Senior Vice President
Lewis E. Daidone and Treasurer 3/13/00
(Chief Financial
and Accounting Officer)
/s/ Paul R. Ades * Director 3/13/00
Paul R. Ades
/s/ Herbert Barg* Director 3/13/00
Herbert Barg
/s/ Dwight B. Crane* Director 3/13/00
Dwight B. Crane
/s/ Frank Hubbard* Director 3/13/00
Frank Hubbard
/s/ Jerome Miller** Director 3/13/00
Jerome Miller
/s/ Ken Miller* Director 3/13/00
Ken Miller
*Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant
to power of attorney dated November 3, 1994.
**Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant
to power of attorney dated April 15, 1998.
/s/ Heath B. McLendon
Heath B. McLendon
EXHIBITS
Exhibit No. Description of Exhibit
Cover
(j) Auditor's Consent
(n) Financial Data Schedule
Independent Auditors Consent
To The Shareholders and Board of Directors of
Concert Peachtree Growth Fund:
We consent to the incorporation by reference, in this Prospectus and
Statement of
Additional Information, of our report dated February 11, 2000, on
the statement of
assets and liabilities for the Concert Peachtree Growth Fund (the Fund) as of
December 31, 1999 and the related statement of operations for the year
then ended,
the statements of changes in net assets for each of the years in the
two-year period
then ended and the financial highlights for each of the years in
the four-year period
then ended and for the period from July 3, 1995 (inception date)
to December 31,
1995. These financial statements and financial highlights and our
report thereon are
included in the Annual Report of the Fund as filed on Form N-30D.
We also consent to the references to our firm under the headings "Financial
Highlights" in the Prospectus for Concert Peachtree Growth Fund and
"Auditors" in the
Statement of Additional Information for the Smith Barney Investment Funds Inc.
KPMG LLP
New York, New York
March 10, 2000
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<PER-SHARE-GAIN-APPREC> 3.50
<PER-SHARE-DIVIDEND> 0.00
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