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. 72
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940,
Amendment No. 74
SMITH BARNEY INVESTMENT FUNDS INC.
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(800)-451-2010
(Registrant's Telephone Number, including Area Code:)
Christina T. Sydor
388 Greenwich Street, New York, New York 10013(22nd
Floor)
(Name and Address of Agent For Service)
Continuous
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective:
immediately upon filing pursuant to Paragraph (b) of
Rule 485
On (date) pursuant to paragraph (b) of Rule
485
60 days after filing pursuant to paragraph (a)(1) of
Rule 485
On (date) pursuant to paragraph (a)(1) of Rule 485
XXX 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
PROSPECTUS
Smith Barney
Managed Sectors
Fund
Class A, B, L and Y Shares
_____________, 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 1
<PAGE>
Smith Barney Managed Sectors Fund
Contents
<TABLE>
<S>
<C>
Investments, risks and performance..........................................
2
More on the fund's investments..............................................
9
Management..................................................................
12
Subscription offering period................................................
13
Choosing a class of shares to buy...........................................
14
Comparing the fund's classes................................................
15
Sales charges...............................................................
16
More about deferred sales charges...........................................
18
Buying shares...............................................................
19
Exchanging shares...........................................................
20
Redeeming shares............................................................
22
Other things to know about share transactions...............................
24
Salomon Smith Barney Retirement Programs....................................
26
Dividends, distributions, and taxes.........................................
27
Share price.................................................................
28
</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 seeks to outperform the S&P 500 Index by investing at
least 80% of its assets in the common stocks that comprise the sectors of the
S&P 500 Index that have been determined by the Smith Barney Group Spectrum
Allocation Model (the "Allocation Model") as likely to outperform the entire
S&P 500 Index. The fund also enters into repurchase agreements, lends
portfolio securities and uses certain types of derivative instruments to help
implement its objective.
The Allocation Model The Allocation Model tracks the sectors that comprise the
S&P 500 Index which now number over 100 and employs technical analysis of each
sector in compiling on a weekly basis a "buy," "hold," "avoid" or "sell"
recommendation for each such sector. The Allocation Model is a "paper
portfolio" that "buys" and "sells" securities within sectors based on the
recommendations. The Allocation Model "buys" an entire group of stocks; it
does not have the ability to discriminate and pick only the technically
stronger looking sector components. If a sector is downgraded during a week
from "hold" to "avoid," and it appears in the Allocation Model, the group of
securities that comprise that sector is sold. If a sector is upgraded to the
"buy" list, the Allocation Model must attempt to take up to three-times a
market weight in that sector. The Allocation Model attempts to take up to a
two-times market weight in a sector on the "hold" list. The Allocation Model
attempts to stay fully invested; cash builds in the Allocation Model only if
there are sufficient downgrades (from "hold" to "avoid," for example);
market timing itself plays no roles in the Allocation Model's cash position.
Selection Process The manager does not seek to select securities based on
their individual potential to outperform the S&P 500 Index. Instead, the
manager seeks to replicate the performance of the Allocation Model by basing
its investment decisions on the recommendations of the Allocation Model. Once
the Allocation Model deems a sector of the S&P 500 Index to be technically
stronger, the manager will purchase the securities of each company in the
sector. Conversely, when the Allocation Model downgrades a sector from "hold"
to "avoid," the manager will sell the securities of each issuer within the
sector. To the extent the recommendations of the Allocation Model or other
factors do not permit the fund to be fully invested, the fund intends to invest
in all types of money market instruments.
The manager will become aware of the Allocation Model's weekly sector
recommendations when such recommendations are made publicly available.
Technical Analysis Technical analysis generally consists of a systematic and
analytical approach to the analysis of stock prices. Technical analysis is not
concerned with the financial position of a company but instead relies
exclusively on price and volume data through the use of charts and computer
programs in an attempt to identify trends or patterns which are then utilized
to draw conclusions as to present market position and possible future market
action.
Smith Barney Managed Sectors Fund
2
<PAGE>
Principal risks of investing in the fund
Investors could lose money on their investments in the fund, or the fund may
not perform as well as other investments, if:
-The Allocation Model's sector recommendations prove to be incorrect
-U.S. stock markets decline or perform poorly relative to other types of
investments
-Large capitalization stocks fall out of favor with investors
-The fund is unable to achieve a high correlation with the performance of the
Allocation Model
The activities of the manager, SSB Citi Fund Management LLC, and its
affiliates, such as Citigroup Inc., Citibank N.A. and Salomon Smith Barney
Inc., may from time to time limit the Fund's ability to purchase or sell
securities in accordance with the recommendations of the Allocation Model.
Who may want to invest The fund may be an appropriate investment if you:
-Are seeking to participate in the capital appreciation potential of the S&P
500 Index
-Are looking for an investment with potentially greater return but higher risk
than fixed income investments
-Are willing to accept the risks of the stock market
The investment policies employed by the fund in an attempt to outperform the
S&P 500 Index may be considered aggressive and, accordingly, may not be
appropriate for all investors.
Performance
The fund is new and does not yet have the performance information that other
Smith Barney funds show in bar and table form in this part of the prospectus.
Smith Barney Mutual Funds
3
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment) Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases
(as a % of offering price) 5.00% None 1.00% None
Maximum deferred sales charge (load) (as a %
of the lower of net asset value at purchase or
redemption) None* 5.00% 1.00% None
Annual fund operating expenses
<CAPTION>
Expenses deducted from fund assets Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Management fee [ ]% [ ]% [ ]% [ ]%
Distribution and service (12b-1) fees 0.25% 1.00% 1.00% None
Other expenses** % % % %
----- ----- ----- ----
Total annual fund operating expenses % % % %
</TABLE>
*You may buy Class A shares in amounts of $1,000,000 or more at net asset value
(without an initial sales charge) but if you redeem those shares within 12
months of their purchase, you will pay a deferred sales charge of 1.00%.
Example
This example helps you compare the costs of investing in the fund with the
costs of investing in other mutual funds. Your actual costs may be higher or
lower. The example assumes:
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
.You redeem all of your shares at the end of the period
.Your investment has a 5% return each year
.You reinvest all distributions and dividends without a sales charge
.The fund's operating expenses remain the same
Smith Barney Managed Sectors Fund
4 <PAGE>
Number of years you own your shares
<TABLE>
<CAPTION>
1 year 3 years
<S> <C> <C>
Class A (with or without redemption) $ $
Class B (redemption at end of period) $ $
Class B (no redemption) $ $
Class L (redemption at end of period) $ $
Class L (no redemption) $ $
Class Y (with or without redemption) $ $
</TABLE>
More on the fund's investments
Futures Contracts and Other Derivatives The fund may use futures contracts and
other derivative instruments in strategies intended to simulate investments in
the recommended sectors of the S&P 500 Index while retaining cash for fund
management purposes.
A derivative contract will obligate or entitle the fund to deliver or receive
an asset or cash payment based on the change in value of one or more indices or
securities. Even a small investment in derivative contracts can have a big
impact on the fund's stock market exposure. Therefore, using derivatives can
disproportionately increase losses and reduce opportunities for gains when
stock prices are changing. The fund may not fully benefit from or may lose
money on derivatives if changes in their value do not correspond accurately to
changes in the value of the fund's holdings. The other parties to certain
derivative contracts present the same types of credit risk as issuers of fixed
income securities. Derivatives can also make the fund less liquid and harder
to value, especially in declining markets.
Defensive investing The fund may depart from its principal investment
strategies 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.
Master/feeder option The fund may in the future seek to achieve its investment
objective by investing all of its net assets in another investment company
having the same investment objective and substantially the same investment
policies and restrictions as those applicable to the fund. Shareholders of the
fund will be given at least 30 days prior notice of any such investment.
Smith Barney Mutual Funds
5
<PAGE>
Management
Manager The fund's investment manager is SSB Citi Fund Management LLC
(successor 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
businesses produce a broad range of financial services-asset management,
banking and consumer finance, credit and charge cards, insurance, investments,
investment banking and trading-and use diverse channels to make them available
to consumer and corporate customers around the world.
Management fee For its services, the manager will receive an annual investment
management fee equal to 0.75% of the fund's average daily net assets.
Distributor The fund has entered into an agreement with Salomon Smith Barney
Inc. to distribute the fund's shares. A selling group consisting of 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 Citi Fiduciary Trust Company
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.
Additional information about the Allocation Model The Allocation Model,
introduced in 1987, was created and is maintained by the Salomon Smith Barney
Technical Research Department.
The chart below reflects historical information regarding the Allocation Model.
The Allocation Model is not maintained for the purpose of managing any account
or investment company such as the fund. The number of sectors in the
Allocation Model and the frequency of additions to and deletions from the
Allocation Model change from year to year, and there are no targets for such
numbers in future years. The sectors selected for the Allocation Model
constitute only a "paper portfolio" that does not reflect actual trading and
does not have an actual performance record. The Allocation Model's price
return shown is simply an equal-weighted arithmetic average of the price
returns for the stocks within the sectors selected for the Allocation Model.
It does not represent the return of any fund or any other account that involves
actual trading. The price returns would not be indicative of the returns on
any fund or account because, among other things, they do not reflect actual
prices when stocks are purchased or sold, transaction costs and account fees.
Also, the information below does not reflect the impact that the manager's
portfolio management decisions and techniques may have on performance. In
addition, the actual performance of the fund may differ from that of the
Allocation Model because of time delays between when a sector is added or
removed from the list and when the stocks that comprise that sector are bought
or sold for the fund. Investors should not consider this price return
information as a substitute for, or an indication of, future performance of the
fund or the manager. Finally, past price returns of the Allocation Model are
not representative of future price returns of the model.
Average Number of Sectors
In the Allocation Model*
Number of Additions and Deletions
Allocation Model Stock Price
Return (as a %) (using prices at
the open after publication**
S&P 500 Index Price Return
(as a %)
*The number of sectors shown is an annual average. At any time during the
year, the number of sectors in the Allocation Model may have been higher or
lower.
**The price returns are based only on capital appreciation or depreciation of
the stocks included in the sectors that comprise the Allocation Model. The
results for the Allocation Model portfolio represent an equal-weighted
arithmetic average of the stocks held at any point during the week. The
results are calculated weekly using each stock's capital appreciation or
depreciation during the period and dividing that by the highest number of
stocks that were in the sectors within the Allocation Model during the week.
The results are calculated each week using S&P group data that is received on a
Friday, with the Allocation Model data posted through each Wednesday's close.
They do not reflect the execution of actual purchases or sales, and there is no
guarantee that a mutual fund following the Allocation Model would be able to
execute purchases and sales at the prices used to calculate the price returns.
The price returns shown do not reflect the reinvestment of dividends, which
would result in higher returns. They do not reflect the market impact on the
stock prices that may occur between the time the publication is made of
additions to and deletions from the Allocation Model and the time a mutual fund
following the Allocation Model would be able to execute purchases and sales.
They also do not reflect transaction fees, such as commissions, fees and
interest charges, or the costs of running a mutual fund, such as management
fees, distribution fees and other expenses. Actual transactions and the effect
of dividends, fees and costs will result in returns that differ from those of
the Allocation Model.
***The S&P 500 Index is an unmanaged index containing common stocks of 500
industrial, transportation, utility and financial companies, regarded as
generally representative of the U.S. stock market. The S&P 500 Index
performance numbers shown are price returns only. The price returns shown do
not reflect the reinvestment of dividends, which would result in higher
returns. They also do not reflect fees, brokerage commissions or other costs
of investing that are not incurred by an index.
Smith Barney Managed Sectors Fund
6 <PAGE>
Subscription offering period
Salomon Smith Barney and investment dealers in the selling group will solicit
subscriptions for shares of the fund during the subscription offering period,
which is scheduled to end on , 2000. On the third business
day after the end of the subscription offering period, subscriptions for the
shares will be payable, exchanges into the fund will be permitted, shares will
be issued and the fund will commence investment operations.
The fund will suspend the offering of shares to new investors on
, 2000. This suspension, which is expected to last two weeks, may be
lengthened or shortened at the fund's discretion. During the suspension,
existing shareholders of the fund may still purchase, redeem or exchange fund
shares. After the suspension, the fund will commence a continuous offering of
shares to the public.
For more information on how to subscribe for fund shares during the
subscription offering period, please contact a Salomon Smith Barney Financial
Consultant.
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
Smith Barney Mutual Funds
7
<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
compensation depending upon which class you choose.
<TABLE>
<CAPTION>
Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Key features .Initial .No initial .Initial .No initial
sales sales sales or
charge charge charge is deferred
.You may .Deferred lower than sales
qualify sales Class A charge
for reduc- charge .Deferred .Must
tion or declines sales invest at
waiver of over time charge for least $15
initial .Converts only 1 million
sales to Class A year .Lower
charge after 8 .Does not annual
.Lower years convert to expenses
annual .Higher Class A than the
expenses annual .Higher other
than Class expenses annual classes
B and than Class expenses
Class L A than Class
A
------------------------------------------------------------------------
Initial sales charge Up to None 1.00% None
5.00%;
reduced for
large pur-
chases and
waived for
certain
investors.
No charge
for pur-
chases of
$1,000,000 or
more
------------------------------------------------------------------------
Deferred sales charge 1.00% on Up to 5.00% 1.00% if None
purchases charged you redeem
of $1,000,000 when you within 1
or more if redeem year of
you redeem shares. The purchase
within 1 charge is
year of reduced
purchase over time
and there
is no
deferred
sales
charge
after 6
years
------------------------------------------------------------------------
Annual distribution and 0.25% of 1.00% of 1.00% of None
service fees average average average
daily net daily net daily net
assets assets assets
------------------------------------------------------------------------
Exchange privilege* Class A Class B Class L Class Y
shares 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 Managed Sectors Fund
8
<PAGE>
Sales charges
Class A shares
You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge
on the fund's distributions or dividends you reinvest in additional Class A
shares.
<TABLE>
<CAPTION>
Sales Charge as a % of
Offering Net amount
Amount of purchase price (%) invested (%)
<S> <C> <C>
Less than $25,000 5.00 5.26
$25,000 but less than $50,000 4.00 4.17
$50,000 but less than $100,000 3.50 3.63
$100,000 but less than $250,000 3.00 3.09
$250,000 but less than $500,000 2.00 2.04
$500,000 or more -0- -0-
</TABLE>
Investments of $1,000,000 or more You do not pay an initial sales charge when
you buy $1,000,000 or more of Class A shares. However, if you redeem these
Class A shares within one year of purchase, you will pay a deferred sales
charge of 1%.
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
Smith Barney Mutual Funds
9
<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
purchase, you will pay a deferred sales charge. The deferred sales charge
decreases as the number of years since your purchase increases.
<TABLE>
<CAPTION>
6th through
Year after purchase 1st 2nd 3rd 4th 5th 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:
Class B conversion After 8 years, Class B shares automatically convert into
Class A shares. This helps you because Class A shares have lower annual
expenses. Your Class B shares will convert to Class A shares as follows:
<TABLE>
<CAPTION>
Shares issued: Shares issued: Shares issued:
At initial purchase On reinvestment of Upon exchange from
dividends and another Smith
distributions Barney fund
<S> <C> <C>
Eight years after the date of purchase In same proportion On the date the
as the number of shares originally
Class B shares acquired would
converting is to have converted
total Class B into Class A
shares you own shares
(excluding shares
issued as a
dividend)
</TABLE>
Smith Barney[Group Spectrum Allocation] Fund
10
<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
purchase 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.
Smith Barney Mutual Funds
11
<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 If you do not provide the following information, your order
dealer will be rejected
representative
.Class of shares being bought
.Dollar amount or number of shares being bought
You should pay for your shares through your brokerage account
no later than the third business day after you place your
order. Salomon Smith Barney or your dealer representative may
charge an annual account maintenance fee.
-------------------------------------------------------------------------------
Through the Qualified retirement plans and certain other investors who
fund's sub- 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.
Smith Barney Managed Sectors 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 Managed Sectors Fund
12
<PAGE>
Through a You may authorize Salomon Smith Barney, your dealer represen-
systematic tative or the sub-transfer agent to transfer funds automati-
investment cally from a regular bank account, cash held in a Salomon
plan 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 .You may exchange shares only for shares of the same class of
varying needs another Smith Barney fund. Not all Smith Barney funds offer
of both large all classes.
and small .Not all Smith Barney funds may be offered in your state of
investors residence. Contact your Salomon Smith Barney Financial Con-
sultant, dealer representative or the transfer agent for
further information.
.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.
Smith Barney Mutual Funds
13
<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.
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By telephone If you do not have a brokerage account, you may be eligible
to exchange shares through the transfer agent. You must com-
plete an authorization form to authorize telephone transfers.
If eligible, you may make telephone exchanges on any day the
New York Stock Exchange is open. Call the transfer agent at
1-800-451-2010 between 9:00 a.m. and 4:00 p.m. (Eastern
time).
You can make telephone exchanges only between accounts that
have identical registrations.
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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 next page.
Redeeming shares
Generally Contact your Salomon Smith Barney Financial Consultant or
dealer representative to redeem shares of the fund.
If you hold share certificates, the 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 Managed Sectors Fund
14
<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.
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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.
Smith Barney Managed Sectors 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.
Smith Barney Mutual Funds
15
<PAGE>
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Automatic You can arrange for the automatic redemption of a portion of
cash your shares on a monthly or quarterly basis. To qualify you
withdrawal must own shares of the fund with a value of at least $10,000
plans ($5,000 for retirement plan accounts) and each automatic
redemption must be at least $50. If your shares are subject
to a deferred sales charge, the sales charge will be waived
if your automatic payments do not exceed 1% per month of the
value of your shares subject to a deferred sales charge.
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 Managed Sectors Fund
16
<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
redemption request is genuine by recording calls, asking the caller to provide
a personal 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 regis-
tration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
The fund has the right to:
.Suspend the offering of shares
.Waive or change minimum and additional investment amounts
.Reject any purchase or exchange order
.Change, revoke or suspend the exchange privilege
.Suspend telephone transactions
.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
Smith Barney Mutual Funds
17
<PAGE>
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
shareholders. 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.
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 accounts 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 accounts opened prior to March 1, 2000 and for accounts 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 account 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 account was opened before June 21, 1996 and a total of $500,000 is
invested in Smith Barney Funds Class L shares (other than money market funds)
on December 31 in any year, all Class L shares are eligible for exchange on or
about March 31 of the following year.
For more information, call your Salomon Smith Barney Financial Consultant or
the transfer agent, or consult the SAI.
Smith Barney Managed Sectors Fund
18
<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
additional 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
distributions (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
during the previous year. If you do not provide the fund with your correct
taxpayer 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
19
<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
liabilities. 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
calculation 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
quotations. 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
representative before the New York Stock Exchange closes. If the Exchange
closes early, you must place your order prior to the actual closing time.
Otherwise, you will receive the next business day's price.
Salomon Smith Barney or members of the selling group must transmit all orders
to buy, exchange or redeem shares to the fund's agent before the agent's close
of business.
Smith Barney Managed Sectors Fund
20
<PAGE>
SalomonSmithBarney
---------------------------
-
A member of citigroup
[LOGO]
Smith Barney
Managed Sectors Fund
An investment portfolio of Smith Barney Investment Funds Inc.
Shareholder Reports Annual and semiannual reports to shareholders provide
additional information about the fund's investments. These reports discuss the
market 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
reference 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
Public 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
Database 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
lawfully sell its shares.
SMSalomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act
file no. 811-03725
(FD0 /00)
<PAGE>
PART B
Smith Barney
Managed Sectors Fund
388 Greenwich Street
New York, New York 10013
1-800-451-2010
Statement of Additional
Information
, 2000
This Statement of Additional Information ("SAI") expands upon and supplements
the information contained in the current Prospectus of Smith Barney Managed
Sectors Fund (the "Fund") dated , 2000, as amended or
supplemented from time to time, and should be read in conjunction with the
Fund's Prospectus. The Fund is a series of Smith Barney Investment Funds Inc.
(the "Company"). The Fund's Prospectus may be obtained from a Salomon Smith
Barney Financial Consultant or by writing or calling the Fund at the address
or telephone number set forth above. This SAI, although not in itself a
prospectus, is incorporated by reference into the Prospectus in its entirety.
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 2
INVESTMENT RESTRICTIONS 21
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY 23
PURCHASE OF SHARES 29
REDEMPTION OF SHARES 35
VALUATION OF SHARES 37
EXCHANGE PRIVILEGE 37
PERFORMANCE DATA 38
DIVIDENDS, DISTRIBUTIONS AND TAXES 40
ADDITIONAL INFORMATION 46
FINANCIAL STATEMENTS 47
OTHER INFORMATION 47
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The prospectus discusses the Fund's investment objective and policies. This
section contains supplemental information concerning the types of securities
and other instruments in which the Fund may invest, the investment policies
and portfolio strategies the Fund may utilize and certain risks associated
with these investments, policies and strategies. SSB Citi Fund Management
LLC ("SSB Citi" or the "Manager") serves as investment manager to the Fund.
The Fund is an open-end, diversified, management investment company whose
investment objective is to seek capital appreciation.
The Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of its total assets in the common stocks that
comprise the sectors of the S&P 500 Index that have been determined by the
Smith Barney Group Spectrum Allocation Model (the "Allocation Model") as
likely to outperform the entire S&P 500 Index. The fund also enters into
repurchase agreements, lends portfolio securities and uses certain types of
derivative instruments to help implement its objective.
The Allocation Model The Allocation Model tracks the sectors that comprise
the S&P 500 Index which now number over 100 and employs technical analysis of
each sector in compiling on a weekly basis a "buy," "hold," "avoid" or "sell"
recommendation for each such sector. The Allocation Model is a "paper
portfolio" that "buys" and "sells" securities within sectors based on the
recommendations. The Allocation Model "buys" an entire group of stocks; it
does not have the ability to discriminate and pick only the technically
stronger looking sector components. If a sector is downgraded during a week
from "hold" to "avoid," and it appears in the Allocation Model, the group of
securities that comprise that sector is sold. If a sector is upgraded to the
"buy" list, the Allocation Model must attempt to take up to three-times a
market weight in that sector. The Allocation Model attempts to take up to a
two-times market weight in a sector on the "hold" list. The Allocation Model
attempts to stay fully invested; cash builds in the Allocation Model only if
there are sufficient downgrades (from "hold" to "avoid," for example); market
timing itself plays no roles in the Allocation Model's cash position.
Selection Process The manager does not seek to select securities based on
their individual potential to outperform the S&P 500 Index. Instead, the
manager seeks to replicate the performance of the Allocation Model by basing
its investment decisions on the recommendations of the Allocation Model.
Once the Allocation Model deems a sector of the S&P 500 Index to be
technically stronger, the manager will purchase the securities of each
company in the sector. Conversely, when the Allocation Model downgrades a
sector from "hold" to "avoid," the manager will sell the securities of each
issuer within the sector. To the extent the recommendations of the
Allocation Model or other factors do not permit the fund to be fully
invested, the fund intends to invest in all types of money market
instruments.
The manager will become aware of the Allocation Model's weekly sector
recommendations when such recommendations are made publicly available.
Technical Analysis Technical analysis generally consists of a systematic and
analytical approach to the analysis of stock prices. Technical analysis is
not concerned with the financial position of a company but instead relies
exclusively on price and volume data through the use of charts and computer
programs in an attempt to identify trends or patterns which are then utilized
to draw conclusions as to present market position and possible future market
action.
Repurchase Agreements. The Fund may agree to purchase securities from a bank
or recognized securities dealer and simultaneously commit to resell the
securities to the bank or dealer at an agreed-upon date and price reflecting
a market rate of interest unrelated to the coupon rate or maturity of the
purchased securities ("repurchase agreements"). The Fund would maintain
custody of the underlying securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the repurchase price on the date
agreed to would be, in effect, secured by such securities. If the value of
such securities were less than the repurchase price, plus interest, the other
party to the agreement would be required to provide additional collateral so
that at all times the collateral is at least 102% of the repurchase price
plus accrued interest. Default by or bankruptcy of a seller would expose the
Fund to possible loss because of adverse market action, expenses and/or
delays in connection with the disposition of the underlying obligations. The
financial institutions with which the Fund may enter into repurchase
agreements will be banks and non-bank dealers of U.S. Government securities
on the Federal Reserve Bank of New York's list of reporting dealers, if such
banks and non-bank dealers are deemed creditworthy by the Fund's manager. The
manager will continue to monitor creditworthiness of the seller under a
repurchase agreement, and will require the seller to maintain during the term
of the agreement the value of the securities subject to the agreement to
equal at least 102% of the repurchase price (including accrued interest). In
addition, the manager will require that the value of this collateral, after
transaction costs (including loss of interest) reasonably expected to be
incurred on a default, be equal to 102% or greater than the repurchase price
(including accrued premium) provided in the repurchase agreement or the daily
amortization of the difference between the purchase price and the repurchase
price specified in the repurchase agreement. The manager will mark-to-market
daily the value of the securities. Repurchase agreements are considered to
be loans by the Fund under the Investment Company Act of 1940, as amended
("1940 Act").
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend portfolio securities to brokers, dealers and
other financial organizations that meet capital and other credit requirements
or other criteria established by the Board. The Fund will not lend portfolio
securities to affiliates of the manager unless they have applied for and
received specific authority to do so from the Securities and Exchange
Commission ("SEC"). Loans of portfolio securities will be collateralized by
cash, letters of credit or U.S. Government Securities, which are maintained
at all times in an amount equal to at least 102% of the current market value
of the loaned securities. Any gain or loss in the market price of the
securities loaned that might occur during the term of the loan would be for
the account of the Fund. From time to time, the Fund may return a part of
the interest earned from the investment of collateral received for securities
loaned to the borrower and/or a third party that is unaffiliated with the
Fund and that is acting as a "finder."
By lending its securities, the Fund can increase its income by continuing to
receive interest and any dividends on the loaned securities as well as by
either investing the collateral received for securities loaned in short-term
instruments or obtaining yield in the form of interest paid by the borrower
when U.S. Government Securities are used as collateral. Although the
generation of income is not the primary investment goal of the Fund, income
received could be used to pay the Fund's expenses and would increase an
investor's total return. The Fund will adhere to the following conditions
whenever its portfolio securities are loaned: (i) the Fund must receive at
least 102% cash collateral or equivalent securities of the type discussed in
the preceding paragraph from the borrower; (ii) the borrower must increase
such collateral whenever the market value of the securities rises above the
level of such collateral; (iii) the Fund must be able to terminate the loan
at any time; (iv) the Fund must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions on the loaned
securities and any increase in market value; (v) the Fund may pay only
reasonable custodian fees in connection with the loan; and (vi) voting rights
on the loaned securities may pass to the borrower, provided, however, that if
a material event adversely affecting the investment occurs, the Board must
terminate the loan and regain the right to vote the securities. Loan
agreements involve certain risks in the event of default or insolvency of the
other party including possible delays or restrictions upon a Fund's ability
to recover the loaned securities or dispose of the collateral for the loan.
Foreign Securities. The Fund may purchase common stocks of foreign
corporations represented in the S&P 500 Index (such securities are publicly
traded on securities exchanges or over-the-counter in the United States).
The Fund's investment in common stock of foreign corporations represented in
the S&P 500 Index may also be in the form of American Depository Receipts
(ADRs). ADRs are receipts typically issued by a United States bank or trust
company evidencing ownership of the underlying securities and are designated
for use in the U.S. Securities markets.
Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies.
These include differences in accounting, auditing and financial reporting
standards, the possibility of expropriation or confiscatory taxation, adverse
changes in investment or exchange control regulations, political instability
which could affect U.S. investments in foreign countries, and potential
restrictions on the flow of international capital. Investments in foreign
securities may be affected by changes in governmental administration or
economic policy (in the United Stated and abroad) or changed circumstances in
dealings between nations. Foreign companies may be subject to less
governmental regulation than U.S. companies. Securities of foreign companies
may be more volatile than securities of U.S. companies. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy
in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payment
positions.
Money Market Instruments. The Fund may invest up to 20% of its assets in
corporate and government bonds and notes and money market instruments. Money
market instruments include: obligations issued or guaranteed by the United
States government, its agencies or instrumentalities ("U.S. government
securities"); certificates of deposit, time deposits and bankers' acceptances
issued by domestic banks (including their branches located outside the United
States and subsidiaries located in Canada), domestic branches of foreign
banks, savings and loan associations and similar institutions; high grade
commercial paper; and repurchase agreements with respect to the foregoing
types of instruments. Certificates of deposit ("CDs") are short-term,
negotiable obligations of commercial banks. Time deposits ("TDs") are non-
negotiable deposits maintained in banking institutions for specified periods
of time at stated interest rates. Bankers' acceptances are time drafts drawn
on commercial banks by borrowers, usually in connection with international
transactions.
Futures and Options. The Fund may enter into futures contracts, options, and
options on futures contracts, subject to the limitation that the value of
these futures contracts and options will not exceed 20% of the Fund's total
assets. Also, the Fund will not purchase options to the extent that more
than 5% of the value of the Fund's total assets would be invested in premiums
on open put option positions. These futures contracts and options will be
used for the following reasons: to simulate full investment in the S&P 500
Index while retaining a cash balance for Fund management purposes, to
facilitate trading, to reduce transaction costs or to seek higher investment
returns when a futures contract is priced more attractively than stocks
comprising the S&P 500 Index. The Fund will only enter into futures
contracts and options on futures contracts that are traded on a domestic
exchange and board of trade. The Fund will not use futures or options for
speculative purposes.
A call option gives a holder the right to purchase a specific security at a
specified price referred to as the "exercise price," within a specified
period of time. A put option gives a holder the right to sell a specific
security at a specified price within a specified period of time. The initial
purchaser of a call option pays the "writer" a premium, which is paid at the
time of purchase and is retained by the writer whether or not such option is
exercised. Institutions, such as the Fund, that sell (or "write") call
options against securities held in their investment portfolios retain the
premium. The Fund may purchase put options to hedge its portfolio against
the risk of a decline in the market value of securities held, and may
purchase call options to hedge against an increase in the price of securities
it is committed to purchase. The Fund may write put and call options along
with a long position in options to increase its ability to hedge against a
change in the market value of the securities it holds or is committed to
purchase.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified
future time and at a specified price. Stock index futures contracts are
based on indices that reflect the market value of common stock of the firms
included in the indices. The Fund may enter into futures contracts to
purchase securities when the manager anticipates purchasing the underlying
securities and believes prices will rise before the purchase will be made.
Assets committed to futures contracts will be segregated at the Fund's
custodian to the extent required by law.
There are several risks accompanying the utilization of futures contracts and
options on futures contracts. First, positions in futures contracts and
options on futures contracts may be closed only on an exchange or board of
trade that furnishes a secondary market for such contracts. While the Fund
plans to utilize future contracts only if there exists an active market for
such contracts, there is no guarantee that a liquid market will exist for the
contracts at a specified time. Furthermore, because, by definition, futures
contracts look to projected price levels in the future and not to current
levels of valuation, market circumstances may result in there being a
discrepancy between the price of the stock index future and the movement in
the stock index. The absence of a perfect price correlation between the
futures contract and its underlying stock index could stem from investors
choosing to close futures contracts by offsetting transactions, rather than
satisfying additional margin requirements. This could result in a distortion
of the relationship between the index and futures market. In addition,
because the futures market imposes less burdensome margin requirements than
the securities market, an increased amount of participation by speculators in
the futures market could result in price fluctuations.
In view of these considerations, the Fund will comply with the following
restrictions when purchasing and selling futures contracts. First, the Fund
will not participate in futures transactions if the sum of its initial margin
deposits on open contracts will exceed 5% of the market value of the Fund's
total assets, after taking into account the unrealized profits and losses on
those contracts which it has entered. Second, the Fund will not enter into
these contracts for speculative purposes. Third, the Fund will limit
transactions in futures and options on futures to the extent necessary to
prevent the Fund from being deemed a "commodity pool" under regulations of
the Commodity Futures Trading Commission.
No consideration will be paid or received by the Fund upon entering into a
futures contract. Initially, the Fund will be required to deposit with the
broker an amount of cash or cash equivalents equal to approximately 1% to 10%
of the contract amount (this amount is subject to change by the board of
trade on which the contract is traded and members of such board of trade may
charge a higher amount). This amount, known as "initial margin," is in the
nature of a performance bond or good faith deposit on the contract and is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker will be made daily as the price of
the index underlying the futures contract fluctuates, making the long and
short positions in the futures contract more or less valuable, a process
known as "marking-to-market." At any time prior to expiration of a futures
contract, the Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
Although the Fund intends to enter into futures contracts only if there is an
active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit
has been reached in a particular contract, no trades may be made that day at
a price beyond that limit. It is possible that futures contract prices could
move to the daily limit for several consecutive trading days with little or
no trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses. In such event, and in
the event of adverse price movements, the Fund would be required to make
daily cash payments of variation margin, and an increase in the value of the
portion of the Fund being hedged, if any, may partially or completely offset
losses on the futures contract. As described above, however, there is no
guarantee that the price of the securities being hedged will, in fact,
correlate with the price movements in a futures contract and thus provide an
offset to losses on the futures contract.
If the Fund hedges against the possibility of a change in market conditions
adversely affecting the value of securities held in its portfolio and market
conditions move in a direction opposite to that which has been anticipated,
the Fund will lose part or all of the benefit of the increased value of
securities that it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund had
insufficient cash, it may have to sell securities to meet daily variation
margin requirements at a time when it may be disadvantageous to do so. These
sales of securities may, but will not necessarily, be at increased prices
that reflect the change in interest rates, market conditions or currency
values, as the case may be.
Options on Futures Contracts. An option on a futures contract, as contrasted
with the direct investment in such a contract, gives the purchaser the right,
in return for the premium paid, to assume a position in the underlying
futures contract at a specified exercise price at any time prior to the
expiration date of the option. Upon exercise of an option, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
futures margin account, which represents the amount by which the market price
of the futures contract exceeds, in the case of a call, or is less than, in
the case of put, the exercise price of the option on the futures contract.
The potential for loss related to the purchase of an option on a futures
contract is limited to the premium paid for the option plus transaction
costs. Because the value of the option is fixed at the point of sale, there
are no daily cash payments to reflect changes in the value of the underlying
contract; however, the value of the option does change daily and that change
would be reflected in the net asset value of the Fund.
The Fund may purchase and write put and call options on futures contracts
that are traded on a U.S. exchange or board of trade as a hedge against
changes in the value of its portfolio securities, or in anticipation of the
purchase of securities, and may enter into closing transactions with respect
to such options to terminate existing positions. There is no guarantee that
such closing transactions can be effected.
Several risks are associated with options on futures contracts. The ability
to establish and close out positions on such options will be subject to the
existence of a liquid market. In addition, the purchase of put or call
options will be based upon predictions by the manager as to anticipated
trends, which predictions could prove to be incorrect. Even if the
expectations of the manager are correct, there may be an imperfect
correlation between the change in the value of the options and of the
portfolio securities being hedged.
Stock Index Options. As described generally above, the Fund may purchase put
and call options and write call options on domestic stock indexes listed on
domestic exchanges in order to realize its investment objective of capital
appreciation or for the purpose of hedging its portfolio. A stock index
fluctuates with changes in the market values of the stocks included in the
index. Some stock index options are based on a broad market index such as the
New York Stock Exchange Composite Index or the Canadian Market Portfolio
Index, or a narrower market index such as the Standard & Poor's 100.
Options on stock indexes are generally similar to options on stock except
that the delivery requirements are different. Instead of giving the right to
take or make delivery of stock at a specified price, an option on a stock
index gives the holder the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed exercise price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of exercise,
multiplied by (b) a fixed "index multiplier." Receipt of this cash amount
will depend upon the closing level of the stock index upon which the option
is based being greater than, in the case of a call, or less than, in the case
of a put, the exercise price of the option. The amount of cash received will
be equal to such difference between the closing price of the index and the
exercise price of the option expressed in dollars or a foreign currency, as
the case may be, times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery of this
amount. The writer may offset its position in stock index options prior to
expiration by entering into a closing transaction on an exchange or it may
let the option expire unexercised.
The effectiveness of purchasing or writing stock index options as a hedging
technique will depend upon the extent to which price movements in the portion
of the securities portfolio of the Fund correlate with price movements of the
stock index selected. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular
stock, whether the Fund will realize a gain or loss from the purchase or
writing of options on an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of certain indexes, in
an industry or market segment, rather than movements in the price of a
particular stock. Accordingly, successful use by the Fund of options on stock
indexes will be subject to the manager's ability to predict correctly
movements in the direction of the stock market generally or of a particular
industry. This requires different skills and techniques than predicting
changes in the price of individual stocks.
MASTER/FEEDER FUND STRUCTURE
The Board of Directors has the discretion to retain the current distribution
arrangement for the Fund while investing in a master fund in a master/feeder
fund structure. A master/feeder fund structure is one in which a fund (a
"feeder fund"), instead of investing directly in a portfolio of securities,
invests most or all of its investment assets in a separate registered
investment company (the "master fund") with substantially the same investment
objective and policies as the feeder fund. Such a structure permits the
pooling of assets of two or more feeder funds, preserving separate identities
or distribution channels at the feeder fund level. Based on the premise that
certain of the expenses of operating an investment portfolio are relatively
fixed, a larger investment portfolio may eventually achieve a lower ratio of
operating expenses to average net assets. An existing investment company is
able to convert to a feeder fund by selling all of its investments, which
involves brokerage and other transaction costs and realization of a taxable
gain or loss, or by contributing its assets to the master fund and avoiding
transaction costs and, if proper procedures are followed, the realization of
taxable gain or loss.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 7 below and the Fund's
investment objective have been adopted by the Company as fundamental policies
of the Fund. Under the 1940 Act, a fundamental policy may not be changed
with respect to a fund without the vote of a majority of the outstanding
voting securities of the fund. Majority is defined in the 1940 Act as the
lesser of (a) 67% or more of the shares present at a fund meeting, if the
holders of more than 50% of the outstanding shares of the fund are present or
represented by proxy, or (b) more than 50% of outstanding shares. The
remaining restrictions may be changed by a vote of a majority of the
Company's Board of Directors at any time.
Under the investment restrictions adopted by the Company with respect to the
Fund, the Fund will not
1. Invest more than 25% of its total assets in securities, the issuers of
which conduct their 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.
2. Borrow money, except that (a) the Fund may borrow from banks for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests which might otherwise require the untimely disposition of
securities, and (b) the Fund may, to the extent consistent with its
investment policies, enter into reverse repurchase agreements, forward roll
transactions and similar investment strategies and techniques. To the extent
that it engages in transactions described in (a) and (b), the Fund will be
limited so that no more than 331/3% of the value of its total assets
(including the amount borrowed), valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) valued at the time the
borrowing is made, is derived from such transactions.
3. Issue "senior securities" as defined in the 1940 Act and the rules,
regulations and orders thereunder, except as permitted under the 1940 Act and
the rules, regulations and orders thereunder
4. Make loans. This restriction does not apply to: (a) the purchase of
debt obligations in which the Fund may invest consistent with its investment
objectives and policies; (b) repurchase agreements; and (c) loans of its
portfolio securities, to the fullest extent permitted under the 1940 Act.
5. Purchase or sell real estate, real estate mortgages, commodities or
commodity contracts, but this restriction shall not prevent the Fund from (a)
investing in securities of issuers engaged in the real estate business or the
business of investing in real estate (including interests in limited
partnerships owning or otherwise engaging in the real estate business or the
business of investing in real estate) and securities which are secured by
real estate or interests therein; (b) holding or selling real estate
received in connection with securities it holds or held; (c) trading in
futures contracts and options on futures contracts (including options on
currencies to the extent consistent with the Fund's investment objective and
policies); or (d) investing in real estate investment trust securities.
6. Engage in the business of underwriting securities issued by other
persons, except to the extent that the Fund may technically be deemed to be
an underwriter under the Securities Act of 1933, as amended, in disposing of
portfolio securities.
7. Purchase or otherwise acquire any illiquid security except as permitted
under the 1940 Act for open-end investment companies, which currently permits
up to 15% of the Fund's net assets to be invested in illiquid securities.
If any percentage restriction described above is complied with at the time of
an investment, a later increase or decrease in percentage resulting from a
change in values or assets will not constitute a violation of such
restriction.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Directors and executive officers of the Company, together with
information as to their principal business occupations during the past five
years, are shown below. Each Director who is an "interested person" of the
Fund, as defined in the 1940 Act, is indicated by an asterisk.
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 75). 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 62). 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 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. 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.
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; Senior Vice President and Treasurer of 61 investment companies
associated with Citigroup. His address is 388 Greenwich Street, New York, New
York 10013.
Alan Blake, Vice President and Investment Officer (Age 48). Managing
Director of Salomon Smith Barney; Investment Officer of SSB Citi. His
address is 7 World Trade Center, New York, New York 10048.
Lawrence Weissman, Vice President and Investment Officer (Age 37). Managing
Director of Salomon Smith Barney; Investment Officer of SSB Citi; prior to
1998, portfolio manager at Neuberger & Berman, LLC; prior to that he was a
portfolio manager at TIAA-CREFF. His address is 388 Greenwich Street, New
York, New York 10013.
Timothy Woods, CFA, Vice President and Investment Officer (Age 38). Managing
Director of Salomon Smith Barney; prior to July 1999, Principal at Bankers
Trust Company and manager of the Small-Mid Cap Growth Team. His address is
388 Greenwich Street, New York, New York 10013.
Paul Brook, Controller (Age 46). Director of Salomon Smith Barney; from
1997-1998 Managing Director of AMT Capital Services Inc.; prior to 1997
Partner with Ernst & Young LLP; Controller or Assistant Treasurer of 43
investment companies associated with Citigroup. His address is 388 Greenwich
Street, New York, New York 10013.
Christina T. Sydor, Secretary (Age 49). 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.
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 calendar year ended
December 31, 1999 such expenses totaled $18,574. For the calendar year ended
December 31, 1999, the Directors of the Company were paid the following
compensation:
Name of Person
Aggregate
Compensation
from Company
FYE 12/31/99
Total Pension
or Retirement
Benefits
Accrued as
part of Fund
Expenses
Compensation
from Company
and Fund
Complex Paid
to Directors
Calendar Year
Ending
12/31/99
Number of
Funds for
Which
Director
Serves Within
Fund Complex
Paul R. Ades
$28,369
$0
$56,238
5
Herbert Barg
28,369
0
114,288
16
Dwight B. Crane
26,297
0
155,363
23
Frank G. Hubbard
28,269
0
56,138
5
Heath B. McLendon
0
0
0
71
Jerome Miller
26,197
0
51,613
5
Ken Miller
24,847
0
47,188
5
Upon attainment of age 80, Directors are required to change to emeritus
status. Directors Emeritus are entitled to serve in emeritus status for a
maximum of 10 years during which time they are paid 50% of the annual
retainer fee and meeting fees otherwise applicable to the Fund Directors,
together with reasonable out-of-pocket expenses for each meeting attended.
Investment Manager - SSB Citi
SSB Citi (successor to SSBC Fund Management Inc.) serves as investment
manager to the Fund pursuant to an investment management agreement (the
"Investment Management Agreement") with the Fund which was approved by the
Board of Directors, including a majority of directors who are not "interested
persons" of the Fund or the Manager. The Manager is a wholly owned
subsidiary of Salomon Smith Barney Holdings Inc. ("Holdings"), which in turn,
is a wholly owned subsidiary of Citigroup Inc. Subject to the supervision and
direction of the Company's Board of Directors, the Manager manages the Fund's
portfolio in accordance with the Fund's stated investment objective and
policies, makes investment decisions for the Fund, places orders to purchase
and sell securities, and employs professional portfolio managers and
securities analysts who provide research services to the Fund. The Manager
pays the salary of any officer and employee who is employed by both it and
the Fund. The Manager bears all expenses in connection with the performance
of its services. The Manager also: (a) assists in supervising all aspects of
the Fund's operations except those it performs under its investment advisory
agreement; b) supplies the Fund with office facilities (which may be in SSB
Citi's own offices), statistical and research data, data processing services,
clerical, accounting and bookkeeping services, including, but not limited to,
the calculation of (i) the net asset value of shares of the Fund, (ii)
applicable Deferred Sales Charges and similar fees and charges and (iii)
distribution fees, internal auditing and legal services, internal executive
and administrative services, and stationary and office supplies; and (c)
prepares reports to shareholders of the Fund, tax returns and reports to and
filings with the SEC and state blue sky authorities.
SSB Citi (through its predecessor entities) has been in the investment
counseling business since 1968 and renders investment advice to a wide
variety of individual, institutional and investment company clients that had
aggregate assets under management as of December 31, 1999 in excess of $183
billion.
As compensation for investment management services, the Fund pays the Manager
a fee computed daily and paid monthly at the annual rate of 0.75% of the
Fund's average daily net assets.
Code of Ethics
Pursuant to Rule 17j-1 of the 1940 Act, the fund, the investment adviser and
principal underwriter have adopted codes of ethics that permit personnel to
invest in securities for their own accounts, including securities that may be
purchased or held by the fund. All personnel must place the interests of
clients first and avoid activities, interests and relationships that might
interfere with the duty to make decisions in the best interests of the
clients. All personal securities transactions by employees must adhere to
the requirements of the codes and must be conducted in such a manner as to
avoid any actual or potential conflict of interest, the appearance of such a
conflict, or the abuse of an employee's position of trust and responsibility.
A copy of the Fund's code of ethics is on file with the Securities and
Exchange Commission.
Counsel and Auditors
Willkie Farr & Gallagher serves as counsel to the Company. The Directors who
are not "interested persons" of the Company have selected Stroock & Stroock &
Lavan LLP to serve as their legal counsel.
KPMG LLP, independent accountants, 757 Third Avenue, New York, New York
10022, serve as auditors of the Fund and will render an opinion on the Fund's
financial statements annually beginning with the fiscal period ending April
30, 2000.
Custodian and Transfer Agent
PNC Bank, National Association ("PNC Bank"), located at 17th and Chestnut
Streets, Philadelphia, Pennsylvania 19103, serves as the custodian of the
Fund. Under its agreement with the Company on behalf of the Fund, PNC Bank
holds the Fund's portfolio securities and keeps all necessary accounts and
records. For its services, PNC Bank receives a monthly fee based upon the
month-end market value of securities held in custody and also receives
securities transaction charges. The assets of the Fund are held under bank
custodianship in compliance with the 1940 Act.
Citi Fiduciary Trust Company (the "transfer agent") located at 388 Greenwich
Street, New York, New York 10013, serves as the transfer agent and
shareholder services agent of the Fund.
PFPC Global Fund Services (the "sub-transfer agent"), located at P.O. Box
9699, Providence Rhode Island 02940-9699, serves as the Fund's sub-transfer
agent to render certain shareholder record-keeping and accounting services
functions.
Distributor
Salomon Smith Barney Inc., located at 388 Greenwich Street, New York, New
York 10013 serves as the Fund's distributor pursuant to a written agreement
with the Company dated , 2000 (the "Distribution Agreement") which
was approved by the Company's Board of Directors, including a majority of the
independent directors, on , 2000.
When payment is made by the investor before the settlement date, unless
otherwise noted by the investor, the funds will be held as a free credit
balance in the investor's brokerage account and Salomon Smith Barney may
benefit from the temporary use of the funds. The Company's Board of
Directors has been advised of the benefits to Salomon Smith Barney resulting
from these settlement procedures and will take such benefits into
consideration when reviewing the Investment Management and Distribution
Agreements for continuance.
Distribution Arrangements
To compensate Salomon Smith Barney for the services it provides and for the
expense it bears under the Distribution Agreement, the Fund has adopted a
services and distribution plan (the "Plan") pursuant to Rule l2b-1 under the
1940 Act. Under the Plan, the Fund pays Salomon Smith Barney a service fee,
accrued daily and paid monthly, calculated at the annual rate of 0.25% of the
value of the Fund's average daily net assets attributable to the Class A,
Class B and Class L shares. In addition, the Fund pays Salomon Smith Barney a
distribution fee with respect to the Class B and Class L shares primarily
intended to compensate Salomon Smith Barney for its initial expense of paying
Financial Consultants a commission upon sales of those shares. The Class B
and Class L distribution fee is calculated at the annual rate of 0.75% of the
value of the Fund's average daily net assets attributable to the shares of
the respective Class.
Under its terms, the Plan continues from year to year, provided such
continuance is approved annually by vote of the Board of Directors, including
a majority of the directors who are not interested persons of the Fund and
who have no direct or indirect financial interest in the operation of the
Plan or in the Distribution Agreement (the "independent directors"). The
Plan may not be amended to increase the amount of the service and
distribution fees without shareholder approval, and all amendments of the
Plan also must be approved by the directors including all of the independent
directors in the manner described above. The Plan may be terminated with
respect to a Class at any time, without penalty, by vote of a majority of the
independent directors or, with respect to the Fund, by vote of a majority of
the outstanding voting securities of the Fund (as defined in the 1940 Act).
Pursuant to the Plan, Salomon Smith Barney will provide the Board of
Directors with periodic reports of amounts expended under the Plan and the
purpose for which such expenditures were made.
Portfolio Transactions
The Manager arranges for the purchase and sale of the Fund's securities and
selects brokers and dealers (including Salomon Smith Barney) which in its
best judgment provide prompt and reliable execution at favorable prices and
reasonable commission rates. The Manager may select brokers and dealers that
provide it with research services and may cause the Fund to pay such brokers
and dealers commissions which exceed those other brokers and dealers may have
charged, if it views the commissions as reasonable in relation to the value
of the brokerage and/or research services. In selecting a broker, including
Salomon Smith Barney, for a transaction, the primary consideration is prompt
and effective execution of orders at the most favorable prices. Subject to
that primary consideration, dealers may be selected for research, statistical
or other services to enable the Manager to supplement its own research and
analysis.
Decisions to buy and sell securities for the Fund are made by the Manager,
subject to the overall supervision and review of the Company's Board of
Directors. Portfolio securities transactions for the Fund are effected by or
under the supervision of the Manager.
Transactions on stock exchanges involve the payment of negotiated brokerage
commissions. There is generally no stated commission in the case of
securities traded in the over-the-counter market, but the price of those
securities includes an undisclosed commission or mark-up. Over-the-counter
purchases and sales are transacted directly with principal market makers
except in those cases in which better prices and executions may be obtained
elsewhere. The cost of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down.
In executing portfolio transactions and selecting brokers or dealers, it is
the Fund's policy to seek the best overall terms available. The Manager, in
seeking the most favorable price and execution, considers all factors it
deems relevant, including, for example, the price, the size of the
transaction, the reputation, experience and financial stability of the
broker-dealer involved and the quality of service rendered by the broker-
dealer in other transactions. The Manager receives research, statistical and
quotation services from several broker-dealers with which it places the
Fund's portfolio transactions. It is possible that certain of the services
received primarily will benefit one or more other accounts for which the
Manager exercises investment discretion. Conversely, the Fund may be the
primary beneficiary of services received as a result of portfolio
transactions effected for other accounts. The Manager's fee under the
management agreement is not reduced by reason of its receiving such brokerage
and research services. The Company's Board of Directors, in its discretion,
may authorize the Manager to cause the Fund to pay a broker that provides
brokerage and research services to the Manager a commission in excess of that
which another qualified broker would have charged for effecting the same
transaction. Salomon Smith Barney will not participate in commissions from
brokerage given by the Fund to other brokers or dealers and will not receive
any reciprocal brokerage business resulting therefrom.
In accordance with Section 17(e) of the 1940 Act and Rule 17e-1 thereunder,
the Company's Board of Directors has determined that any portfolio
transaction for the Fund may be executed through Salomon Smith Barney or an
affiliate of Salomon Smith Barney if, in the Manager's judgment, the use of
Salomon Smith Barney or an affiliate is likely to result in price and
execution at least as favorable as those of other qualified brokers and if,
in the transaction, Salomon Smith Barney or the affiliate charges the Fund a
commission rate consistent with those charged by Salomon Smith Barney or an
affiliate to comparable unaffiliated customers in similar transactions. In
addition, under SEC rules, Salomon Smith Barney may directly execute such
transactions for the Fund on the floor of any national securities exchange,
provided: (a) the Board of 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.
Even though investment decisions for the Fund are made independently from
those of the other accounts managed by the Manager, investments of the kind
made by the Fund also may be made by those other accounts. When the Fund and
one or more accounts managed by the Manager are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the Manager
to be equitable. In some cases, this procedure may adversely affect the price
paid or received by the Fund or the size of the position obtained for or
disposed of by the Fund.
The Fund will not purchase securities during the existence of any
underwriting or selling group relating to the securities, of which the
Manager is a member, except to the extent permitted by the SEC. Under
certain circumstances, the Fund may be at a disadvantage because of this
limitation in comparison with other Funds that have similar investment
objectives but that are not subject to a similar limitation.
Portfolio Turnover
The Fund's portfolio turnover rate (the lesser of purchases or sales of
portfolio securities during the year, excluding purchases or sales of
short-term securities, divided by the monthly average value of portfolio
securities) is generally not expected to exceed 100%. The rate of turnover
will not be a limiting factor, however, when the Fund deems it desirable to
sell or purchase securities.
The Manager will also monitor the Fund's portfolio to ensure that no more
than 25% of the Fund's assets are concentrated in the securities of companies
in the same industry and that the Fund complies with its other investment
policies. The Manager may cause the Fund to sell or purchase securities to
ensure compliance with the Fund's investment policies.
PURCHASE OF SHARES
Sales Charge Alternatives
The following classes of shares are available for purchase. See the
prospectus for a discussion of factors to consider in selecting which Class
of shares to purchase.
Class A Shares. Class A shares are sold to investors at the public offering
price, which is the net asset value plus an initial sales charge as follows:
Amount
of
Investment
Sales Charge
as a %
of
Transaction
Sales
Charge as a
% of Amount
Invested
Dealers'
Reallowance as
%
Of Offering
Price
Less than
$25,000
5.00%
5.26%
4.50%
$ 25,000 -
49,999
4.25
4.44
3.83
50,000 -
99,999
3.75
3.90
3.38
100,000 -
249,999
3.25
3.36
2.93
250,000 -
499,999
2.75
2.83
2.48
500,000 -
$1,000,000
$1,000,000 and
above
2.00
*
2.04
*
1.80
* Purchases of Class A shares of $1,000,000 or more will be made at net
asset value without any initial sales charge, but will be subject to a
Deferred Sales Charge of 1.00% on redemptions made within 12 months of
purchase. The Deferred Sales Charge on Class A shares is payable to
Salomon Smith Barney, which compensates Salomon Smith Barney Financial
Consultants and other dealers whose clients make purchases of
$1,000,000 or more. The Deferred Sales Charge is waived in the same
circumstances in which the Deferred Sales Charge applicable to Class B
and Class L shares is waived. See "Deferred Sales Charge Provisions"
and "Waivers of Deferred Sales Charge."
Members of the selling group may receive up to 90% of the sales charge and
may be deemed to be underwriters of the Fund as defined in the 1933 Act. The
reduced sales charges shown above apply to the aggregate of purchases of
Class A shares of the Fund made at one time by "any person," which includes
an individual and his or her immediate family, or a trustee or other
fiduciary of a single trust estate or single fiduciary account.
Class B Shares. Class B shares are sold without an initial sales charge but
are subject to a Deferred Sales Charge payable upon certain redemptions. See
"Deferred Sales Charge Provisions" below.
Class L Shares. Class L shares are sold with an initial sales charge of
1.00% (which is equal to 1.01% of the amount invested) and are subject to a
Deferred Sales Charge payable upon certain redemptions. See "Deferred Sales
Charge Provisions" below. Until June 22, 2001, purchases of Class L shares
by investors who were holders of Class C shares of other Smith Barney Mutual
Funds on June 12, 1998 will not be subject to the 1.00% 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 broker that clears through Salomon Smith Barney ("Dealer
Representative"). In addition, certain investors, including qualified
retirement plans purchasing through certain Dealer Representatives, may
purchase shares directly from the Fund. When purchasing shares of the Fund,
investors must specify whether the purchase is for Class A, Class B, Class L
or Class Y shares. 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 the sub-transfer agent are not subject to a
maintenance fee.
Investors in Class A, Class B and Class L shares may open an account in the
Fund by making an initial investment of at least $1,000 for each account, or
$250 for an IRA or a Self-Employed Retirement Plan, in the Fund. Investors in
Class Y shares may open an account by making an initial investment of
$15,000,000. Subsequent investments of at least $50 may be made for all
Classes. For participants in retirement plans qualified under Section
403(b)(7) or Section 401(c) of the Code, the minimum initial investment
required for Class A, Class B and Class L shares and the subsequent
investment requirement for all Classes in the Fund is $25. 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 the sub-transfer agent. Share certificates are
issued only upon a shareholder's written request to the sub-transfer agent.
Purchase orders received by the Fund or a Salomon Smith Barney Financial
Consultant prior to the close of regular trading on the New York Stock
Exchange ("NYSE"), on any day the Fund calculates its net asset value, are
priced according to the net asset value determined on that day (the ''trade
date''). Orders received by a Dealer Representative prior to the close of
regular trading on the NYSE on any day the Fund calculates its net asset
value, are priced according to the net asset value determined on that day,
provided the order is received by the Fund or the Fund's agent prior to its
close of business. For shares purchased through Salomon Smith Barney or a
Dealer Representative purchasing through Salomon Smith Barney, payment for
shares of the Fund is due on the third business day after the trade date. In
all other cases, payment must be made with the purchase order.
Systematic Investment Plan. Shareholders may make additions to their
accounts at any time by purchasing shares through a service known as the
Systematic Investment Plan. Under the Systematic Investment Plan, Salomon
Smith Barney or the sub-transfer agent is authorized through preauthorized
transfers of at least $25 on a monthly basis or at least $50 on a quarterly
basis to charge the shareholder's account held with a bank or other
financial institution on a monthly or quarterly basis as indicated by the
shareholder, to provide for systematic additions to the shareholder's fund
account. A shareholder who has insufficient funds to complete the transfer
will be charged a fee of up to $25 by Salomon Smith Barney or the sub-
transfer agent. The Systematic Investment Plan also authorizes Salomon Smith
Barney to apply cash held in the shareholder's Salomon Smith Barney brokerage
account or redeem the shareholder's shares of a Smith Barney money market
fund to make additions to the account. Additional information is available
from the fund or a Salomon Smith Barney Financial Consultant or a Dealer
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 (for a period up to 90 days from the commencement of the
Financial Consultant's employment with Salomon Smith Barney), on the
condition the purchase of Class A shares is made with the proceeds of the
redemption of shares of a mutual fund which (i) was sponsored by the
Financial Consultant's prior employer, (ii) was sold to the client by the
Financial Consultant and (iii) was subject to a sales charge; (d) purchases
by shareholders who have redeemed Class A shares in the Fund (or Class A
shares of another Smith Barney Mutual Fund that is offered with a sales
charge) and who wish to reinvest their redemption proceeds in the Fund,
provided the reinvestment is made within 60 calendar days of the redemption;
(e) purchases by accounts managed by registered investment advisory
subsidiaries of Citigroup; (f) direct rollovers by plan participants of
distributions from a 401(k) plan offered to employees of Citigroup or its
subsidiaries (Note: subsequent investments will be subject to the applicable
sales charge); (g) purchases by a separate account used to fund certain
unregistered variable annuity contracts; (h) investments of distributions
from or proceeds from a sale of a UIT sponsored by Salomon Smith Barney;
(i) purchases by investors participating in a Salomon Smith Barney fee-based
arrangement; and (j) purchases of Class A shares by Section 403(b) or
Section 401(a) or (k) accounts associated with Copeland Retirement Programs.
In order to obtain such discounts, the purchaser must provide sufficient
information at the time of purchase to permit verification that the purchase
would qualify for the elimination of the sales charge.
Right of Accumulation. Class A shares of the Fund may be purchased by "any
person" (as defined above) at a reduced sales charge or at net asset value
determined by aggregating the dollar amount of the new purchase and the total
net asset value of all Class A shares of the Fund and of other Smith Barney
Mutual Funds that are offered with a sales charge as currently listed under
"Exchange Privilege" then held by such person and applying the sales charge
applicable to such aggregate. In order to obtain such discount, the
purchaser must provide sufficient information at the time of purchase to
permit verification that the purchase qualifies for the reduced sales charge.
The right of accumulation is subject to modification or discontinuance at any
time with respect to all shares purchased thereafter.
Letter of Intent - Class A Shares. A Letter of Intent for an amount of
$50,000 or more provides an opportunity for an investor to obtain a reduced
sales charge by aggregating investments over a 13 month period, provided that
the investor refers to such Letter when placing orders. For purposes of a
Letter of Intent, the "Amount of Investment" as referred to in the preceding
sales charge table includes (i) all Class A shares of the Fund and other
Smith Barney Mutual Funds offered with a sales charge acquired during the
term of the letter plus (ii) the value of all Class A shares previously
purchased and still owned. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment
goal. If the goal is not achieved within the period, the investor must pay
the difference between the sales charges applicable to the purchases made and
the charges previously paid, or an appropriate number of escrowed shares will
be redeemed. The term of the Letter will commence upon the date the Letter
is signed, or at the option of the investor, up to 90 days before such date.
Please contact a Salomon Smith Barney Financial Consultant or the transfer
agent to obtain a Letter of Intent application.
Letter of Intent - Class Y Shares. A Letter of Intent may also be used as a
way for investors to meet the minimum investment requirement for Class Y
shares (except purchases of Class Y shares by Smith Barney 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 13 months from the date of the Letter. If a total investment of
$15,000,000 is not made within the 13-month period, all Class Y shares
purchased to date will be transferred to Class A shares, where they will be
subject to all fees (including a service fee of 0.25%) and expenses
applicable to the Fund's Class A shares, which may include a Deferred Sales
Charge of 1.00%. Please contact a Salomon Smith Barney Financial Consultant
or the transfer agent for further information.
Deferred Sales Charge Provisions
"Deferred Sales Charge shares" are: (a) Class B shares; (b) Class L shares;
and (c) Class A shares that were purchased without an initial sales charge
but are subject to a Deferred Sales Charge. A Deferred Sales Charge may be
imposed on certain redemptions of these shares.
Any applicable Deferred Sales Charge will be assessed on an amount equal to
the lesser of the original cost of the shares being redeemed or their net
asset value at the time of redemption. Deferred Sales Charge shares that are
redeemed will not be subject to a Deferred Sales Charge to the extent that
the value of such shares represents: (a) capital appreciation of Fund assets;
(b) reinvestment of dividends or capital gain distributions; (c) with respect
to Class B shares, shares redeemed more than five years after their purchase;
or (d) with respect to Class L shares and Class A shares that are Deferred
Sales Charge shares, shares redeemed more than 12 months after their
purchase.
Class L shares and Class A shares that are Deferred Sales Charge shares are
subject to a 1.00% Deferred Sales Charge if redeemed within 12 months of
purchase. In circumstances in which the Deferred Sales Charge is imposed on
Class B shares, the amount of the charge will depend on the number of years
since the shareholder made the purchase payment from which the amount is
being redeemed. Solely for purposes of determining the number of years since
a purchase payment, all purchase payments made during a month will be
aggregated and deemed to have been made on the last day of the preceding
Salomon Smith Barney statement month. The following table sets forth the
rates of the charge for redemptions of Class B shares by shareholders.
Year Since Purchase Payment Was
Made
Deferred Sales Charge
First
5.00%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth and thereafter
0.00
Class B shares will convert automatically to Class A shares eight years after
the date on which they were purchased and thereafter will no longer be
subject to any distribution fees. There will also be converted at that time
such proportion of Class B Dividend Shares owned by the shareholders as the
total number of his or her Class B shares converting at the time bears to the
total number of outstanding Class B shares (other than Class B Dividend
Shares) owned by the shareholder.
In determining the applicability of any Deferred Sales Charge, it will be
assumed that a redemption is made first of shares representing capital
appreciation, next of shares representing the reinvestment of dividends and
capital gain distributions and finally of other shares held by the
shareholder for the longest period of time. The length of time that Deferred
Sales Charge shares acquired through an exchange have been held will be
calculated from the date that the shares exchanged were initially acquired in
one of the other Smith Barney Mutual Funds, and fund shares being redeemed
will be considered to represent, as applicable, capital appreciation or
dividend and capital gain distribution reinvestments in such other funds.
For Federal income tax purposes, the amount of the Deferred Sales Charge will
reduce the gain or increase the loss, as the case may be, on the amount
realized on redemption. The amount of any Deferred Sales Charge will be paid
to Salomon Smith Barney.
To provide an example, assume an investor purchased 100 Class B shares of the
Fund at $10 per share for a cost of $1,000. Subsequently, the investor
acquired 5 additional shares of the Fund through dividend reinvestment.
During the fifteenth month after the purchase, the investor decided to redeem
$500 of his or her investment. Assuming at the time of the redemption the
net asset value had appreciated to $12 per share, the value of the investor's
shares would be $1,260 (105 shares at $12 per share). The Deferred Sales
Charge would not be applied to the amount which represents appreciation
($200) and the value of the reinvested dividend shares ($60). Therefore,
$240 of the $500 redemption proceeds ($500 minus $260) would be charged at a
rate of 4.00% (the applicable rate for Class B shares) for a total Deferred
Sales Charge of $9.60.
Waivers of Deferred Sales Charge
The Deferred Sales Charge will be waived on: (a) exchanges (see "Exchange
Privilege"); (b) redemptions of shares within 12 months following the death
or disability of the shareholder; (c) redemptions of shares made in
connection with qualified distributions from retirement plans or IRAs upon
the attainment of age 591/2; (d) involuntary redemptions; and (e) 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
The Fund offers its shares to current shareholders of the Fund on a
continuous basis. The public offering price for a Class A, Class B 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 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. The public
offering price for a Class L share includes a 1.00% initial sales charge. A
Deferred Sales Charge is imposed on certain redemptions of Class B shares,
and on Class L shares and Class A shares (purchased in amounts exceeding
$500,000) redeemed within one year of purchase.
REDEMPTION OF SHARES
The right of redemption of shares of the Fund may be suspended or the date of
payment postponed (a) for any periods during which the New York Stock
Exchange, Inc. (the "NYSE") is closed (other than for customary weekend and
holiday closings), (b) when trading in the markets the Fund normally utilizes
is restricted, or an emergency exists, as determined by the SEC, so that
disposal of the Fund's investments or determination of its net asset value is
not reasonably practicable or (c) for any other periods as the SEC by order
may permit for the protection of the Fund's shareholders.
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, trustees or guardians. A redemption request will
not be deemed properly received until the transfer agent receives all
required documents in proper form.
If a shareholder holds shares in more than one Class, any request for
redemption must specify the Class being redeemed. In the event of a failure
to specify which Class, or if the investor owns fewer shares of the Class
than specified, the redemption request will be delayed until the transfer
agent receives further instructions from Salomon Smith Barney, or if the
shareholder's account is not with Salomon Smith Barney, from the shareholder
directly. The redemption proceeds will be remitted on or before the third
business day following receipt of proper tender, except on any days on which
the NYSE is closed or as permitted under the 1940 Act, in extraordinary
circumstances. Generally, if the redemption proceeds are remitted to a
Salomon Smith Barney brokerage account, these funds will not be invested for
the shareholder's benefit without specific instruction and Salomon Smith
Barney will benefit from the use of temporarily uninvested funds. Redemption
proceeds for shares purchased by check, other than a certified or official
bank check, will be remitted upon clearance of the check, which may take up
to fifteen days.
Distributions in Kind
If the Board of Directors of the Fund determines that it would be detrimental
to the best interests of the remaining shareholders to make a redemption
payment wholly in cash, the Fund may pay, in accordance with SEC rules, any
portion of a redemption in excess of the lesser of $250,000 or 1.00% of the
Fund's net assets by a distribution in kind of portfolio securities in lieu
of cash. Securities issued as a distribution in kind may incur brokerage
commissions when shareholders subsequently sell those securities.
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.
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 Deferred Sales Charge will not be waived on amounts withdrawn
by shareholders that exceed 1.00% per month of the value of a shareholder's
shares at the time the Withdrawal Plan commences. (With respect to Withdrawal
Plans in effect prior to November 7, 1994, any applicable Deferred Sales
Charge will be waived on amounts withdrawn that do not exceed 2.00% per month
of the value of the shareholder's shares that are subject to a Deferred Sales
Charge). 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. All dividends and distributions on shares in the Withdrawal Plan
are reinvested automatically at net asset value in additional shares of the
Fund.
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 Financial Consultant, Dealer Representative. 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 net asset value per share of the Fund's Classes is calculated on each
day, Monday through Friday, except days on which the NYSE is closed. The NYSE
currently is scheduled to be closed on New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas, and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday,
respectively. Because of the differences in distribution fees and
Class-specific expenses, the per share net asset value of each Class may
differ. The following is a description of the procedures used by the Fund in
valuing its assets.
Securities listed on a national securities exchange will be valued on the
basis of the last sale on the date on which the valuation is made or, in the
absence of sales, at the mean between the closing bid and asked prices.
Over-the-counter securities will be valued at the mean between the closing
bid and asked prices on each day, or, if market quotations for those
securities are not readily available, at fair value, as determined in good
faith by the Company's Board of Directors. Short-term obligations with
maturities of 60 days or less are valued at amortized cost, which constitutes
fair value as determined by the Company's Board of Directors. Amortized cost
involves valuing an instrument at its original cost to the Fund and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the effect of fluctuating interest rates on the market
value of the instrument. All other securities and other assets of the Fund
will be valued at fair value as determined in good faith by the Company's
Board of Directors.
EXCHANGE PRIVILEGE
Except as noted below and in the Prospectus, shareholders of any of the Smith
Barney Mutual Funds may exchange all or part of their shares for shares of
the same class of other Smith Barney Mutual Funds, to the extent such shares
are offered for sale in the shareholder's state of residence, on the basis of
relative net asset value per share at the time of exchange as follows:
A. Class A and Class Y shares of the Fund may be exchanged without a
sales charge for the respective shares of any of the Smith Barney
Mutual Funds.
B. Class B shares of any fund may be exchanged without a sales charge.
Class B shares of the Fund exchanged for Class B shares of another
Smith Barney Mutual Fund will be subject to the higher applicable
Deferred Sales Charge of the two funds and, for purposes of calculating
Deferred Sales Charge rates and conversion periods, will be deemed to
have been held since the date the shares being exchanged were deemed to
be purchased.
C. Class L shares of any fund may be exchanged without a sales charge.
For purposes of Deferred Sales Charge applicability, Class L shares of
the Fund exchanged for Class L shares of another Smith Barney Mutual
Fund will be deemed to have been owned since the date the shares being
exchanged were deemed to be purchased.
The exchange privilege enables shareholders to acquire shares of the same
Class in a fund with different investment objectives when they believe that a
shift between funds is an appropriate investment decision. This privilege is
available to shareholders residing in any state in which fund shares being
acquired may legally be sold. Prior to any exchange, the shareholder should
obtain and review a copy of the current prospectus of each fund into which an
exchange is being considered. Prospectuses may be obtained from a Salomon
Smith Barney Financial Consultant.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange are redeemed at the then-current net asset
value and the proceeds are immediately invested, at a price as described
above, in shares of the fund being acquired. Salomon Smith Barney reserves
the right to reject any exchange request. The exchange privilege may be
modified or terminated at any time after written notice to shareholders.
Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions
can be detrimental to the Fund's performance and its shareholders. The
Manager may determine that a pattern of frequent exchanges is excessive and
contrary to the best interests of the Fund's other shareholders. In this
event, the Fund may, at its discretion, decide to limit additional purchases
and/or exchanges by a shareholder. Upon such a determination, the Fund will
provide notice in writing or by telephone to the shareholder at least 15 days
prior to suspending the exchange privilege and during the 15 day period the
shareholder will be required to (a) redeem his or her shares in the Fund or
(b) remain invested in the Fund or exchange into any of the funds of the
Smith Barney Mutual funds ordinarily available, which position the
shareholder would be expected to maintain for a significant period of time.
All relevant factors will be considered in determining what constitutes an
abusive pattern of exchanges.
PERFORMANCE DATA
From time to time, the Company may advertise the Fund's total return and
average annual total return in advertisements and/or other types of sales
literature. These figures are computed separately for Class A, Class B,
Class L and Class Y shares of the Fund. These figures are based on
historical earnings and are not intended to indicate future performance.
Total return is computed for a specified period of time assuming deduction of
the maximum sales charge, if any, from the initial amount invested and
reinvestment of all income dividends and capital gain distributions on the
reinvestment dates at prices calculated as stated in this prospectus, then
dividing the value of the investment at the end of the period so calculated
by the initial amount invested and subtracting 100%. The standard average
annual total return, as prescribed by the SEC is derived from this total
return, which provides the ending redeemable value. Such standard total
return information may also be accompanied with nonstandard total return
information for differing periods computed in the same manner but without
annualizing the total return or taking sales charges into account. The
Company may also include comparative performance information in advertising
or marketing the Fund's shares. Such performance information may include
data from Lipper Analytical Services, Inc. and other financial publications.
From time to time, the Company may quote the Fund's yield or total return in
advertisements or in reports and other communications to shareholders. The
Company may include comparative performance information in advertising or
marketing the Fund's shares. Such performance information may include the
following industry and financial publications- Barron's, Business Week, CDA
Investment Technologies, Inc., Changing Times, Forbes, Fortune, Institutional
Investor, Investors Daily, Money, Morningstar Mutual Fund Values, The New
York Times, USA Today and The Wall Street Journal. To the extent any
advertisement or sales literature of the Fund describes the expenses or
performance of any Class it will also disclose such information for the other
Classes.
Average Annual Total Return
"Average annual total return" figures are computed according to a formula
prescribed by the SEC. The formula can be expressed as follows:
P (1 + T)n = ERV
Where: P = a hypothetical initial payment of $ 1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical
$1,000
investment made at the beginning of a 1-, 5- or
10-year
period at the end of the 1-, 5- or 10-year
period (or
fractional portion thereof), assuming
reinvestment of all
dividends and distributions.
The ERV assumes complete redemption of the hypothetical investment at the end
of the measuring period. The Fund's net investment income changes in
response to fluctuations in interest rates and the expenses of the Fund.
Aggregate Total Return
The Fund's "aggregate total return," as described below, represents the
cumulative change in the value of an investment in the Fund for the specified
period and is computed by the following formula:
ERV - P
P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical
$10,000 investment made at the beginning of the
1-, 5- or 10-year period at the end of the 1-,
5- or 10-year period (or fractional portion
thereof), assuming reinvestment of all
dividends and distributions.
The ERV assumes complete redemption of the hypothetical investment at the end
of the measuring period.
Performance will vary from time to time depending on market conditions, the
composition of the Fund's portfolio and operating expenses. Consequently, any
given performance quotation should not be considered representative of the
Fund's performance for any specified period in the future. Because
performance will vary, it may not provide a basis for comparing an investment
in the Fund with certain bank deposits or other investments that pay a fixed
yield for a stated period of time.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions
The Fund's policy is to distribute its net investment income and net realized
capital gains, if any, annually. The Fund may also pay additional dividends
shortly before December 31 from certain amounts of undistributed ordinary
income and capital gains realized, in order to avoid a Federal excise tax
liability.
If a shareholder does not otherwise instruct, dividends and capital gains
distributions will be reinvested automatically in additional shares of the
same Class at net asset value, subject to no sales charge or Deferred Sales
Charge. A shareholder may change the option at any time by notifying his
Salomon Smith Barney Financial Consultant or Dealer Representative. A
shareholder whose account is held directly at the sub-transfer agent should
notify the sub-transfer agent in writing, requesting a change to this
reinvest option.
The per share dividends on Class B and Class L shares of the Fund may be
lower than the per share dividends on Class A and Class Y shares principally
as a result of the distribution fee applicable with respect to Class B and
Class L shares. The per share dividends on Class A shares of the Fund may be
lower than the per share dividends on Class Y shares principally as a result
of the service fee applicable to Class A shares. Distributions of capital
gains, if any, will be in the same amount for Class A, Class B, Class L and
Class Y shares.
Taxes
The following is a summary of the material United States federal income tax
considerations regarding the purchase, ownership and disposition of shares of
the Fund. Each prospective shareholder is urged to consult his own tax
adviser with respect to the specific federal, state, local and foreign tax
consequences of investing in a fund. The summary is based on the laws in
effect on the date of this SAI, which are subject to change.
The Fund and Its Investments
The Fund intends to qualify to be treated as a regulated investment company
each taxable year under the Code. To so qualify, the Fund must, among other
things: (a) derive at least 90% of its gross income in each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock or securities 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 the Fund's taxable year, (i) at least 50% of
the market value of the Fund's assets is represented by cash, securities of
other regulated investment companies, United States government securities and
other securities, with such other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the Fund's assets and not greater
than 10% of the outstanding voting securities of such issuer and (ii) not
more than 25% of the value of its assets is invested in the securities (other
than United States government securities or securities of other regulated
investment companies) of any one issuer or any two or more issuers that the
Fund controls and are determined to be engaged in the same or similar trades
or businesses or related trades or businesses.
As a regulated investment company, the Fund will not be subject to United
States federal income tax on its net investment income (i.e., income other
than its net realized long- and short-term capital gains) and its net
realized long- and short-term capital gains, if any, that it distributes to
its shareholders, provided an amount equal to at least 90% of its investment
company taxable income (i.e., 90% of its taxable income minus the excess, if
any, of its net realized long-term capital gains over its net realized short-
term capital losses (including any capital loss carryovers), plus or minus
certain other adjustments as specified in the Code) and 90% of its net tax-
exempt income for the taxable year is distributed in compliance with the
Code's timing and other requirements but will be subject to tax at regular
corporate rates on any taxable income or gains it does not distribute. The
Code imposes a 4% nondeductible excise tax on the Fund to the extent it does
not distribute by the end of any calendar year at least 98% of its 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 the Fund that is subject to corporate income tax will be
considered to have been distributed by year-end. In addition, the minimum
amounts that must be distributed in any year to avoid the excise tax will be
increased or decreased to reflect any underdistribution or overdistribution,
as the case may be, from the previous year. The Fund anticipates that it
will pay such dividends and will make such distributions as are necessary in
order to avoid the application of this tax.
If, in any taxable year, the Fund fails to qualify as a regulated investment
company under the Code or fails to meet the distribution requirement, it
would be taxed in the same manner as an ordinary corporation and
distributions to its shareholders would not be deductible by the Fund in
computing its taxable income. In addition, in the event of a failure to
qualify, the Fund's distributions, to the extent derived from the Fund's
current or accumulated earnings and profits would constitute dividends
(eligible for the corporate dividends-received deduction) which are taxable
to shareholders as ordinary income, even though those distributions might
otherwise (at least in part) have been treated in the shareholders' hands as
long-term capital gains. If the Fund fails to qualify as a regulated
investment company in any year, it must pay out its earnings and profits
accumulated in that year in order to qualify again as a regulated investment
company. In addition, if the Fund failed to qualify as a regulated
investment company for a period greater than one taxable year, the 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 Fund's transactions in foreign currencies, forward contracts, options and
futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code (including
provisions relating to "hedging transactions" and "straddles") that, among
other things, may affect the character of gains and losses realized by the
Fund (i.e., may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to the Fund and defer Fund losses. These
rules could therefore affect the character, amount and timing of
distributions to shareholders. These provisions also (a) will require the
Fund to mark-to-market certain types of the positions in its portfolio (i.e.,
treat them as if they were closed out) and (b) may cause the Fund to
recognize income without receiving cash with which to pay dividends or make
distributions in amounts necessary to satisfy the distribution requirements
for avoiding income and excise taxes. The Fund will monitor its
transactions, will make the appropriate tax elections and will make the
appropriate entries in its books and records when it acquires any foreign
currency, forward contract, option, futures contract or hedged investment in
order to mitigate the effect of these rules and prevent disqualification of
the Fund as a regulated investment company.
The Fund's investment in Section 1256 contracts, such as regulated futures
contracts, most forward currency forward contracts traded in the interbank
market and options on most stock indices, are subject to special tax rules.
All section 1256 contracts held by the Fund at the end of its taxable year
are required to be marked to their market value, and any unrealized gain or
loss on those positions will be included in the Fund's income as if each
position had been sold for its fair market value at the end of the taxable
year. The resulting gain or loss will be combined with any gain or loss
realized by the Fund from positions in section 1256 contracts closed during
the taxable year. Provided such positions were held as capital assets and
were not part of a "hedging transaction" nor part of a "straddle," 60% of the
resulting net gain or loss will be treated as long-term capital gain or loss,
and 40% of such net gain or loss will be treated as short-term capital gain
or loss, regardless of the period of time the positions were actually held by
the Fund.
Foreign Investments. Dividends or other income (including, in some cases,
capital gains) received by the Fund from investments in foreign securities
may be subject to withholding and other taxes imposed by foreign countries.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes in some cases. The Fund will not be eligible to elect
to treat any foreign taxes paid by it as paid by its shareholders, who
therefore will not be entitled to credits for such taxes on their own tax
returns. Foreign taxes paid by the Fund will reduce the return from the
Fund's investments.
Passive Foreign Investment Companies. If the Fund purchases shares in
certain foreign investment entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to United States federal income tax
on a portion of any "excess distribution" or gain from the disposition of
such shares even if such income is distributed as a taxable dividend by the
Fund to its shareholders. Additional charges in the nature of interest may
be imposed on the Fund in respect of deferred taxes arising from such
distributions or gains. If the Fund were to invest in a PFIC and elected to
treat the PFIC as a "qualified electing fund" under the Code, in lieu of the
foregoing requirements, the Fund might be required to include in income each
year a portion of the ordinary earnings and net capital gains of the
qualified electing fund, even if not distributed to the Fund, and such
amounts would be subject to the 90% and excise tax distribution requirements
described above. In order to make this election, the Fund would be required
to obtain certain annual information from the passive foreign investment
companies in which it invests, which may be difficult or not possible to
obtain.
Recently, legislation was enacted that provides a mark-to-market election for
regulated investment companies effective for taxable years beginning after
December 31, 1997. This election would result in the Fund being treated as
if it had sold and repurchased all of the PFIC stock at the end of each year.
In this case, the Fund would report gains as ordinary income and would deduct
losses as ordinary losses to the extent of previously recognized gains. The
election, once made, would be effective for all subsequent taxable years of
the Fund, unless revoked with the consent of the IRS. By making the
election, the Fund could potentially ameliorate the adverse tax consequences
with respect to its ownership of shares in a PFIC, but in any particular year
may be required to recognize income in excess of the distributions it
receives from PFICs and its proceeds from dispositions of PFIC company stock.
The Fund may have to distribute this "phantom" income and gain to satisfy its
distribution requirement and to avoid imposition of the 4% excise tax. The
Fund will make the appropriate tax elections, if possible, and take any
additional steps that are necessary to mitigate the effect of these rules.
Taxation of United States Shareholders
Dividends and Distributions. Any dividend declared by the Fund in October,
November or December of any calendar year and payable to shareholders of
record on a specified date in such a month shall be deemed to have been
received by each shareholder on December 31 of such calendar year and to have
been paid by the Fund not later than such December 31, provided such dividend
is actually paid by the Fund during January of the following calendar year.
The Fund intends to distribute annually to its shareholders substantially all
of its investment company taxable income, and any net realized long-term
capital gains in excess of net realized short-term capital losses (including
any capital loss carryovers). The Fund currently expects to distribute any
excess annually to its shareholders. However, if the Fund retains for
investment an amount equal to all or a portion of its net long-term capital
gains in excess of its net short-term capital losses and capital loss
carryovers, it will be subject to a corporate tax (currently at a rate of
35%) on the amount retained. In that event, the Fund will designate such
retained amounts as undistributed capital gains in a notice to its
shareholders who (a) will be required to include in income for United Stares
federal income tax purposes, as long-term capital gains, their proportionate
shares of the undistributed amount, (b) will be entitled to credit their
proportionate shares of the 35% tax paid by the Fund on the undistributed
amount against their United States federal income tax liabilities, if any,
and to claim refunds to the extent their credits exceed their liabilities, if
any, and (c) will be entitled to increase their tax basis, for United States
federal income tax purposes, in their shares by an amount equal to 65% of the
amount of undistributed capital gains included in the shareholder's income.
Organizations or persons not subject to federal income tax on such capital
gains will be entitled to a refund of their pro rata share of such taxes paid
by the Fund upon filing appropriate returns or claims for refund with the
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 the Fund designates as capital gains dividends
are taxable as long-term capital gains, whether paid in cash or in shares and
regardless of how long a shareholder has held shares of the Fund. Dividends
and distributions paid by the Fund attributable to dividends on stock of U.S.
corporations received by the Fund, with respect to which the Fund meets
certain holding period requirements, will be eligible for the deduction for
dividends received by corporations. Distributions in excess of the Fund's
current and accumulated earnings and profits will, as to each shareholder, be
treated as a tax-free return of capital to the extent of a shareholder's
basis in his shares of the Fund, and as a capital gain thereafter (if the
shareholder holds his shares of the Fund as capital assets). Shareholders
receiving dividends or distributions in the form of additional shares should
be treated for United States federal income tax purposes as receiving a
distribution in the amount equal to the amount of money that the shareholders
receiving cash dividends or distributions will receive, and should have a
cost basis in the shares received equal to such amount.
Investors considering buying shares just prior to a dividend or capital gain
distribution should be aware that, although the price of shares just
purchased at that time may reflect the amount of the forthcoming
distribution, such dividend or distribution may nevertheless be taxable to
them. If the Fund is the holder of record of any stock on the record date for
any dividends payable with respect to such stock, such dividends are included
in the Fund's gross income not as of the date received but as of the later of
(a) the date such stock became ex-dividend with respect to such dividends
(i.e., the date on which a buyer of the stock would not be entitled to
receive the declared, but unpaid, dividends) or (b) the date the Fund
acquired such stock. Accordingly, in order to satisfy its income
distribution requirements, the Fund may be required to pay dividends based on
anticipated earnings, and shareholders may receive dividends in an earlier
year than would otherwise be the case.
Sales of Shares. Upon the sale or exchange of his shares, a shareholder will
realize a taxable gain or loss equal to the difference between the amount
realized and his basis in his shares. Such gain or loss will be treated as
capital gain or loss, if the shares are capital assets in the shareholder's
hands, and will be long-term capital gain or loss if the shares are held for
more than one year and short-term capital gain or loss if the shares are held
for one year or less. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced, including
replacement through the reinvesting of dividends and capital gains
distributions in the Fund, within a 61-day period beginning 30 days before
and ending 30 days after the disposition of the shares. In such a case, the
basis of the shares acquired will be increased to reflect the disallowed
loss. Any loss realized by a shareholder on the sale of a Fund share held by
the shareholder for six months or less will be treated for United States
federal income tax purposes as a long-term capital loss to the extent of any
distributions or deemed distributions of long-term capital gains received by
the shareholder with respect to such share. If a shareholder incurs a sales
charge in acquiring shares of the Fund, disposes of those shares within 90
days and then acquires shares in a mutual fund for which the otherwise
applicable sales charge is reduced by reason of a reinvestment right (e.g.,
an exchange privilege), the original sales charge will not be taken into
account in computing gain/loss on the original shares to the extent the
subsequent sales charge is reduced. Instead, the disregarded portion of the
original sales charge will be added to the tax basis in the newly acquired
shares. Furthermore, the same rule also applies to a disposition of the
newly acquired shares made within 90 days of the second acquisition. This
provision prevents a shareholder from immediately deducting the sales charge
by shifting his or her investment in a family of mutual funds.
Backup Withholding. The Fund may be required to withhold, for United States
federal income tax purposes, 31% of the dividends, distributions and
redemption proceeds payable to shareholders who fail to provide the Fund with
their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Certain shareholders are exempt from backup withholding.
Backup withholding is not an additional tax and any amount withheld may be
credited against a shareholder's United States federal income tax
liabilities.
Notices. Shareholders will be notified annually by the Fund as to the United
States federal income tax status of the dividends, distributions and deemed
distributions attributable to undistributed capital gains (discussed above in
"Taxes - Taxation of United States Shareholders -Dividends and
Distributions") made by the Fund to its shareholders. Furthermore,
shareholders will also receive, if appropriate, various written notices after
the close of the Fund's taxable year regarding the United States federal
income tax status of certain dividends, distributions and deemed
distributions that were paid (or that are treated as having been paid) by the
Fund to its shareholders during the preceding taxable year.
Other Taxation
Distributions also may be subject to additional state, local and foreign
taxes depending on each shareholder's particular situation.
The foregoing is only a summary of certain material tax consequences
affecting the Fund and its shareholders. Shareholders are advised to consult
their own tax advisers with respect to the particular tax consequences to
them of an investment in the Fund.
ADDITIONAL INFORMATION
The Company was incorporated on September 29, 1981 under the laws of the
state of Maryland 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.
The Company offers shares of nine separate series with a par value of $.001
per share. The Fund offers shares currently classified into four Classes -
A, B, L and Y. Each Class of the Fund represents an identical interest in
the Fund's investment portfolio. As a result, the Classes have the same
rights, privileges and preferences, except with respect to: (a) the
designation of each Class; (b) the effect of the respective sales charges; if
any, for each class; (c) the distribution and/or service fees borne by each
Class pursuant to the Plan; (d) the expenses allocable exclusively to each
Class; (e) voting rights on matters exclusively affecting a single Class;
(f) the exchange privilege of each Class; and (g) the conversion feature of
the Class B shares. The Company's Board of Directors does not anticipate
that there will be any conflicts among the interests of the holders of the
different Classes. The directors, on an ongoing basis, will consider whether
any such conflict exists and, if so, take appropriate action.
As permitted by Maryland law, there will normally be no meetings of
shareholders for the purpose of electing directors unless and until such time
as less than a majority of the directors holding office have been elected by
shareholders. At that time, the directors then in office will call a
shareholders' meeting for the election of directors. The directors must call
a meeting of shareholders for the purpose of voting upon the question or
removal of any director when requested in writing to do so by the record
holders of not less than 10% of the outstanding shares of the Fund. At such
a meeting, a director may be removed after the holders of record of not less
than a majority of the outstanding shares of the Fund have declared that the
director be removed either by declaration in writing or by votes cast in
person or by proxy. Except as set forth above, the directors shall continue
to hold office and may appoint successor directors.
As used in the Prospectus and this Statement of Additional Information, a
"vote of a majority of the outstanding voting securities" means the
affirmative vote of the lesser of (a) more than 50% of the outstanding shares
of the Company (or the affected series or Class) or (b) 67% or more of such
shares present at a meeting if more than 50% of the outstanding shares of the
Company (or the affected series or Class) are represented at the meeting in
person or by proxy. A series or Class shall be deemed to be affected by a
matter unless it is clear that the interests of each series or Class in the
matter are identical or that the matter does not affect any interest of the
series or Class. The approval of a management agreement or any change in a
fundamental investment policy would be effectively acted upon with respect to
the Fund only if approved by a "vote of a majority of the outstanding voting
securities" of the Fund; however, the ratification of independent
accountants, the election of directors, and the approval of a distribution
agreement that is submitted to shareholders are not subject to the separate
voting requirements and may be effectively acted upon by a vote of the
holders of a majority of all Company shares voting without regard to series
or Class.
Annual and Semi-annual Reports. The Fund sends its shareholders a semi-
annual report and an audited annual report, which include listings of
investment securities held by the Fund at the end of the period covered. In
an effort to reduce the Fund's printing and mailing costs, the Fund
consolidates the mailing of its semi-annual and annual reports by household.
This consolidation means that a household having multiple accounts with the
identical address of record will receive a single copy of each report. In
addition, the Fund also consolidates the mailing of its Prospectus so that a
shareholder having multiple accounts (that is, individual, IRA and/or Self-
Employed Retirement Plan accounts) will receive a single Prospectus annually.
Shareholders who do not want this consolidation to apply to their accounts
should contact their Salomon Smith Barney Financial Consultant or the
Transfer Agent.
FINANCIAL STATEMENTS
As of the date of this SAI, the Fund had not yet commenced operations.
Consequently, there are no financial statements for the Fund at this time.
OTHER INFORMATION
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.
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 to be filed amendment.
(k) Not Applicable
(l) Not Applicable
(m)(1) Amended Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on behalf
of Smith Barney Investment Grade Bond Fund, Smith
Barney Government Securities Fund, Smith Barney Special
Equities Fund and Smith Barney European Fund and Smith
Barney, Inc. ("Smith Barney") are incorporated by
reference to Post-Effective Amendment No. 37 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 to be filed amendment.
(o) Form of Plan pursuant to Rule 18f-3 is incorporated by
reference to Post-Effective Amendment No.50 to
Registration Statement.
(p) Revised Code of Ethics is incorporated by reference to Post-Effective
Amendment No. 71 to the Registrant's Registration Statement.
Item 24.
None.
Item 25. Indemnification
The response to this item is incorporated by
reference to Pre-Effective Amendment No. 1 to the
registration statement filed on Form N-14 on October
8, 1993 (File No. 33-50153).
Item 26. Business and Other Connections of Investment Adviser
Investment Adviser - - SSB Citi Fund Management LLC ("SSB Citi")
Successor to SSBC Fund Management Inc. ("SSBC")
SSB Citi was incorporated in December 1968 under the laws
of the State of Delaware. On September 21, 1999, SSB Citi
was converted into a Delaware Limited Liability Company.
SSB Citi is a wholly owned subsidiary of Salomon Smith Barney
Holdings Inc. ("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) Citi Fiduciary Trust Company
388 Greenwich Street
New York, New York 10013
(6) PFPC Global Fund Services
Exchange Place
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
8th day of June, 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 6/8/00
Heath B. McLendon (Chief Executive Officer)
/s/ Lewis E. Daidone Senior Vice President
Lewis E. Daidone and Treasurer 6/8/00
(Chief Financial
and Accounting Officer)
/s/ Paul R. Ades * Director 6/8/00
Paul R. Ades
/s/ Herbert Barg* Director 6/8/00
Herbert Barg
/s/ Dwight B. Crane* Director 6/8/00
Dwight B. Crane
/s/ Frank Hubbard* Director 6/8/00
Frank Hubbard
/s/ Jerome Miller** Director 6/8/00
Jerome Miller
/s/ Ken Miller* Director 6/8/00
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
