<PAGE>
[SMITH BARNEY MUTUAL FUNDS LOGO]
PROSPECTUS
GOVERNMENT
SECURITIES
FUND
CLASS A, B, L, Y AND 1 SHARES
---------------------------------------
APRIL 28, 2000 AS AMENDED
AUGUST 21, 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 Smith Barney Mutual Funds
GOVERNMENT SECURITIES FUND
CONTENTS
<TABLE>
<S> <C>
Investments, risks and performance......................... 2
More on the fund's investments............................. 8
Management................................................. 9
Choosing a class of shares to buy.......................... 10
Comparing the fund's classes............................... 11
Sales charges.............................................. 12
More about deferred sales charges.......................... 16
Buying shares.............................................. 17
Exchanging shares.......................................... 19
Redeeming shares........................................... 21
Other things to know about share transactions.............. 23
Dividends, distributions and taxes......................... 25
Share price................................................ 26
Financial highlights....................................... 27
</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.
<PAGE>
Government Securities Fund 2
INVESTMENTS, RISKS AND PERFORMANCE
INVESTMENT OBJECTIVE
The fund seeks high current return.
PRINCIPAL INVESTMENT STRATEGIES
KEY INVESTMENTS The fund invests primarily in debt securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities. These
securities include U.S. Treasury securities and mortgage-related securities.
Mortgage-related securities issued by federal agencies or instrumentalities may
be backed by the full faith and credit of the U.S. Treasury, by the right of the
issuer to borrow from the U.S. government or only by the credit of the issuer
itself.
The fund may also enter into mortgage dollar roll transactions where the fund
sells a mortgage related security and simultaneously agrees to repurchase, at a
future date, another mortgage related security with the same interest rate and
maturity date but generally backed by a different pool of mortgages. The
benefits from these transactions depend on the manager's ability to forecast
mortgage prepayment patterns on different mortgage pools. The fund may lose
money if the securities to be repurchased decline in value before the date of
repurchase.
SELECTION PROCESS The manager focuses on identifying undervalued securities.
Specifically, the manager:
- Monitors the spreads between U.S. Treasury and government agency or
instrumentality issuers and purchases agency and instrumentality issues that
it believes will provide a yield advantage
- Determines sector and maturity weightings based on intermediate and long-term
assessments of the economic environment and relative value factors based on
interest rate outlook
- Uses research to identify sectors of the government and mortgage markets that
are inefficiently priced, and adjusts portfolio positions to take advantage of
new information
- Measures the potential impact of supply/demand imbalances, yield curve shifts
and changing prepayment patterns to identify individual securities that
balance potential return and risk
<PAGE>
3 Smith Barney Mutual Funds
PRINCIPAL RISKS OF INVESTING IN THE FUND
Investors could lose money on their investment in the fund, or the fund may not
perform as well as other investments, if:
- Interest rates increase, causing the prices of fixed income securities to
decline and reducing the value of the fund's portfolio
- As interest rates decline, the issuers of mortgage-related securities held by
the fund may pay principal earlier than scheduled or exercise a right to call
the securities, forcing the fund to reinvest in lower yielding securities.
This is known as prepayment or call risk.
- As interest rates increase, slower than expected principal payments may extend
the average life of fixed income securities, locking in below-market interest
rates and reducing the value of these securities. This is known as extension
risk.
- The manager's judgment about interest rates or the attractiveness, value or
income potential of a particular security proves incorrect
- The fund may engage in active and frequent trading, resulting in high
portfolio turnover. This may lead to the realization and distribution to
shareholders of higher capital gains, increasing their tax liability. Frequent
trading also increases transaction costs, which could detract from the fund's
performance.
Payments of principal and interest on mortgage pools issued by instrumentalities
of the U.S. government are not guaranteed by the U.S. government. Although
mortgage pools issued by U.S. agencies are guaranteed with respect to payments
of principal and interest, this guarantee does not apply to losses resulting
from declines in the market value of these securities.
WHO MAY WANT TO INVEST The fund may be an appropriate investment if you:
- Are seeking income consistent with preservation of capital
- Are willing to accept the interest rate risks and market risks of investing in
government bonds and mortgage-related securities
- Prefer to invest in U.S. government securities rather than higher yielding
corporate securities
<PAGE>
Government Securities Fund 4
RISK RETURN BAR CHART
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. Past performance does not
necessarily indicate how the fund will perform in the future. The bar chart
shows the performance of the fund's Class B shares for each of the past 10
years. Class 1, A, L and Y shares have different performance because of their
different expenses. The performance information in the chart does not reflect
sales charges, which would reduce your return.
TOTAL RETURN FOR CLASS B SHARES
[Risk bar chart]
<TABLE>
<CAPTION>
90 6.99
-- ----
<S> <C>
91 16.28
92 5.45
93 10.45
94 -3.25
95 13.87
96 1.42
97 10.82
98 7.44
99 -5.35
</TABLE>
CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS (PAST 10 YEARS)
Highest: 6.36% in 3rd quarter 1991; Lowest: (3.62)% in 1st quarter 1992.
Year to date; 3.61% through 06/30/00
<PAGE>
5 Smith Barney Mutual Funds
RISK RETURN TABLE
This table indicates the risks of investing in the fund by comparing the average
annual total return of each class for the periods shown with that of the Lehman
Brothers Government Bond Index ("Lehman Index"), a broad-based unmanaged index
of all U.S. government obligations. This table assumes imposition of the maximum
sales charge applicable to the class, redemption of shares at the end of the
period, and reinvestment of distributions and dividends.
AVERAGE ANNUAL TOTAL RETURNS
CALENDAR YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
CLASS 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE
<S> <C> <C> <C> <C> <C>
A (9.24)% 4.97% n/a 4.90% 11/06/92
B (9.42)% 5.25% 6.20% 7.27% 03/20/84
L (7.24)% 5.26% n/a 4.36% 02/04/93
Y (4.61)% n/a n/a 4.38% 02/07/96
1 n/a n/a n/a n/a n/a*
Lehman Index (2.23)% 7.44% 7.48% 9.31% **
</TABLE>
* Class 1 Shares are currently not being offered. Their inception date will be
September 11, 2000.
** Index comparison begins on March 31, 1984.
<PAGE>
Government Securities Fund 6
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 CLASS 1
<S> <C> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a % of
offering price) 4.50%* None 1.00% None 6.75%
Maximum deferred sales
charge (load) (as a % of
the lower of net asset
value at purchase or
redemption) None* 4.50% 1.00% None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
(EXPENSES DEDUCTED FROM
FUND ASSETS) CLASS A CLASS B CLASS L CLASS Y CLASS 1
<S> <C> <C> <C> <C> <C>
Management fee 0.55% 0.55% 0.55% 0.55% 0.55%
Distribution and
service (12b-1) fees 0.25% 0.75% 0.70% None None
Other expenses 0.13% 0.11% 0.14% 0.04% 0.13%
---- ---- ---- ---- ----
Total annual fund
operating expenses 0.93% 1.41% 1.39% 0.59% 0.68%
==== ==== ==== ==== ====
</TABLE>
* You may buy Class A shares in amounts of $500,000 or more at net asset value
(without an initial sales charge) but if you redeem those shares within 12
months of their purchase, you will pay a deferred sales charge of 1.00%.
<PAGE>
7 Smith Barney Mutual Funds
EXAMPLE
This example helps you compare the costs of investing in the fund with the costs
of investing in other mutual funds. Your actual costs may be higher or lower.
The example assumes:
- You invest $10,000 in the fund for the period shown
- Your investment has a 5% return each year
- You reinvest all distributions and dividends without a sales charge
- The fund's operating expenses remain the same
NUMBER OF YEARS YOU OWN YOUR SHARES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A (with or without redemption) $541 $733 $ 942 $1,542
Class B (redemption at end of period) $594 $746 $ 871 $1,560
Class B (no redemption) $144 $446 $ 771 $1,560
Class L (redemption at end of period) $340 $536 $ 853 $1,752
Class L (no redemption) $240 $536 $ 853 $1,752
Class Y (with or without redemption) $ 60 $189 $ 329 $ 738
Class 1 (with or without redemption) $740 $878 $1,028 $1,464
</TABLE>
<PAGE>
Government Securities Fund 8
MORE ON THE FUND'S INVESTMENTS
DERIVATIVE CONTRACTS The fund may, but need not, use derivative contracts, such
as interest rate futures and options on interest rate futures, for any of the
following purposes:
- To hedge against the economic impact of adverse changes in the market value of
portfolio securities, because of changes in interest rates
- As a substitute for buying or selling securities
A futures 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 securities.
Even a small investment in derivative contracts can have a big impact on a
fund's interest rate exposure. Therefore, using derivatives can
disproportionately increase losses and reduce opportunities for gains when
interest rates are changing. The fund may not fully benefit from or may lose
money on derivatives if changes in their value do not correspond accurately to
changes in the value of the fund's holdings. The other parties to certain
derivative contracts present the same types of default risk as issuers of fixed
income securities. Derivatives can also make a 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.
<PAGE>
9 Smith Barney Mutual Funds
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.
James E. Conroy, investment officer of the manager and managing director of
Salomon Smith Barney, has been responsible for the day-to-day management of the
fund since its inception in 1984.
MANAGEMENT FEE For its services, the manager received a fee during the fund's
last fiscal year equal to 0.35% of the fund's average daily net assets. In
addition, the manager received a fee for its administrative services to the fund
equal to 0.20% of the fund's average daily net assets.
DISTRIBUTOR The fund has entered into agreements with Salomon Smith Barney and
PFS Distributors Inc. to distribute the fund's shares.
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.
A distributor may make payments for distribution and/or shareholder servicing
activities out of its past profits and other available sources. A distributor
may also make payments for marketing, promotional or related expenses to
dealers. The amount of these payments is determined by the distributor and may
be substantial. SSB Citi or an affiliate may make similar payments under similar
arrangements.
TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT Citi Fiduciary Trust Company
serves as the fund's transfer agent and shareholder servicing agent (the
"transfer agent"). The transfer agent has entered into sub-transfer agency and
services agreements with PFPC Global Fund Services and PFS Shareholder Services
to serve as the fund's sub-transfer agents (the "sub-transfer agents"). The
sub-transfer agents will perform certain functions including shareholder record
keeping and accounting services.
<PAGE>
Government Securities Fund 10
CHOOSING A CLASS OF SHARES TO BUY
You can choose among four classes of shares: Classes A, B, L and Y. In addition,
you can buy additional Class 1 shares if you are a Class 1 shareholder. 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 broker-dealer, financial intermediary, financial institution or a
distributor's financial consultants (each called a "Service Agent")
- The fund, but only if you are investing through certain qualified plans or
certain dealer representatives
All classes of shares are not available through all Service Agents. You should
contact your Service Agent for further information.
INVESTMENT MINIMUMS Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
CLASSES A,
B, L CLASS Y ALL CLASSES
<S> <C> <C> <C>
General $1,000 $15 million $50
IRAs, Self Employed Retirement Plans,
Uniform Gift to Minor Accounts $250 $15 million $50
Qualified Retirement Plans* $25 $15 million $25
Simple IRAs $1 n/a $ 1
Monthly Systematic Investment Plans $25 n/a $25
Quarterly Systematic Investment Plans $50 n/a $50
</TABLE>
* Qualified Retirement Plans are retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, including 401(k)
plans
<PAGE>
11 Smith Barney Mutual Funds
COMPARING THE FUND'S CLASSES
Your Service Agent can help you decide which class meets your goals. The Service
Agent may receive different compensation depending upon which class you choose.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS L CLASS Y CLASS 1
<S> <C> <C> <C> <C> <C>
KEY FEATURES - Initial - No initial - Initial - No initial - Only
sales charge sales charge sales charge or deferred available to
- You may - Deferred is lower sales charge eligible
qualify for sales charge than Class A - Must invest Class 1
reduction or declines - Deferred at least $15 shareholders
waiver of over time sales charge million - Higher
initial - Convert to for only 1 - Lower annual initial sales
sales charge Class A year expenses charge
- Lower annual after 8 - Does not than the - Lower annual
expenses years convert to other expenses
than Class B - Higher Class A classes than Class
and Class L annual - Higher A, B and L
expenses annual
than Class A expenses
than Class A
-----------------------------------------------------------------------------------------------------
INITIAL SALES CHARGE Up to 4.50%; None 1.00% None Up to 8.50%
reduced for reduced for
large large
purchases purchases
and waived
for certain
investors;
no charge
for
purchases of
$500,000 or
more
-----------------------------------------------------------------------------------------------------
DEFERRED SALES CHARGE 1.00% on Up to 4.50% 1.00% if you None None
purchases of charged when redeem
$500,000 or you redeem within 1
more if you shares. The year of
redeem charge is purchase
within 1 reduced over
year of time and
purchase there is no
deferred
sales charge
after 6
years
-----------------------------------------------------------------------------------------------------
ANNUAL DISTRIBUTION 0.25% of 0.75% of 0.70% of None None
AND SERVICE FEES average average average
daily net daily net daily net
assets assets assets
-----------------------------------------------------------------------------------------------------
EXCHANGE PRIVILEGE* Class A shares Class B shares Class L shares Class Y shares Class 1 Shares
of most of most of most of most of Smith
Smith Barney Smith Barney Smith Barney Smith Barney Barney funds
funds funds. funds funds that offer
Class 1
shares and
Class A
shares of
certain
other Smith
Barney
mutual funds
-----------------------------------------------------------------------------------------------------
</TABLE>
*Ask your Service Agent for the Smith Barney funds available for exchange.
<PAGE>
Government Securities Fund 12
SALES CHARGES
CLASS A SHARES
You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge on
the fund's distributions or dividends you reinvest in additional Class A shares.
The table below shows the rate of sales charge you pay, depending on the amount
you purchase.
The table below also shows the amount of broker/dealer compensation that is paid
out of the sales charge. This compensation includes commissions and other fees
Service Agents that sell shares of the Fund receive. The distributors keep up to
approximately 10% of the sales charge imposed on Class A shares. Service Agents
will also receive the service fee payable on Class A shares at an annual rate
equal to 0.25% of the average daily net assets represented by the Class A shares
sold by them.
<TABLE>
<CAPTION>
BROKER/DEALER
SALES CHARGE AS A % OF: COMMISSION
OFFERING NET AMOUNT AS A % OF
AMOUNT OF PURCHASE PRICE (%) INVESTED (%) OFFERING PRICE
<S> <C> <C> <C>
Less than $25,000 4.50 4.71 4.05
$25,000 but less than $50,000 4.00 4.17 3.60
$50,000 but less than $100,000 3.50 3.63 3.15
$100,000 but less than $250,000 2.50 2.56 2.25
$250,000 but less than $500,000 1.50 1.52 1.35
$500,000 or more 0.00 0.00 0.00
</TABLE>
INVESTMENTS OF $500,000 OR MORE You do not pay an initial sales charge when
you buy $500,000 or more of Class A shares. However, if you redeem these Class
A shares within one year of purchase, you will pay a deferred sales charge of
1%.
QUALIFYING FOR A REDUCED CLASS A SALES CHARGE There are several ways you can
combine multiple purchases of Class A shares of Smith Barney funds to take
advantage of the breakpoints in the sales charge schedule.
<PAGE>
13 Smith Barney Mutual Funds
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. Certain
trustees and fiduciaries may be entitled to combine accounts in determining
their sales charge.
Letter of intent -- lets you purchase Class A shares of the fund and other Smith
Barney funds over a 13-month period and pay the same sales charge, if any, as if
all shares had been purchased at once. You may include purchases on which you
paid a sales charge within 90 days before you sign the letter.
WAIVERS FOR CERTAIN CLASS A INVESTORS Class A initial sales charges are waived
for certain types of investors, including:
- Employees of NASD members
- Investors participating in a fee-based program sponsored by certain
broker-dealers affiliated with Citigroup
- Investors who redeemed Class A shares of a Smith Barney fund in the past 60
days, if the investor's Service Agent is notified
If you want to learn about additional waivers of Class A initial sales charges,
contact your Service Agent or consult the Statement of Additional Information
("SAI").
CLASS B SHARES
You buy Class B shares at net asset value without paying an initial sales
charge. However, if you redeem your Class B shares within six years of purchase,
you will pay a deferred sales charge. The deferred sales charge decreases as the
number of years since your purchase increases.
<TABLE>
<CAPTION>
YEAR AFTER PURCHASE 1ST 2ND 3RD 4TH 5TH 6TH THROUGH 8TH
<S> <C> <C> <C> <C> <C> <C>
Deferred sales charge 4.5% 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
<PAGE>
Government Securities Fund 14
annual expenses. Your Class B shares will convert to Class A shares as follows:
<TABLE>
<CAPTION>
SHARES ISSUED: SHARES ISSUED:
SHARES ISSUED: ON REINVESTMENT OF UPON EXCHANGE FROM
AT INITIAL DIVIDENDS AND ANOTHER SMITH BARNEY
PURCHASE DISTRIBUTIONS FUND
<S> <C> <C>
Eight years after the In same proportion as On the date the shares
date of purchase the number of Class B originally acquired
shares converting is would have converted
to total Class B into Class A shares
shares you own
(excluding shares
issued as a dividend)
</TABLE>
CLASS 1 SALES CHARGE
Class 1 shares are offered to eligible Class 1 shareholders at the next
determined net asset value plus a sales charge. You do not pay a sales charge on
a fund's distributions or dividends that you reinvest in additional Class 1
shares.
You pay a lower sales charge as the size of your investment increases to certain
levels called breakpoints.
<TABLE>
<CAPTION>
SALES CHARGE BROKER/DEALER
SALES CHARGE AS % OF COMMISSION
AS % OF NET AMOUNT AS A % OF
AMOUNT OF INVESTMENT OFFERING PRICE INVESTED OFFERING PRICE
<S> <C> <C> <C>
Less than $25,000 6.75% 7.24% 6.00%
$25,000 but less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.25% 4.44% 3.50%
$100,000 but less than $250,000 3.50% 3.63% 2.75%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.60%
$1,000,000 but less than
$2,500,000 1.00% 1.01% 0.75%
$2,500,000 but less than
$5,000,000 0.50% 0.50% 0.40%
$5,000,000 or more 0.25% 0.25% 0.20%
</TABLE>
CLASS L SHARES (AVAILABLE THROUGH CERTAIN SERVICE AGENTS)
You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1% (1.01% of the net amount invested). In addition, if you
redeem your Class L shares within one year of purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the fund and/or other Smith
Barney mutual funds on June 12, 1998, you will not pay an initial sales charge
on Class L shares you buy before June 22, 2001.
<PAGE>
15 Smith Barney Mutual Funds
CLASS Y SHARES (AVAILABLE THROUGH CERTAIN SERVICE AGENTS)
You buy Class Y shares at net asset value with no initial sales charge and no
deferred sales charge when you redeem. You must meet the $15,000,000 initial
investment requirement. You can 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.
<PAGE>
Government Securities Fund 16
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. Therefore you do not pay a sales
charge on amounts representing appreciation or depreciation.
In addition, you do not pay a deferred sales charge on:
- Shares exchanged for shares of another Smith Barney fund
- Shares representing reinvested distributions and dividends
- Shares no longer subject to the deferred sales charge
Each time you place a request to redeem shares, the fund will first redeem any
shares in your account that are not subject to a deferred sales charge and then
the shares in your account that have been held the longest.
If you redeemed shares of a Smith Barney fund in the past 60 days and paid a
deferred sales charge, you may buy shares of the fund at the current net asset
value and be credited with the amount of the deferred sales charge, if you
notify your Service Agent.
The fund's distributors receive deferred sales charges as partial compensation
for their expenses in selling shares, including the payment of compensation to
your Service Agent.
Service Agents selling Class B shares receive a commission of up to 4.50% of the
purchase price of the Class B shares they sell, except for sales exempt from the
deferred sales charge. Service Agents also receive a service fee at an annual
rate equal to 0.25% of the average daily net assets represented by the Class B
shares they are servicing.
Service Agents selling Class L shares receive commission of up to 2.00% of the
purchase price of the Class L shares they sell.
DEFERRED SALES CHARGE WAIVERS
The deferred sales charge for each share class will generally be waived:
- On payments made through certain systematic withdrawal plans
- On certain distributions from a retirement plan
- For involuntary redemptions of small account balances
- For 12 months following the death or disability of a shareholder
If you want to learn more about additional waivers of deferred sales charges,
contact your Service Agent or consult the SAI.
<PAGE>
17 Smith Barney Mutual Funds
BUYING SHARES
<TABLE>
<C> <S>
Through a You should contact your Service Agent to open
Service Agent a brokerage account and make arrangements to
buy shares.
If you do not provide the following
information, your order will be rejected:
- Class of shares being bought
- Dollar amount or number of shares being
bought
Your Service Agent may charge an annual
account maintenance fee.
--------------------------------------------------------------------
Through the Qualified retirement plans and certain other
fund investors who are clients of certain Service
Agents are eligible to buy shares directly
from the fund.
- Write the fund at the following address:
SMITH BARNEY INVESTMENT FUNDS INC.
SMITH BARNEY GOVERNMENT SECURITIES 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.
</TABLE>
<PAGE>
Government Securities Fund 18
<TABLE>
<C> <S>
Through a You may authorize your Service Agent or a
systematic sub- transfer agent to transfer funds
investment plan automatically from (i) a regular bank
account, (ii) cash held in a brokerage
account opened with a Service Agent or (iii)
certain money market funds, in order to buy
shares on a regular basis.
- Amounts transferred should be at least: $25
monthly or $50 quarterly.
- If you do not have sufficient funds in your
account on a transfer date, your Service
Agent or the sub-transfer agent may charge
you a fee.
For more information, contact your Service
Agent or the transfer agent or consult the
SAI.
</TABLE>
<PAGE>
19 Smith Barney Mutual Funds
EXCHANGING SHARES
<TABLE>
<C> <S>
Smith Barney offers You should contact your Service Agent to
a distinctive exchange into other Smith Barney funds. Be
family of funds sure to read the prospectus of the Smith
tailored to help Barney fund you are exchanging into. An
meet the varying exchange is a taxable transaction.
needs of both
large and small - You may exchange shares only for shares of
investors the same class of another Smith Barney fund.
Not all Smith Barney funds offer all
classes.
- Not all Smith Barney funds may be offered
in your state of residence. Contact your
Service Agent or the transfer agent.
- You must meet the minimum investment amount
for each fund (except for systematic
investment plan exchanges).
- If you hold share certificates, the
transfer agent must receive the certificates
endorsed for transfer or with signed stock
powers (documents transferring ownership of
certificates) before the exchange is
effective.
- The fund may suspend or terminate your
exchange privilege if you engage in an
excessive pattern of exchanges.
--------------------------------------------------------------------
Waiver of Your shares will not be subject to an initial
additional sales sales charge at the time of the exchange.
charges
Your deferred sales charge (if any) will
continue to be measured 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.
</TABLE>
<PAGE>
Government Securities Fund 20
<TABLE>
<C> <S>
By telephone If you do not have a brokerage account with a
Service Agent, you may be eligible to
exchange shares through the fund. You must
complete an authorization form to authorize
telephone transfers. If eligible, you may
make telephone exchanges on any day the New
York Stock Exchange is open. For clients of a
PFS Registered Representative, call PFS
Shareholder Services at 1-800-544-5445
between 8 a.m. and 8 p.m. All other
shareholders should call the transfer agent
at 1-800-451- 2010 between 9:00 a.m. and 4:00
p.m. (Eastern time). Requests received after
the close of regular trading on the Exchange
are priced at the net asset value next
determined.
You can make telephone exchanges only between
accounts that have identical registrations.
--------------------------------------------------------------------
By mail If you do not have a brokerage account,
contact your Service Agent or write to a
sub-transfer agent at the address on the
following page.
</TABLE>
<PAGE>
21 Smith Barney Mutual Funds
REDEEMING SHARES
<TABLE>
<C> <S>
Generally Contact your Service Agent to redeem shares
of the fund.
If you hold share certificates, the
sub-transfer agent must receive the
certificates endorsed for transfer or with
signed stock powers before the redemption is
effective.
If the shares are held by a fiduciary or
corporation, other documents may be required.
Your redemption proceeds will be sent within
three business days after your request is
received in good order. However, if you
recently purchased your shares by check, your
redemption proceeds will not be sent to you
until your original check clears, which may
take up to 15 days.
If you have a brokerage account with a
Service Agent, your redemption proceeds will
be placed in your account and not reinvested
without your specific instruction. In other
cases, unless you direct otherwise, your
redemption proceeds will be paid by check
mailed to your address of record.
--------------------------------------------------------------------
By mail For accounts held directly at the fund, send
written requests to the fund at either of the
following addresses:
For clients of a PFS Investments Registered
Representative, write PFS Shareholder
Services at the following address:
PFS SHAREHOLDER SERVICES
P.O. BOX 105043
ATLANTA, GA 30348-5043
For all other investors, send your request to
PFPC Global Fund Services at the following
address:
SMITH BARNEY INVESTMENT FUNDS INC.
SMITH BARNEY GOVERNMENT SECURITIES FUND
(SPECIFY CLASS OF SHARES)
C/O PFPC GLOBAL FUND SERVICES
P.O. BOX 9699
PROVIDENCE, R.I. 02940-9699
Your written request must provide the
following:
- The fund and account number
- The class of shares and the dollar amount
or number of shares to be redeemed
- Signatures of each owner exactly as the
account is registered
--------------------------------------------------------------------
</TABLE>
<PAGE>
Government Securities Fund 22
<TABLE>
<C> <S>
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 $50,000 per day through the fund. You must
complete an authorization form to authorize
telephone redemptions. If eligible, you may
request redemptions by telephone on any day
the New York Stock Exchange is open. For
clients of a PFS Investments Registered
Representative, call PFS Shareholder Services
at 1-800-544-5445 between 8:00 a.m. and 8:00
p.m. (Eastern time). All other shareholders
should call the transfer agent at 1-800-
451-2010 between 9:00 a.m. and 4:00 p.m.
(Eastern time). Requests received after the
close of regular trading on the Exchange are
priced at the net asset value next
determined.
Your redemption proceeds can be sent by check
to your address of record or by wire or
electronic transfer (ACH) to a bank account
designated on your authorization form. You
must submit a new authorization form to
change the bank account designated to receive
wire or electronic transfers and you may be
asked to provide certain other documents. The
sub-transfer agent may charge a fee on an
electronic transfer (ACH).
--------------------------------------------------------------------
Automatic cash You can arrange for the automatic redemption
withdrawal plans of a portion of your shares on a monthly or
quarterly basis. To qualify you must own
shares of the fund with a value of at least
$10,000 ($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 Service
Agent or consult the SAI.
</TABLE>
<PAGE>
23 Smith Barney Mutual Funds
OTHER THINGS TO KNOW ABOUT SHARE TRANSACTIONS
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information, without which your
request will not be processed:
- Name of the fund
- Account number
- Class of shares being bought, exchanged or redeemed
- Dollar amount or number of shares being bought, exchanged or redeemed
- Signature of each owner exactly as the account is registered
The fund will try to confirm that any telephone exchange or redemption request
is genuine by recording calls, asking the caller to provide certain personal
identification information, sending you a written confirmation or requiring
other confirmation procedures from time to time.
SIGNATURE GUARANTEES To be in good order, your redemption request must include
a signature guarantee if you:
- Are redeeming over $50,000
- Are sending signed share certificates or stock powers to the sub-transfer
agent
- Instruct the sub-transfer agent to mail the check to an address different from
the one on your account
- Changed your account registration
- Want the check paid to someone other than the account owner(s)
- Are transferring the redemption proceeds to an account with a different
registration
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
<PAGE>
Government Securities Fund 24
- 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 Securities
and Exchange Commission
- Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities
SMALL ACCOUNT BALANCES If your account falls below $500, ($250 for IRA
accounts) because of a redemption of fund shares, the fund may ask you to bring
your account up to the applicable minimum investment amounts. If you choose not
to do so within 60 days, the fund may close your account and send you the
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.
<PAGE>
25 Smith Barney Mutual Funds
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS The fund generally pays dividends from net investment income
periodically and makes capital gain distributions, if any, once a year,
typically in December. The fund may pay additional distributions and dividends
at other times if necessary for the fund to avoid a federal tax. Capital gain
distributions and dividends are reinvested in additional fund shares of the same
class that you hold. The fund expects distributions to be primarily from income.
You do not pay a sales charge on reinvested distributions or dividends.
Alternatively, you can instruct your Service Agent 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 Long-term capital gain
distributions
Short-term capital gain Ordinary income
distributions
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
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.
<PAGE>
Government Securities Fund 26
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. When reliable market prices or quotations are not readily available,
or when the value of a security has been materially affected by events occurring
after the close of the Exchange or market on which the security is principally
traded, the fund may price those securities at fair value. 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 Service Agent or the fund's sub-transfer agents before the
New York Stock Exchange closes. If the Exchange closes early, you must place
your order prior to the actual closing time. Otherwise, you will receive the
next business day's price.
Service Agents must transmit all orders to buy, exchange or redeem shares to the
fund's sub-transfer agent before the sub-transfer agent's close of business.
<PAGE>
27 Smith Barney Mutual Funds
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
performance of each class for the past 5 years (or since inception if less than
5 years). Certain information reflects financial results for a single share.
Total return represents the rate that a shareholder would have earned (or lost)
on a fund share assuming reinvestment of all dividends and distributions. The
information in the following tables was audited by KPMG LLP, independent
auditors, whose report, along with the fund's financial statements, is included
in the annual report (available upon request).
FOR A CLASS A SHARE OF CAPITAL STOCK
OUTSTANDING THROUGHOUT EACH YEAR ENDED DECEMBER 31:
<TABLE>
<CAPTION>
1999(1) 1998(1) 1997 1996 1995
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
Net asset value, beginning of
year $9.97 $9.75 $9.34 $9.77 $9.17
----------------------------------------------------------------------------
Income (loss) from operations:
Net investment income 0.49 0.51 0.59 0.61 0.67
Net realized and unrealized
gain (loss) (0.98) 0.26 0.42 (0.44) 0.62
----------------------------------------------------------------------------
Total income (loss) from
operations (0.49) 0.77 1.01 0.17 1.29
----------------------------------------------------------------------------
Less distribution from:
Net investment income (0.49) (0.55) (0.60) (0.59) (0.69)
Capital (0.00)(2) -- -- (0.01) --
----------------------------------------------------------------------------
Total distributions (0.49) (0.55) (0.60) (0.60) (0.69)
----------------------------------------------------------------------------
Net asset value, end of year $8.99 $9.97 $9.75 $9.34 $9.77
----------------------------------------------------------------------------
Total return (4.96)% 8.12% 11.23% 1.96% 14.50%
----------------------------------------------------------------------------
Net assets, end of year (000)'s $288,133 $347,622 $361,124 $388,563 $453,378
----------------------------------------------------------------------------
Ratios to average net assets:
Expenses excluding interest
expense 0.93% 0.92% 0.92% 0.93% 0.94%
Interest expense 0.01 0.08 0.85 0.84 0.43
Net investment income 5.21 5.15 6.24 6.16 6.70
----------------------------------------------------------------------------
Portfolio turnover rate 161% 334% 274% 420% 294%
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(1) Per share amounts have been calculated using the monthly
average shares method.
(2) Amount represents less than $0.01 per share.
</TABLE>
<PAGE>
Government Securities Fund 28
FOR A CLASS B SHARE OF CAPITAL STOCK
OUTSTANDING THROUGHOUT EACH YEAR ENDED DECEMBER 31:
<TABLE>
<CAPTION>
1999(1) 1998(1) 1997 1996 1995
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
Net asset value, beginning of
year $9.97 $9.79 $9.38 $9.81 $9.17
----------------------------------------------------------------------------
Income (loss) from operations:
Net investment income 0.45 0.45 0.54 0.56 0.59
Net realized and unrealized
gain (loss) (0.97) 0.26 0.44 (0.44) 0.65
----------------------------------------------------------------------------
Total income (loss) from
operations (0.52) 0.71 0.98 0.12 1.24
----------------------------------------------------------------------------
Less distribution from:
Net investment income (0.45) (0.53) (0.57) (0.54) (0.60)
Capital (0.00)(2) -- -- (0.01) --
----------------------------------------------------------------------------
Total distributions (0.45) (0.53) (0.57) (0.55) (0.60)
----------------------------------------------------------------------------
Net asset value, end of year $9.00 $9.97 $9.79 $9.38 $9.81
----------------------------------------------------------------------------
Total return (5.35)% 7.44% 10.82% 1.42% 13.87%
----------------------------------------------------------------------------
Net assets, end of year (000)'s $65,989 $92,082 $101,273 $121,894 $158,459
----------------------------------------------------------------------------
Ratios to average net assets:
Expenses excluding interest
expense 1.41% 1.43% 1.44% 1.45% 1.45%
Interest expense 0.01 0.08 0.85 0.84 0.43
Net investment income 4.72 4.64 5.73 5.64 6.19
----------------------------------------------------------------------------
Portfolio turnover rate 161% 334% 274% 420% 294%
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(1) Per share amounts have been calculated using the monthly
average shares method.
(2) Amount represents less than $0.01 per share.
</TABLE>
<PAGE>
29 Smith Barney Mutual Funds
FOR A CLASS L(2) SHARE OF CAPITAL STOCK
OUTSTANDING THROUGHOUT EACH YEAR ENDED DECEMBER 31:
<TABLE>
<CAPTION>
1999(1) 1998(1) 1997 1996 1995
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
Net asset value, beginning of
year $9.97 $9.78 $9.38 $9.81 $9.17
----------------------------------------------------------------------------
Income (loss) from operations:
Net investment income 0.46 0.45 0.54 0.57 0.60
Net realized and unrealized
gain (loss) (0.99) 0.27 0.43 (0.44) 0.65
----------------------------------------------------------------------------
Total income (loss) from
operations (0.53) 0.72 0.97 0.13 1.25
----------------------------------------------------------------------------
Less distribution from:
Net investment income (0.45) (0.53) (0.57) (0.55) (0.61)
Capital (0.00)(3) -- -- (0.01) --
----------------------------------------------------------------------------
Total distributions (0.45) (0.53) (0.57) (0.56) (0.61)
----------------------------------------------------------------------------
Net assets value, end of year $8.99 $9.97 $9.78 $9.38 $9.81
----------------------------------------------------------------------------
Total return (5.41)% 7.56% 10.75% 1.47% 13.93%
----------------------------------------------------------------------------
Net asset, end of year (000)'s $6,611 $4,411 $2,311 $1,443 $1,039
----------------------------------------------------------------------------
Ratios to average net assets:
Expenses excluding interest
expense 1.39% 1.40% 1.39% 1.38% 1.37%
Interest expense 0.01 0.08 0.85 0.84 0.43
Net investment income 4.77 4.63 5.70 5.71 6.27
----------------------------------------------------------------------------
Portfolio turnover rate 161% 334% 274% 420% 294%
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(1) Per share amounts have been calculated using the monthly
average shares method.
(2) On June 12, 1998, Class C shares were renamed Class L
shares.
(3) Amount represents less than $0.01 per share.
</TABLE>
<PAGE>
Government Securities Fund 30
FOR A CLASS Y SHARE OF CAPITAL STOCK
OUTSTANDING THROUGHOUT EACH YEAR ENDED DECEMBER 31:
<TABLE>
<CAPTION>
1999(1) 1998(1) 1997 1996(2)
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------
Net asset value, beginning of year $9.97 $9.76 $9.34 $9.71
----------------------------------------------------------------------------
Income from operations:
Net investment income 0.53 0.54 0.61 0.57
Net realized and unrealized gain
(loss) (0.98) 0.26 0.44 (0.37)
----------------------------------------------------------------------------
Total income (loss) from operations (0.45) 0.80 1.05 0.20
----------------------------------------------------------------------------
Less distribution from:
Net investment income (0.53) (0.59) (0.63) (0.56)
Net realized gains (0.00)(5) -- -- (0.01)
----------------------------------------------------------------------------
Total distributions (0.53) (0.59) (0.63) (0.57)
----------------------------------------------------------------------------
Net asset value, end of year $8.99 $9.97 $9.76 $9.34
----------------------------------------------------------------------------
Total return (4.61)% 8.42% 11.73% 2.30%(3)
----------------------------------------------------------------------------
Net assets, end of year (000)'s $213,170 $191,253 $109,909 $39,667
----------------------------------------------------------------------------
Ratios to average net assets:
Expenses excluding interest expense 0.59% 0.59% 0.58% 0.44%(4)
Interest expense 0.01 0.08 0.85 0.84(4)
Net investment income 5.57 5.43 6.46 6.49(4)
----------------------------------------------------------------------------
Portfolio turnover rate 161% 334% 274% 420%
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(1) Per share amounts have been calculated using the monthly
average shares method.
(2) For the period from February 7, 1996 (inception date) to
December 31, 1996.
(3) Not Annualized.
(4) Annualized.
(5) Amount represents less than $0.01 per share.
</TABLE>
<PAGE>
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<PAGE>
(This page intentionally left blank)
<PAGE>
[SMITH BARNEY MUTUAL FUNDS LOGO]
GOVERNMENT
SECURITIES 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 Service Agent or the transfer agent if you do not
want this policy to apply to you.
STATEMENT OF ADDITIONAL INFORMATION The statement of additional information
provides more detailed information about the fund and is incorporated by
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 Service
Agent, by calling the fund's sub-transfer agents (PFS Shareholder Services at
1-800-544-5445 or PFPC Global Fund Services at 1-800-451-2010), or by writing to
the fund at Smith Barney Mutual Funds, 388 Greenwich Street, MF2, New York, New
York 10013.
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.
(Investment Company Act file no. 811-03275)
FD0234 8/00
