SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec.
240.14a-12
SMITH BARNEY SHEARSON INCOME FUNDS, ON BEHALF OF
SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to
Exchange Act Rule 0-11:1
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1 Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND
A SUB-TRUST OF SMITH BARNEY SHEARSON INCOME FUNDS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on June 1, 1994
To the Shareholders of the Smith Barney Shearson
Premium Total Return Fund:
Notice is hereby given that a special meeting of Shareholders of Smith
Barney Shearson Premium Total Return Fund (the "Fund"), a mutual fund
organized as a sub-trust of Smith Barney Shearson Income Funds (the "Trust"),
will be held at Two World Trade Center, 100th Floor, New York, New York on
June 2, 1994 commencing at 1:30 p.m for the following purposes:
1. To approve or disapprove a new investment advisory agreement
between the Trust, on behalf of the Fund, and Smith Barney Shearson Strategy
Advisers, Inc. ("SBSSA"), containing substantially the same terms and
conditions as the Fund's current advisory agreement (Proposal 1).
2. To approve or disapprove a sub-investment advisory agreement
between the Trust, on behalf of the Fund, SBSSA, as adviser, and The Boston
Company Advisors, Inc. ("Boston Advisors"), the Fund's current adviser
(Proposal 2).
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
These items are discussed in greater detail in the attached Proxy
Statement. The close of business on April 18, 1994 has been fixed as the
record date for the determination of shareholders of the Fund entitled to
notice of and to vote at the meeting and any adjournment thereof.
By Order of the Board of Trustees
Francis J. McNamara, III
Secretary
April 22, 1994
SHAREHOLDERS OF THE FUND WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING
ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE CONTINENTAL UNITED
STATES. INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXY CARDS ARE SET FORTH ON
THE FOLLOWING PAGE. IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense to the Fund involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in
the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to the name shown in the
registration on the proxy card..
1. All Other Accounts: The capacity of the individual signing
the proxy card should be indicated unless it is reflected in the form of
registration. For example:
Registration Valid Signature
Corporate Accounts
(1) ABC Corp.
ABC Corp.
(2) ABC Corp.
John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer
John Doe
(4) ABC Corp. Profit Sharing Plan
John Doe, Trustee
Trust Accounts
(1) ABC Trust
Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78
Jane B. Doe
Custodian or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA
John B. Smith, Jr.
(2) John B. Smith
John B. Smith, Jr.,
Executor
SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND
A SUB-TRUST OF SMITH BARNEY SHEARSON INCOME FUNDS
Two World Trade Center
New York, New York 10048
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on June 2, 1994
PROXY STATEMENT
This Proxy Statement is being solicited by the Board of Trustees
(the "Board") of Smith Barney Shearson Income Funds (the "Trust"),
for use at the special meeting of Shareholders (the "Meeting") of
sub-trust, Smith Barney Shearson Premium Total Return Fund (the "Fund"),
to be held on June 2, 1994, or any
adjournment or adjournment thereof. The Meeting will be held at
Two World Trade Center, 100th Floor, New
York, New York at the time specified in the Notice of Meeting of
Shareholders and proxy card that accompany
this Proxy Statement. Proxy solicitations will be made
primarily by mail, but proxy solicitations also may
be made by telephone, telegraph or personal interviews
conducted by officers and employees of: the Trust;
Smith Barney Shearson, Inc. ("Smith Barney Shearson"),
the distributor of shares of the Fund; Boston Company
Advisors, Inc., the current investment adviser and
administrator for the Fund; and/or The Shareholder
Services Group Inc. ("TSSG"), a subsidiary of
First Data Corporation and the transfer agent of the Fund.
The costs of the proxy solicitation and expenses
incurred in connection with the preparation of this Proxy
Statement and its enclosures will be paid by
Smith Barney Shearson. Smith Barney Shearson also will
reimburse expenses of forwarding solicitation material to
beneficial owners of shares of the Fund.
The Trust currently issues two classes of shares of
beneficial interest ("Shares") in respect of the
Fund, but for purposes of the matters to be considered
at the Meeting, all Shares will be voted as a single
class. Each Share is entitled to one vote and any fractional
Share is entitled to a fractional vote. If
the enclosed proxy is properly executed and returned in
time to be voted at the Meeting, the Shares
represented thereby will be voted in accordance with the
instructions marked thereon. Unless instructions
to the contrary are marked on the proxy, it will be voted
FOR the matters listed in the accompanying Notice
of Special Meeting of Shareholders. Any shareholder who has
given a proxy has the right to revoke it at any
time prior to its exercise either by attending the
Meeting and voting his or her shares in person or by
submitting a letter of revocation or a later-dated
proxy to the Trust at the above address prior to the date
of the Meeting. For purposes of determining the presence of a
quorum for transacting business at the
Meeting, abstentions and broker "non-votes" (i.e., proxies from
brokers or nominees indicating that such
persons have not received instructions from the beneficial
owner or other persons entitled to vote Shares on
a particular matter with respect to which the brokers or
nominees do not have discretionary power) will be
traded as Shares that are present but which have not been voted.
For this reason, abstentions and broker
"non-votes" will have the effect of a "no" vote for purposes of
obtaining the requisite approval of the
proposal.
In the event that a quorum is not present at the Meeting,
or in the event that a quorum is present but
sufficient votes to approve any of the proposals are not
received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether
to adjourn the Meeting, the following factors may be considered:
the nature of the proposals that are the
subject of the Meeting, the percentage of votes actually cast,
the percentage of negative votes actually
cast, the nature of any further solicitation and the information
to be provided to shareholders with respect
to the reasons for the solicitation. Any adjournment will
require the affirmative vote of a majority of
those shares represented at the Meeting in person or by proxy.
A shareholder vote may be taken on one or
more of the proposals in this Proxy Statement prior to any
adjournment if sufficient votes have been
received for approval. Under the Trust's Master Trust Agreement,
a quorum is constituted by the presence in
person or by proxy of the holders of a majority of the outstanding
Shares of the Fund entitled to vote at
the Meeting.
The Board has fixed the close of business on April 18, 1994
as the record date (the "Record Date") for
the determination of shareholders of the Fund entitled to
notice of and to vote at the Meeting. On the
Record Date, ____ Shares of the Fund were outstanding.
As of the Record Date, to the knowledge of the Trust
and the Board, no single shareholder or "group"
(as that term is used in Section 13 (d) of the Securities
Exchange Act of 1934), beneficially owned more than 5% of
the outstanding Shares of the Fund. As of the
Record Date, the officers and Board members of the Trust
beneficially owned less than 1% of the Shares of
the Fund.
As of Record Date, no shares of SBSSA or its ultimate parent
corporation, The Travelers Inc.
("Travelers"), were held by Board members who are not interested
persons of the Trust (as that term is used
in the Investment Company Act of 1940, as amended (the "1940 Act")).
In order that your Shares may be represented at the
Meeting, you are requested to:
- indicate your instructions on the enclosed proxy card;
- date and sign the proxy card;
- mail the proxy card promptly in the enclosed envelope,
which requires no postage if mailed in the
United States; and
- allow sufficient time for the proxy card to be
received on or before 10:00 a.m., June 2 1994.
As a business trust formed under the laws of the
Commonwealth of Massachusetts, the Trust is not
required to hold annual shareholder meetings
but may hold special meetings as required or deemed desirable.
As indicated above, the Special Meeting is being
called to consider new advisory and sub-investment advisory
contracts for the Fund.
The Board recommends affirmative votes on Proposals 1 and 2.
PROPOSAL 1
TO APPROVE OR DISAPPROVE A NEW INVESTMENT ADVISORY
AGREEMENT BETWEEN SMITH BARNEY SHEARSON STRATEGY
ADVISERS, INC. AND THE TRUST, ON BEHALF OF THE FUND,
CONTAINING SUBSTANTIALLY THE SAME TERMS AND CONDITIONS
AS THE FUND'S CURRENT INVESTMENT ADVISORY AGREEMENT.
For the reasons described below under the caption,
"Evaluation by the Board and Reasons for the
Proposals," the Trustees of the Trust have unanimously
determined, subject to approval by the shareholders
of the Fund, to enter into a new investment advisory
agreement (the "New Advisory Agreement") between the
Fund and SBSSA, a subsidiary of Smith Barney Shearson.
The Fund currently is advised by Boston Advisors
under an agreement (the "Current Advisory Agreement").
Boston Advisors and the Trust have agreed to
terminate the Current Advisory Agreement, waiving any
applicable notice provisions, upon the shareholders'
approval of the New Advisory Agreement. The New Advisory
Agreement contains substantially the same terms
and conditions, including the same advisory fee,
found in the Current Advisory Agreement. In conjunction
with this proposal, the Trustees of the Trust have
determined, subject to the approval of the shareholders
of the Fund, to enter into a sub-investment advisory
agreement (the "Sub-Advisory Agreement" and
collectively with the New Advisory Agreement,
the "Agreements") between the Fund, SBSSA, as adviser, and
Boston Advisors, the current investment adviser to the Fund.
If approved by shareholders, the New Advisory Agreement will
commence on June 3, 1994, and continue
thereafter for a two-year period and continue automatically
for successive annual periods; provided such
continuance is approved at least annually by (a) a
majority of the Board who are not interested persons of
the Trust (as the term is used in the 1940 Act) and (b)
a majority of the full Board of Trustees or a
majority of the outstanding voting securities of the Fund, as
defined in the 1940 Act.
PROPOSAL 2
TO APPROVE OR DISAPPROVE A SUB-INVESTMENT ADVISORY AGREEMENT
BETWEEN THE BOSTON COMPANY ADVISORS, INC.
AND THE TRUST, ON BEHALF OF THE FUND.
In conjunction with Proposal 1, the Trustees of the Trust
have determined, subject to the approval of
the shareholders of the Fund, to enter into a sub-investment
advisory agreement between the Fund, SBSSA, as
adviser, and Boston Advisors, the current investment
adviser to the Fund. Under the proposed arrangement,
SBSSA would provide oversight and coordination with the
other components of the Smith Barney Shearson group
of funds while Boston Advisors would continue to provide
the day-to-day support and personnel. Pursuant to
the Sub-Advisory Agreement, Boston Advisors would
receive a portion of the advisory fee payable to SBSSA
under the New Advisory Agreement. The cost to the Fund
for all advisory services under both Agreements
would be the same as the fee currently paid to Boston
Advisors under the Current Advisory Agreement.
THE CURRENT ADVISER AND PROPOSED SUB-ADVISER
The Fund is presently advised by Boston Advisors, an
adviser registered under the Investment Advisers
Act of 1940, as amended. Boston Advisors is located at
One Boston Place, Boston, Massachusetts 02108 and
also serves as the Fund's administrator. The names of
the investment companies for which Boston Advisors
currently provides investment services, the amount of
their net assets as of December 31, 1993, and the
annual rate of its fees for services to those
companies are set forth at Exhibit A to this Proxy Statement.
The Current Advisory Agreement dated May 22, 1993,
was last approved by shareholders on December 29, 1992.
During the fiscal year ended December 31, 1993,
the Fund paid Boston Advisers $_____ in investment advisory
fees.
An audited balance sheet of Boston Advisors as of
December 31, 1993 is set forth as Exhibit B to this
Proxy Statement. The name, position with Boston
Advisors and principal occupation of each executive officer
and director of Boston Advisors are set forth in the following table.
Name
Position with Boston
Advisors
Principal Occupation
Lawrence S. Kash
Director; Chairman of the
Board, Chief Executive
Officer and President
President of TBCA;
Executive Vice President
of Boston Safe Deposit
and Trust Company
W. Keith Smith
Director
Desmond J.
Heathwood
Executive Vice President
Chief Executive Officer
of The Boston Company
Institutional Investors,
Inc.; Executive Vice
President and Chief
Investment Officer of The
Boston Company, Inc.
Vincent T. Molloy
Executive Vice President
Executive Vice President
of Custody Administration
And Support.
THE PROPOSED ADVISER
SBSSA is a wholly owned subsidiary of Smith,
Barney Advisers, Inc. SBSSA is located at Two World
Trade Center, New York, New York 10048. The names of the
investment companies for which SBSSA currently
provides services, the amounts of their net assets as of
February 3, 1994 and the annual rate of its fees
for services to those companies are set forth at Exhibit C
to this Proxy Statement.
An audited balance sheet of SBSSA as of December 31, 1993
is set forth as Exhibit D to this Proxy
Statement. The name, position with SBSSA and principal
occupation of each executive officer and director of
SBSSA are set forth in the following table.
Name
Position with SBSSA
Principal Occupation
Heath B. McLendon
Chairman of the Board
of Directors
Executive Vice
President of Smith
Barney Shearson;
Chairman of the Smith
Barney Shearson mutual
funds.
Richard P. Roelofs
President and Director
Managing Director of
Smith Barney Shearson
Robert I. Schulman
Director
Executive Vice
President of Smith
Barney Shearson
Stephen J. Treadway
Director
Executive Vice
President of Smith
Barney Shearson
Michael J. Day
Treasurer
Managing Director of
Smith Barney Shearson
Christina T. Sydor
Secretary
Managing Director of
Smith Barney Shearson
EVALUATION BY THE BOARD AND REASONS FOR THE PROPOSALS
On April 4, 1994, the Trustees of the Trust met in
person at a meeting called for the purpose of
considering, among other things, the New Advisory
Agreement with SBSSA and the Sub-Advisory Agreement with
Boston Advisors. Although SBSSA and Boston Advisors
jointly recommended the Trustees' approval of these
proposals, the Trustees also considered, at that time,
continuation of the Fund's Current Advisory Agreement
with Boston Advisors and various other possible alternatives.
The Board reviewed various materials
furnished by Smith Barney Shearson, SBSSA and Boston Advisors.
The materials described, among other
matters, SBSSA and Boston Advisors and their affiliates,
senior personnel, portfolio managers, analysts,
economist and others, methods of operation, investment
philosophies, performance records and financial
conditions. Representatives of SBSSA and Boston Advisors
met with the Board to discuss in depth the written
materials and to respond to questions from the Board and
its independent counsel.
The Trustees have determined that if the investment advisory
agreement were moved to SBSSA, the asset
management function could be more easily coordinated with
the marketing and distribution functions of Smith
Barney Shearson. As a result, the interaction between
marketing personnel and financial consultants with
the portfolio managers would be facilitated because
the marketing and advisory functions would be managed,
to a greater extent, within one company. This, in turn,
should strengthen support from the marketing arm of
Smith Barney Shearson and enhance the support and
services received by the Fund's shareholders. The Board
also considered the ability of Smith Barney Shearson
to arrange opportunities for Smith Barney Shearson
financial consultants to meet SBSSA managers in person,
by telephone and otherwise to become familiar with
the management style, philosophy and investment outlook
of the Fund's investment adviser.
At the same time, the Board reviewed the past performance
records of Boston Advisors over relevant
periods of time as well as the background and experience of
the various officers and managers employed by
that company. The Board recognized the high quality advisory
and management services provided by Boston
Advisors to the Fund in the past and expressed a desire to
retain Boston Advisors in an advisory capacity.
Thus, it was determined that the Fund enter into a sub-advisory
agreement under which Boston Advisors would
provide the day-to-day support and personnel while,
pursuant to the New Advisory Agreement, SBSSA would
provide the necessary executive oversight and coordination
to ensure consistency within the Smith Barney
Shearson group of funds.
As a secondary consideration, the Board also recognized that,
currently, most Shares of the Fund are
sold under an arrangement pursuant to which the Fund's
distributor, Smith Barney Shearson, advances the cost
of distribution and seeks to recover that cost through
a combination of contingent deferred sales charges
and distribution fees paid under a plan of distribution
adopted pursuant to Rule 12b-1 under the 1940 Act.
Smith Barney Shearson informed the Trustees that this
method of distribution, while preferred by investors,
was expensive to the distributor on a current basis and a
distributor would rarely agree to offer its
services under these circumstances to a fund to which it
or its affiliates did not serve as investment
adviser. Prior to July 30, 1993, Shearson Lehman Brothers Inc.,
served as the Fund's distributor and Boston
Advisors, its affiliate at the time, served as the
Fund's investment adviser. As of that date, however, the
retail brokerage and investment advisory
businesses (other than LBGAM) of Shearson Lehman Brothers Inc. were
transferred to Smith Barney Shearson
(known at the time as Smith Barney, Harris Upham & Co., Inc.) and Smith
Barney Shearson was selected by the Trustees to
serve as the Fund's distributor. Smith Barney Shearson is
not affiliated with Boston Advisors.
After carefully evaluating the foregoing materials
and factors, and after meeting in executive session
with independent counsel, the Trustees of the
Trust who were not interested persons of the Trust approved,
and then the Board as a whole approved, subject
to shareholder approval, the New Advisory Agreement with
SBSSA containing substantially identical terms
and conditions to the Current Advisory Agreement and the Sub-
Advisory Agreement substantially in the form of
Exhibit E to this Proxy Statement.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Fund
are made by the Fund's investment Adviser, and under
the proposed Agreements, would be made by the
Fund's sub-investment Adviser (both the investment adviser and
sub-investment adviser are referred to
collectively herein as the "Adviser") subject to the overall review
of the Board. Although investment decisions for
the Fund are made independently from those of the other
accounts managed by the Adviser, investments of the
type the Fund may make also may be made by those other
accounts. When the Fund and one or more other
accounts managed by the Adviser 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 Adviser to be
equitable to each. In some cases, this procedure may adversely
affect the price paid or received by the Fund
or the size of the position obtained or disposed of by the
Fund.
Transactions on U.S. stock exchanges and some
foreign stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges
where commissions are negotiated, the cost of transactions
may vary among different brokers. No stated
commission is generally applicable to securities traded in U.S.
over-the counter markets, but the prices of those
securities include undisclosed commissions or mark-ups.
The cost of securities purchased from underwriters
includes an underwriting commission or concession and the
prices at which securities are repurchased from and
sold to dealers include a dealer's mark-up or mark-down.
In selecting brokers or dealers to execute
portfolio transactions on behalf of the Fund, the Adviser
seeks the best overall terms available. In
assessing the best overall terms available for any transaction,
the Adviser will consider the factors it
deems relevant, including the breadth of the market in the
security, the price of the security, the financial
condition and execution capability of the broker or
dealer and the reasonableness of the commission,
if any, for the specific transaction and on a continuing
basis. In addition, the Adviser is authorized,
in selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms
available, to consider the brokerage and research
services ( as those terms are defined in Section 28(e) of
the Securities and Exchange Act of 1934) provided
to the Fund and/or other accounts over which the
Adviser or its affiliates exercises investment discretion.
The fees under the Fund's investment advisory agreement
are not reduced by reason of the Fund's or the
Adviser's receiving brokerage and research services.
Research and investment services are those which
brokerage houses customarily provide to institutional
investors and include statistical and economic data
and research reports on particular issues and industries.
These services are used by the Adviser in
connection with all of its investment activities,
and some of the services obtained in connection with the
execution of transactions for the Fund may be used
in managing other investment accounts. Conversely,
brokers furnishing these services may be selected for
the execution of transactions for these other
accounts, whose aggregate assets may exceed those of
the Fund, and the services furnished by the brokers may
be used by the Adviser in providing investment
management for the Fund. The Board of Trustees periodically
will review the commissions paid by the Fund
to determine if the commissions paid over representative
periods of time were reasonable in relation
to the benefits inuring to the Fund. Over-the-counter purchases
and sales by the Fund are transacted directly
with principal market makers except in those cases in which
better prices and executions may be obtained elsewhere.
To the extent consistent with applicable
provisions of the 1940 Act and the rules and exemptions
adopted by the Securities and Exchange
Commission (the "SEC") under the 1940 Act, subject to the approval of
the Board, transactions for the Fund may
be executed through Smith Barney Shearson and other affiliated
broker-dealers if, in the judgment of the
Fund's Adviser, the use of an affiliated broker-dealer is likely
to result in price and execution at least as
favorable as those of other qualified broker-dealers. Under
rules adopted by the SEC, Smith Barney Shearson
may not directly execute transactions for the Fund on the
floor of any national securities exchange unless:
(i) the Board of Trustees has expressly authorized Smith
Barney Shearson to effect such transactions; and
(ii) Smith Barney Shearson annually advises the Fund of the
aggregate compensation it earned on such transactions.
The Fund will not purchase any security, including
U.S. government securities, during the existence of
any underwriting or selling group relating to the
security of which Smith Barney Shearson is a member,
except to the extent permitted by the SEC.
During the fiscal year ended July 31, 1993, the Fund did
[not] pay [any] brokerage commissions.
PROPOSED AGREEMENTS
A copy of the form of New Advisory Agreement is set forth
as Exhibit F to this Proxy Statement. Under
its terms, SBSSA, subject to the supervision and
approval of the Board, would manage the Fund's investments
in accordance with the investment objectives and policies
stated in the Fund's Prospectus and Statement of
Additional Information. As adviser, SBSSA would supervise
the sub-investment advisory services rendered by
Boston Advisors, evaluate and make final determinations
with respect to investment strategies for the Fund
and provide the Fund with the benefits of research
capabilities of the Smith Barney Shearson organization
and provide executive management for the Fund.
SBSSA would receive a fee that is computed daily and paid
monthly at the annual rate of .55% of the value of the
Fund's average daily net assets. With the exception
of the identity of the investment adviser and the
commencement and termination dates, the provisions of the
New Advisory Agreement and the Current Advisory
Agreement with Boston Advisors are virtually identical.
Under the term of the New Advisory Agreement,
SBSSA would bear all expenses in connection with its
performance, including the sub-investment advisory
fee payable to Boston Advisors under the Sub-Advisory
Agreement. Other expenses incurred in the
operation of the Fund would continue to be borne by the Fund,
including: taxes, interest, brokerage fees and
commissions, if any; distribution and shareholder service
fees; fees of the Board Members who are not officers,
directors, shareholders or employees of Smith Barney
Shearson, or any of its affiliates; SEC fees and
state blue sky qualification fees; charges of custodian and
transfer and dividend disbursing agents; certain
insurance premiums; outside auditing and legal expenses;
costs of investor services (including allocable
telephone and personnel expenses); costs of preparation and
printing of prospectuses and statements of
additional information for regulatory purposes and for
distribution to shareholders; costs of preparation
and printing of shareholders' reports; costs incurred in
connection with meetings of the shareholders of the
Fund and of the officers or Board of the Trust; and any
extraordinary expenses.
Under the terms of the Sub-Advisory Agreement,
Boston Advisors, subject to the supervision and
approval of the Board and SBSSA as investment
adviser, would continue to make investment decisions for the
Fund, place purchase and sale orders for portfolio
transactions and provide analytical and research services
to the Fund. Pursuant to the Agreement,
SBSSA would pay Boston Advisors a sub-investment advisory fee of
.275 of 1.00% of the value of the Fund's average daily net assets.
If in any fiscal year the aggregate expenses of
the Fund (including fees pursuant to the New Advisory
Agreement and the Sub-Advisory Agreement but
excluding distribution and shareholder service fees, interest,
taxes, brokerage and, if permitted by state securities
commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction
over the Fund, SBSSA will reduce its advisory fee and
Boston Advisors will reduce its sub-advisory fee
to the Fund for the excess expense to the extent required
by state law in the same proportion as the respective
advisory fees bear to the Fund's aggregate fees for
investment advice and administration.
This expense reimbursement, if any, will be estimated, reconciled and
paid on a monthly basis.
Both Agreements provide that in the absence of
willful misfeasance, bad faith, gross negligence or
reckless disregard for its obligations thereunder,
the investment adviser or sub-investment adviser,
respectively, shall be liable for any act or omission in the course
of or in connection with the rendering
of its services thereunder.
Each Agreement will remain in effect pursuant to its terms
for an initial term of one year from its
date of execution and thereafter with respect to the
Fund for successive periods if and so long as such
continuance is specifically approved annually by
(a) the Trust's Board or (b) a Majority Vote of the Fund's
shareholders, provided that in either event the
continuance also is approved by a majority of the board
members who are not "interested persons"
(as defined in the 1940 Act) of any party of the Agreement by vote
cast in person at a meeting called for the
purpose of voting on approval. Each Agreement is terminable,
without penalty, on 60 days' written notice by the
Board of the Trust or by a Majority Vote of the Fund's
shareholders, or on 90 days' written notice by the
investment adviser in the case of the New Advisory
Agreement and sub-investment adviser in the case of
the Sub-Advisory Agreement. Each Agreement would
terminate automatically in the event of its
assignment (as defined in the 1940 Act).
SUBMISSION OF SHAREHOLDER PROPOSALS
The Trust is not generally required to hold
annual or special shareholders' meetings. Shareholders
wishing to submit proposals for inclusion in a
proxy statement for a subsequent shareholders' meeting should
send their written proposals to the Secretary of
the Trust at the address set forth on the cover of this
proxy statement. Shareholder proposals for
inclusion in the Trust's proxy statement for any subsequent
meeting must be received by the Trust a reasonable
period of time prior to any such meeting.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board does not intend to present any other
business at the Meeting nor is it aware that any
shareholder intends to do so. If, however, any
other matters are properly brought before the Meeting, the
persons named in the accompanying proxy card (s)
will vote thereon in accordance with their judgment.
April 22, 1994.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE
THEREFORE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Please indicate your vote by an "X" in the appropriate box below.
This proxy, if properly executed, will be voted in the
manner directed by the undersigned shareholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS.
Please refer to the Proxy Statement for a discussion of the Proposals.
1. To approve a new investment advisory agreement between FOR * AGAINST *
ABSTAIN *
Smith Barney Shearson Income Funds, on behalf of its
sub-trust, Smith Barney Shearson Premium Total
Return Fund (the "Fund"), and Smith Barney Shearson
Strategy Advisers, Inc. ("SBSSA") containing
substantially the same terms and conditions as
the Fund's current investment advisory agreement
2. To approve a sub-investment advisory
agreement between the FOR * AGAINST * ABSTAIN *
Trust on behalf of the Fund and The Boston Company Advisors, Inc.
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND PROXY
SOLICITED BY THE BOARD OF TRUSTEES
The undersigned holder of shares of Smith Barney Shearson
Premium Total Return Fund ("the Fund"), a
Massachusetts business trust, hereby appoints Heath B. McLendon,
Richard P. Roelofs, Francis J. McNamara,
III and Lee D. Augsburger attorney and proxies for the
undersigned with full powers of substitution and
revocation, to represent the undersigned and to vote on
behalf of the undersigned all shares of the Fund
that the undersigned is entitled to vote at the
Special Meeting of Shareholders of the Fund to be held at
the offices of the Fund, Two World Trade Center,
New York, New York, on June 2, 1994 at 1:30 p.m. and any
adjournment or adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting and Proxy Statement dated April 22, 1994 and
hereby instructs said attorney and proxies to vote said
shares as indicated hereon. In their discretion,
the proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
A majority of the proxies present and acting at
the Special Meeting in person or by substitute (or, if only one
shall be so present, then that one,) shall
have and may exercise all the power and
authority of said proxies hereunder. The undersigned hereby revokes
any proxy previously given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
NOTE: Please sign exactly as your name appears on this
Proxy. If joint owners, EITHER may sign this Proxy.
When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give your
full title.
DATE: _________________________________________
_______________________________________________
_______________________________________________
Signature(s) (Title(s), if applicable)
1
shared\domestic\clients\shearson\funds\slip\ptrn\proxy.doc
shared\domestic\client\shearson\boards\inc_eq.\prxycrd.doc
EXHIBIT A
Names of Investment Companies Serviced by Boston Advisors
Fund
Net Asset
as of
12/31/93
Annual Rate of Fee
Expressed
as a Percentage of
Average
Daily Net
Assets
The Boston Company:
Cash Management Fund
205,000,000
.50%
Managed Income Fund
99,000,00
0
.60%
Government Money Fund
53,000,00
0
.50%
Capital Appreciation Fund
443,000,000
.75%
Special Growth Fund
118,000,000
1.00%
Int. Term Government Sec.
Fund
23,000,00
0
.65%
Asset Manager's Fund
17,000,00
0
.75%
The Boston Company Investment
Series:
Asset Allocation Fund
33,000,00
0
.70%
International Fund
5,000,0
00
.95%
Contrarian Fund
4,000,0
00
1.00%
Equity Income Fund
-
.75%
Short-Term Bond Fund
3,000,0
00
.50%
The Boston Tax-Free Municipal
Funds:
Tax-Free Money Fund
37,000,00
0
.50%
Mass. Tax-Free Money Fund
123,000,00
0
.50%
Tax-Free Bond Fund
39,000,00
0
.50%
Mass. Tax-Free Bond Fund
37,000,00
0
.50%
California Tax-Free Money
Fund
27,000,00
0
.50%
California Tax-Free Bond
Fund
22,000,00
0
.50%
New York Tax-Free Money
Fund
16,000,00
0
.50%
New York Tax-Free Bond
Fund
7,000,00
0
.50%
Smith Barney Shearson
Telecommunications Trust:
Income Fund
71,000,
000
.75%
Growth Fund
229,000,0
00
.75%
Smith Barney Shearson Income
Funds:
Premium Total Return Fund
1,509,000,0
00
.55%
Smith Barney Shearson Equity
Funds:
Strategic Investors Fund
298,000,000
.55%
The USA High Yield Fund N.V.
124,000,000
.21%
The Latin American Bond Fund
N.V. (1)
109,000,000
.20%
International Currency
Portfolios N.V.:
Deutsche Mark Portfolio
N.V (1)
2,000,000
.30%
Japanese Yen Portfolio
N.V. (1)
2,000,000
.30%
US Money Market Fund N.V.
(1)
394,000,000
.30%
Offshore Portfolios:
U.S. Government Securities
Instruments N.V. (1)
20,000,000
.45%
U.S. Appreciation Fund
N.V. (1)
13,00,000
.60%
Pacific Equity Fund N.V.
(1)
8,000,000
.70%
European Equity Fund N.V.
(1)
11,000,00
0
.70%
Global Bond Investments
N.V. (1)
23,000,00
0
.30%
U.S. Money Market
Investments N.V. (1)
12,000,00
0
.30%
ECU Fixed - Income
Investments N.V. (1)
2,000,000
.30%
Offshore Diversified Strategic
Income
Fund N.V. (1)
214,000,000
.45%
Lehman Brothers Series I
Mortgage-Related
Securities Portfolio
N.V. (2)
10,000,00
0
.25%
TBC Portfolio of Fixed Income
Securities N.V. (2)
25,000,00
0
.50%
Atlas Assets:
California Double
Municipal Money Fund
46,000,000
.15%
National Municipal Money
Fund
9,000,000
.15%
California Municipal Bond
Fund
178,000,000
.25% up to $100
million,
.20% on excess
National Municipal Bond
Fund
.25% up to $100
million,
.20% on excess
National Insured
Intermediate Municipal
15,000,00
0
California Insured
Intermediate
Municipal
23,000,00
0
___________________________
(1) The Boston Company Advisers (Bermuda) Ltd.
(2) The Boston Company Institutional Investors
A portion of this fee is paid to Lehman Brothers Global Asset Management
Limited
shared\domestic\clients\shearson\funds\prtn\exhibita.doc
EXHIBIT B
THE BOSTON COMPANY ADVISORS, INC.
Consolidated Balance Sheet
December 31, 1993
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
To the Board of Directors
The Boston Company Advisors, Inc. and subsidiaries:
We have audited the accompanying consolidated balance sheet of The Boston
Company Advisors, Inc. and subsidiaries, a wholly-owned subsidiary of The
Boston Company, Inc., as of December 31, 1993. This consolidated balance sheet
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this consolidated balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated balance sheet is
free of material misstatement. An audit of a consolidated balance sheet
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated balance sheet. An audit of a consolidated
balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated balance sheet presentation. We believe that our audit of the
consolidated balance sheet provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of The Boston Company
Advisors, Inc. and subsidiaries at December 31, 1993, in conformity with
generally accepted accounting principles.
February 25, 1994
/s/KPMG Peat Marwick
KPMG Peat Marwick
THE BOSTON COMPANY ADVISORS, INC.
Consolidated Balance Sheet
December 31,1993
Assets
Cash $ 65,830
Investments in mutual funds, at lower of aggregate cost
or market (market value $308,706) 280,874
Fees receivable (note 8) 13,705,819
Other receivables 1,423,778
Due from affiliates, net (note 6) 143,843
Fixed assets, net (note 3) 8,369,293
Net deferred tax asset (note 4) 2,215,704
Total assets $ 26,205,141
Liabilities and Stockholder's Equity
Liabilities:
Accrued compensation $ 2,782,951
Accrued expenses and other liabilities (note 1) 7,009,704
Current tax payable (note 4) 7,331,939
Due to Parent (note 6) 474,556
Total liabilities 17,599,150
Commitments and contingencies (note 7)
Stockholder's equity:
Common stock, par value $1 per share; l,000 shares
authorized, issued and outstanding 1,000
Capital surplus 22,100
Retained earnings 8,582,891
Total stockholder's equity 8,605,991
Total liabilities and stockholder's equity $ 26,205,141
See accompanying notes to consolidated balance sheet.
THE BOSTON COMPANY ADVISORS, INC.
Notes to Consolidated Balance Sheet
December 31, 1993
(1) Organization
The consolidated balance sheet includes the accounts of The Boston
Company Advisors, Inc. and subsidiaries (the "Company"). The Company, a
Massachusetts corporation and a wholly owned subsidiary of The Boston Company,
Inc. (the "Parent"), is an investment advisor registered under the Investment
Advisers Act of 1940. The Company is an investment advisory and administrative
services firm serving regulated investment companies. The Parent is a wholly
owned subsidiary of Mellon Bank Corporation ("Mellon").
In May 1993, Mellon completed its acquisition of the Parent and certain
subsidiaries from Shearson Lehman Brothers Inc., which was a wholly owned
subsidiary of the American Express Company. The acquisition was accounted for
as a purchase in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations." Retained earnings includes the results of operations
since the acquisition date.
Restructuring expenses and related reserve accounts were recorded
incident to the acquisition reflecting management's estimate of the costs to
restructure the Company. These costs relate to various expenses associated
with the acquisition and amounted to $2,254,000. The restructuring reserve at
December 31, 1993, amounted to $2,220,465 and is included in accrued expenses
and other liabilities in the accompanying consolidated balance sheet.
(2) Summary of Significant Accounting Policies
The accompanying consolidated balance sheet was prepared in accordance
with generally accepted accounting principles. All material intercompany
transactions and balances have been eliminated in consolidation. A description
of significant accounting policies follows.
Intercompany Cost Allocation
In addition to specific operating expenses incurred by the Company and
charged directly to operations, certain management, accounting and other costs
are incurred in common for the Company by Mellon and its other subsidiaries.
The Company is allocated a share of these costs proportionately based on an
appropriate methodology for each type of expense. Occupancy, data processing
and certain office support costs are allocated to the Company based on actual
usage.
Management believes the allocation methods used are reasonable and
appropriate in the circumstances; however, the Company's consolidated balance
sheet may not necessarily be indicative of the financial condition that would
have existed if the Company had been operated as an unaffiliated entity.
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated useful
lives of the assets which range from 3 to l0 years.
(Continued)
THE BOSTON COMPANY ADVISORS, INC.
Notes to Consolidated Balance Sheet
December 31, 1993
Income Taxes
The Company will participate in a consolidated federal and a combined
state income tax return through the Company's Parent with the Parent's former
owner, The American Express Company, for the period ended May 21, 1993, the
date of the Mellon acquisition. The Company's results for the period from the
acquisition through December 31, 1993, will be included in the consolidated
Mellon tax return.
Pursuant to a tax-sharing agreement with the Parent, the current tax
liability is determined on a separate return basis with benefits for net
losses and credits recorded when realized in the consolidated Mellon tax
return. Deferred income taxes are computed on a separate entity basis.
Fair Value of Financial Instruments
Financial Accounting Standards Board Statement No. 107 (SFAS No. l07),
"Disclosures About Fair Value of Financial Instruments," requires disclosure
of fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate that
value. A financial instrument is defined as cash, evidence of an ownership
interest and certain contracts to exchange cash or other financial
instruments. Generally, for financial instruments due within three months of
the reporting date, carrying amount approximates fair value. Since the Company
has less than $150 million in assets, SFAS No. l07 is not effective until the
fiscal year ended December 31, 1995. Management does not believe SFAS No. 107
will have a material effect on the financial statements.
(3) Fixed Assets
Fixed assets at December 31, 1993, were as follows:
Accumulated Net
Cost depreciation book value
Leasehold improvements $ 1,878,964 $ 179,824 $ 1,699,140
Furniture 2,596,956 229,542 2,367,414
Equipment and workstations 5,459,850 1,157,111 4,302,739
$ 9,935,770 $ 1,566,477 $ 8,369,293
(4) Income Taxes
Intercompany taxes are remitted to the Parent if the Parent is required
to make payment to Mellon. At December 31, 1993, the Company has a current
income tax payable to the Parent of $7,331,939.
(Continued)
THE BOSTON COMPANY ADVISORS, INC.
Notes to Consolidated Balance Sheet
December 31, 1993
Deferred income taxes reflect the tax effects of temporary differences
between the financial reporting basis and tax basis of the Company's assets
and liabilities. Temporary differences resulting in deferred tax assets
consist of nondeductible reserves, and temporary differences resulting in
deferred tax liabilities consist of book versus tax basis of mutual fund
investments and fixed assets. Included in the accompanying consolidated
balance sheet are the following deferred tax balances:
Deferred tax assets $ 2,320,078
Valuation allowance for deferred
tax assets
2,320,078
Deferred tax liabilities (l04,374)
Net deferred tax asset $ 2,215,704
The Company believes that it is more likely than not that the Company
will realize the benefits of the total deferred tax assets and, accordingly,
believes that a valuation allowance with respect to the realization of the
total deferred tax assets is not necessary. While there are no assurances that
this benefit will be realized, the Company expects that the deductible amount
will be recoverable through future expectations of taxable income and tax
planning strategies.
(5) Employees' Retirement Plans
The Company participates in a noncontributory defined benefit pension
plan, sponsored by its Parent, which covers substantially all employees. As a
result of the acquisition by Mellon, the Plan was amended to conform to the
provisions of the Mellon Bank Retirement Plan effective May 31,1993. Because
the Company participates in the Mellon plan with other subsidiaries of its
Parent, an analysis setting forth the plan's funded status at December 31,
1993, cannot be separately determined for the Company.
Prior to the Mellon acquisition, the Company participated in a defined
contribution retirement savings plan sponsored by the Parent. As of May 31,
1993, the effective date, all future contributions to the Parent's plan were
prohibited, but all participants with account balances were granted full
vesting in the plan. After the effective date, participants in the Plan could
invest in the Mellon Bank Retirement Savings Plan (the "Mellon plan"). The
Mellon plan is a defined contribution retirement savings plan, sponsored by
Mellon, covering substantially all U.S. employees. Employees become eligible
to participate after one full year of service. If a participant decides to
contribute, a portion of the contribution is matched by Mellon.
The Company participates in defined benefit health care plans, sponsored
by its Parent, that provide health care, life insurance and other
post-retirement benefits covering substantially all retired U.S. employees.
The plans include participant contributions, deductibles, co-insurance
provisions and service-related eligibility requirements. Since the Company
participates in the plans with other subsidiaries of its Parent, an analysis
setting forth the funded status of the plans at December 31,1993 cannot be
separately determined for the Company.
(Continued)
THE BOSTON COMPANY ADVISORS, INC.
Notes to Consolidated Balance Sheet
December 31, 1993
(6) Related Party Transactions
The Company routinely engages in various financial transactions with
affiliated companies. The nature of these transactions and their related
effect on the Company's consolidated balance sheet at December 31,1993, were
as follows:
Cash
Cash reflected on the Company's consolidated balance sheet of $65,830 at
December 31, 1993, is held on deposit at Boston Safe Deposit and Trust
Company, which is also a wholly owned subsidiary of the Parent. Generally, the
Company advances to its Parent on a noninterest-bearing basis cash that is not
required for its direct operational needs. These amounts are reduced over time
through the payment of expenses by the Parent on the Company's behalf and
dividend payments by the Company to the Parent.
Due from Affiliates
Due from affiliates reflected on the balance sheet of $143,845
represents the net aggregate amounts due from affiliated companies, other than
the Parent, for cash advances in excess of operational expenses paid on behalf
of the Company.
Due to Parent
Due to Parent reflected in the consolidated balance sheet of $474,556
represents the aggregate unsettled balance of various amounts, mainly
operational expenses, paid on behalf of the Company by the Parent.
(7) Commitments and Contingencies
As of December 31, 1993, the Company is contingently liable for certain
excess expenses incurred by regulated investment companies serviced under
administration contracts. In the opinion of management, the accrual that has
been established in the consolidated balance sheet in accrued expenses and
other liabilities is sufficient to meet these contingent payments.
(8) Significant Contractual Relationships
For the year ended December 31,1993, the Company provided administrative
services to mutual funds that are sponsored by Smith Barney Shearson, Inc.
("SBS") and other sponsors. Accrued fee income receivables related to funds
sponsored by SBS at December 31, 1993, were approximately $8,879,000, which
represents approximately 65% of total fees receivable.
Effective January 1,1994, the Company formalized an arrangement (the
"agreement") with Smith Barney Shearson, Inc. ("SBS") under which the Company
and SBS will cooperate with regard to the providing of administrative services
to mutual funds sponsored by SBS (the SBS funds). The agreement provides for
SBS to seek appointment as administrator and for the Company to become
subadministrator for the SBS funds. Although the agreement may result in a
reduction to the level of fees received by the Company from the SBS funds,
management believes the impact of this reduction is not material to the
financial condition of the Company.
shared\domestic\peat.doc
shared\domestic\peat.doc
3
EXHIBIT C
Names Of Investment Companies Serviced By SBSSA
Fund
Net Assets as of
2/3/94
Annual Rate of Fee Expressed
as a Percentage of Average Daily
Net
Assets
Smith Barney Shearson
Sector Analysis Fund
$134,000,000
.25%
The Advisors Fund L.P.
129,000,000
.20% (to be adjusted up or down
by
a maximum of .02% based on
comparative performance to the
S&P 500, of which .10% is
retained
by adviser and remainder is
allocated
among sub-investment advisers)
Gazarelli Sector Analysis
Fund N.V.
20,000,000
.40%
E.C. Tactical Allocation
Fund
60,00,000
.80%
Smith Barney Shearson
Adjustable Rate Government
Income Fund
382,000,000
.40% (of which .20% is paid to
BlackRock Financial Management
as sub-investment adviser)
shared\domestic\clients\shearson\funds\slip\prtn\exhibitb.doc
EXHIBIT E
SUB-INVESTMENT ADVISORY AGREEMENT
SMITH BARNEY SHEARSON INCOME FUNDS
(Smith Barney Shearson Premium Total Return Fund)
[June ___, 1994]
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
Dear Sirs:
Smith Barney Shearson Income Funds (the "Company"), a trust organized
under the laws of the Commonwealth of Massachusetts and Smith Barney Shearson
Strategy Advisers Inc. (the "Adviser"), each confirms its agreement with The
Boston Company Advisors, Inc. (the "Sub-Adviser"), as follows:
1. Investment Description; Appointment
The Company desires to employ its capital relating to Smith Barney
Shearson Premium Total Return Fund (the "Fund") by investing and reinvesting
in investments of the kind and in accordance with the investment objective(s),
policies and limitations specified in its Master Trust Agreement, as amended
from time to time (the "Master Trust Agreement"), in the prospectus (the
"Prospectus") and the statement of additional information (the "Statement")
filed with the Securities and Exchange Commission as part of the Company's
Registration Statement on Form N-1A, as amended from time to time, and in the
manner and to the extent as may from time to time be approved by the Board of
Trustees of the Company (the "Board"). Copies of the Prospectus, the
Statement and the Master Trust Agreement have been or will be submitted to the
Sub-Adviser. The Company agrees to provide copies of all amendments to the
Prospectus, the Statement and the Master Trust Agreement to the Sub-Adviser on
an on-going basis. The Company employs the Adviser as the investment adviser
to the Fund, and the Company and the Adviser desire to employ and hereby
appoint the Sub-Adviser to act as the sub-investment adviser to the Fund. The
Sub-Adviser accepts the appointment and agrees to furnish the services for the
compensation set forth below.
2. Services as Sub-Investment Adviser
Subject to the supervision, direction and approval of the Board of the
Company and the Adviser, the Sub-Adviser will: (a) manage the Fund's
portfolio in accordance with the Fund's investment objective(s) and policies
as stated in the Master Trust Agreement, the Prospectus and the Statement; (b)
make investment decisions for the Fund; (c) place purchase and sale orders for
portfolio transactions for the Fund; and (d) employ professional portfolio
managers and securities analysts who provide research services to the Fund.
In providing those services, the Sub-Adviser will conduct a continual program
of investment, evaluation and, if appropriate, sale and reinvestment of the
Fund's assets.
3. Brokerage
In selecting brokers or dealers to execute transactions on behalf of the
Fund, the Sub-Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub-
Adviser will consider factors it deems relevant, including, but not limited
to, the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Sub-
Adviser is authorized to consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of
1934), provided to the Fund and/or other accounts over which the Sub-Adviser
or its affiliates exercise investment discretion.
4. Information Provided to the Company
The Sub-Adviser will keep the Adviser and the Company informed of
developments materially affecting the Fund, and will, on its own initiative,
furnish the Adviser and the Company from time to time with whatever
information the Sub-Adviser believes is appropriate for this purpose.
5. Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering the
services listed in paragraphs 2 and 3 above. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund and the Adviser in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect the Sub-Adviser against any liability to the
Adviser, the Company or the shareholders of the Fund to which the Sub-Adviser
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or by reason of
the Sub-Adviser's reckless disregard of its obligations and duties under this
Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser on the first business day of each month a
fee for the previous month at the annual rate of .275 of 1.00% of the Fund's
average daily net assets. The fee for the period from the Effective Date
(defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Sub-Adviser,
the value of the Fund's net assets shall be computed at the times and in the
manner specified in the Prospectus and/or the Statement.
7. Expenses
The Sub-Adviser will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear certain
other expenses to be incurred in its operation, including, but not limited to,
investment advisory and administration fees; fees for necessary professional
and brokerage services; fees for any pricing service; the costs of regulatory
compliance; and costs associated with maintaining the Company's legal
existence and shareholder relations.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to this Agreement and the Fund's investment advisory agreement, but
excluding interest, taxes, brokerage and extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over the Fund, the Sub-
Adviser will reduce its fee by the proportion of such excess expense equal to
the proportion that its fee thereunder bears to the aggregate of fees paid by
the Fund for investment advice and administration in that year, to the extent
required by state law. A fee reduction pursuant to this paragraph 8, if any,
will be estimated, reconciled and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Company understands that the Sub-Adviser now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts, and as investment adviser to other investment companies, and
the Company has no objection to the Sub-Adviser's so acting, provided that
whenever the Fund and one or more other investment companies advised by the
Sub-Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed
to be equitable to each company. The Company recognizes that in some cases
this procedure may adversely affect the size of the position obtainable for
the Fund. In addition, the Company understands that the persons employed by
the Sub-Adviser to assist in the performance of the Sub-Adviser's duties under
this Agreement will not devote their full time to such service and nothing
contained in this Agreement shall be deemed to limit or restrict the right of
the Sub-Adviser or any affiliate of the Sub-Adviser to engage in and devote
time and attention to other businesses or to render services of whatever kind
or nature.
10. Term of Agreement
This Agreement shall become effective as of [June ___, 1994] (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually by (i) the Board of the Company or (ii) a vote of a "majority"
(as that term is defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) of the Fund's outstanding voting securities, provided that
in either event the continuance is also approved by a majority of the Board
who are not "interested persons" (as defined in the 1940 Act) of any party to
this Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable, without penalty, on 60
days' written notice, by the Board of the Company or by vote of holders of a
majority of the Fund's shares, or upon 90 days' written notice, by the Sub-
Adviser. This Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act and the rules thereunder).
11. Representation by the Company
The Company represents that a copy of the Master Trust Agreement is on
file with the Secretary of The Commonwealth of Massachusetts and with the
Boston City Clerk.
12. Limitation of Liability
The Company, the Adviser and the Sub-Adviser agree that the obligations
of the Company under this Agreement shall not be binding upon any of the
members of the Board, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Company, individually, but are binding
only upon the assets and property of the Fund and not upon the assets and
property of any other portfolio of the Company. The execution and delivery of
this Agreement have been authorized by the Board and a majority of the holders
of the Fund's outstanding voting securities, and signed by an authorized
officer of the Company, acting as such, and neither such authorization by such
members of the Board and shareholders nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the assets
and property of the Fund as provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
SMITH BARNEY SHEARSON
INCOME FUNDS
By:__________________________________________
SMITH BARNEY SHEARSON STRATEGY
ADVISERS INC.
By:___________________________________________
Accepted:
THE BOSTON COMPANY ADVISORS, INC.
By:______________________________
shared/domestic/clients/shearson/funds/slip/prtn/subadv2.doc
E-5
EXHIBIT F
ADVISORY AGREEMENT
SMITH BARNEY SHEARSON INCOME FUNDS
(Smith Barney Shearson Premium Total Return Fund)
[June __, 1994]
Smith Barney Shearson Strategy Advisers Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Smith Barney Shearson Income Funds (the "Company"), a trust organized
under the laws of the Commonwealth of Massachusetts, confirms its agreement
with Smith Barney Shearson Strategy Advisers Inc. (the "Adviser"), as follows:
1. Investment Description; Appointment
The Company desires to employ its capital relating to its Smith Barney
Shearson Premium Total Return Fund (the "Fund") by investing and reinvesting
in investments of the kind and in accordance with the investment objective(s),
policies and limitations specified in its Master Trust Agreement, as amended
from time to time (the "Master Trust Agreement"), in the prospectus (the
"Prospectus") and the statement of additional information (the "Statement")
filed with the Securities and Exchange Commission as part of the Company's
Registration Statement on Form N-1A, as amended from time to time, and in the
manner and to the extent as may from time to time be approved by the Board of
Trustees of the Company (the "Board"). Copies of the Prospectus, the
Statement and the Master Trust Agreement have been or will be submitted to the
Adviser. The Company agrees to provide copies of all amendments to the
Prospectus, the Statement and the Master Trust Agreement to the Adviser on an
on-going basis. The Company desires to employ and hereby appoints the Adviser
to act as the Fund's investment adviser. The Adviser accepts the appointment
and agrees to furnish the services for the compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision, direction and approval of the Board of the
Company, the Adviser will: (a) manage the Fund's portfolio in accordance with
the Fund's investment objective(s) and policies as stated in the Master Trust
Agreement, the Prospectus and the Statement; (b) make investment decisions for
the Fund; (c) place purchase and sale orders for portfolio transactions for
the Fund; and (d) employ professional portfolio managers and securities
analysts who provide research services to the Fund. In providing those
services, the Adviser will conduct a continual program of investment,
evaluation and, if appropriate, sale and reinvestment of the Fund's assets.
The Adviser may, with the approval of the Board and the shareholders of the
Fund (to the extent required by applicable law), from time to time, sub-
contract with one or more sub-investment advisers to provide some or all of
the services required under this agreement.
3. Brokerage
In selecting brokers or dealers to execute transactions on behalf of the
Fund, the Adviser will seek the best overall terms available. In assessing
the best overall terms available for any transaction, the Adviser will
consider factors it deems relevant, including, but not limited to, the breadth
of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Adviser
is authorized to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934), provided
to the Fund and/or other accounts over which the Adviser or its affiliates
exercise investment discretion.
4. Information Provided to the Company
The Adviser will keep the Company informed of developments materially
affecting the Fund's portfolio, and will, on its own initiative, furnish the
Company from time to time with whatever information the Adviser believes is
appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
listed in paragraphs 2 and 3 above. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Company in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Adviser against any liability to the Company or its shareholders of the Fund
to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of the Adviser's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Fund will pay the Adviser on the first business day of each month a fee
for the previous month at the annual rate of .55 of 1.00% of the Fund's
average daily net assets. The fee for the period from the Effective Date
(defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Adviser, the
value of the Fund's net assets shall be computed at the times and in the
manner specified in the Prospectus and/or the Statement.
7. Expenses
The Adviser will bear all expenses in connection with the performance of
its services under this Agreement and will pay (a) to The Boston Company
Advisors, Inc. ("Boston Advisors"), as sub-investment adviser to the Fund
under the Sub-Investment Advisory Agreement dated of even date herewith among
the Company, the Adviser and Boston Advisors, as amended from time to time,
and (b) to any additional or substitute sub-investment adviser or advisers
retained by the Adviser to provide advisory services to the Fund (together
with Boston Advisors, each a "Sub-Adviser"), the fees required to be paid to
each Sub-Adviser. The Fund will bear certain other expenses to be incurred in
its operation, including, but not limited to, investment advisory and
administration fees, other than those payable to a Sub-Adviser or any
additional or substitute investment adviser; fees for necessary professional
and brokerage services; fees for any pricing service; the costs of regulatory
compliance; and costs associated with maintaining the Company's legal
existence and shareholder relations.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to this Agreement and the Fund's sub-investment advisory and
administration agreements, but excluding interest, taxes, brokerage and
extraordinary expenses) exceed the expense limitation of any state having
jurisdiction over the Fund, the Adviser will reduce its fee to the Fund by the
proportion of such excess expense equal to the proportion that its fee
thereunder bears to the aggregate of fees paid by the Fund for investment
advice and administration in that year, to the extent required by state law.
A fee reduction pursuant to this paragraph 8, if any, will be estimated,
reconciled and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Company understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts, and as investment adviser to other investment companies, and the
Company has no objection to the Adviser's so acting, provided that whenever
the Fund and one or more other investment companies advised by the Adviser
have available funds for investment, investments suitable and appropriate for
each will be allocated in accordance with a formula believed to be equitable
to each company. The Fund recognizes that in some cases this procedure may
adversely affect the size of the position obtainable for the Fund. In
addition, the Fund understands that the persons employed by the Adviser to
assist in the performance of the Adviser's duties under this Agreement will
not devote their full time to such service and nothing contained in this
Agreement shall be deemed to limit or restrict the right of the Adviser or any
affiliate of the Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective [June __, 1994] (the "Effective
Date") and shall continue for an initial two-year term and shall continue
thereafter so long as such continuance is specifically approved at least
annually by (i) the Board of the Company or (ii) a vote of a "majority" (as
that term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the Fund's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the Board who
are not "interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable, without penalty, on 60
days' written notice, by the Board of the Company or by vote of holders of a
majority of the Fund's shares, or upon 90 days' written notice, by the
Adviser. This Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act and the rules thereunder).
11. Representation by the Company
The Company represents that a copy of the Master Trust Agreement is on
file with the Secretary of The Commonwealth of Massachusetts.
12. Limitation of Liability
The Company and the Adviser agree that the obligations of the Company
under this Agreement shall not be binding upon any of the members of the
Board, shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Company, individually, but are binding only upon the
assets and property of the Company, as provided in the Master Trust Agreement.
The execution and delivery of this Agreement have been authorized by the Board
and a majority of the holders of the Fund's outstanding voting securities, and
signed by an authorized officer of the Company, acting as such, and neither
such authorization by such members of the Board and shareholders nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
but shall bind only the assets and property of the Company as provided in the
Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
SMITH BARNEY SHEARSON
INCOME FUNDS
By:___________________________________
Name:
Title:
Accepted:
SMITH BARNEY SHEARSON STRATEGY ADVISERS INC.
By:__________________________________
Name:
Title:
shared\domestic\clients\shearson\funds\slip\prtn\advis2ds.doc
F-4
