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
. . . . . . . . . DIVERSIFIED STRATEGIC INCOME 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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2) Aggregate number 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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4) Proposed maximum aggregate value of transaction:
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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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3) Filing Party:
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4) Date Filed:
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SMITH BARNEY SHEARSON DIVERSIFIED STRATEGIC INCOME FUND
A SUBTRUST OF SMITH BARNEY SHEARSON INCOME FUNDS
Two World Trade Center
New York, New York 10048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on [March 21], 1994
To the Shareholders of Smith Barney Shearson
Diversified Strategic Income Fund:
Notice is hereby given that a Special Meeting of Shareholders of
Smith Barney Shearson Diversified Strategic Income Fund (the "Fund"),
a mutual fund organized as a subtrust of Smith Barney Shearson Income
Funds (the "Trust"), will be held at the offices of the Fund, Two
World Trade Center, 100th floor, New York, New York 10048, at [1:30
p.m.,] on [March 21,] 1994, for the following purposes:
1. To approve or disapprove a new sub-investment advisory
agreement between the Trust, on behalf of the Fund, and Smith Barney
Global Capital Management, Inc. ("SBGCM"), containing substantially
the same terms and conditions as the Fund's current sub-investment
advisory agreement (Proposal 1).
2. To transact such other business as may properly come
before the Special Meeting or any adjournment thereof.
The Board of Trustees of the Trust has fixed the close of
business on [March ___, 1994] as the record date for the
determination of shareholders of the Fund entitled to notice of and
to vote at the Special Meeting.
By Order of the Board of
Trustees
Francis J. McNamara, III
Secretary
[March __, 1994]
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE
REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY
CARD IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN
THE UNITED STATES. INSTRUCTIONS FOR THE PROPER EXECUTION OF THE
PROXY CARD ARE SET FORTH ON THE INSIDE COVER OF THIS NOTICE. 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.
3. 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
i/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 DIVERSIFIED STRATEGIC INCOME FUND
A SUBTRUST OF SMITH BARNEY SHEARSON INCOME FUNDS
Two World Trade Center
New York, New York 10048
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on [March 21], 1994
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Trustees (the "Board") of Smith Barney
Shearson Income Funds with respect to the Smith Barney Shearson Diversified
Strategic Income Fund, for use at a Special Meeting of Shareholders
of the Fund to be held at [1:30 p.m.] on [March 21,] 1994, at the
Fund, Two World Trade Center, 100th floor, New York, New York 10048,
and at any adjournments thereof (collectively, the "Special Meeting").
A Notice of Special Meeting of Shareholders and
a proxy card accompany this Proxy Statement.
Proxy solicitations will be made primarily by
mail, but proxy solicitations may also be made by telephone,
telegraph or personal interviews
conducted by: officers and employees of the Fund;
Smith Barney Shearson Inc. ("Smith Barney
Shearson"), the distributor of the shares of the Fund;
The Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First Data Corporation,
the transfer agent of the Fund; and/or The
Boston Company Advisors, Inc. ("Boston Advisors"),
the administrator of the Fund. The costs of
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 will
also reimburse brokerage firms and others for their expenses in
forwarding solicitation material
to the beneficial owners of Fund shares.
The Trust currently issues four classes of shares of beneficial
interest (the "Shares") in respect of the Fund, but for purposes of
the matters to be considered at the Special 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 Special Meeting,
the Shares represented by the proxy
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
Special Meeting and
voting his or her Shares in person, or by submitting a letter of
revocation or a later-dated proxy to the Fund at the above address prior
to the date of the Special Meeting. For purposes
of determining the presence of a quorum for transacting business
at the Special 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 treated as Shares that are
present but which have not been voted.
For this reason, abstention and broker "non-votes" will have the effect of a
"no" vote for purposes of obtaining the requisite approval of each proposal.
In the event that a quorum is not present at the Special 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 on the
enclosed proxy card may propose one or more adjournments of the
Special Meeting to permit further solicitation of proxies. In deter
the Special Meeting, the following factors may be considered: tis
the subject of the Special Meeting, the percentage of votes actual
negative votes actually cast, the nature of any further solicitation
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 Special 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 such adjournment if sufficient votes have
been received for
approval. Under the Trust's First Amended and Restated Master
Trust Agreement dated November 5,
1992, as amended ("Master Trust Agreement"), a quorum of shareholders
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 Special Meeting.
The Board has fixed the close of business on [March __, 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 Special Meeting. At the close of business on the Record Date,
there were
[____________] Shares of the Fund outstanding. At Record Date, to the
knowledge of the Fund and
the Board, no single shareholder or "group" (as that term is used in
Section 13(d) of the
Securities Exchange Act of 1934), except as set forth in the table below,
beneficially owned
more than 5% of the outstanding Shares of the Fund. As of the
Record Date, the officers and
Board members beneficially owned less than 1% of the Shares of the Fund.
Name and Address
Amount and (Percentage)
of Shares Beneficially Owned
TO BE PROVIDED
As of [___, 1994,] no shares of SGCM or its parent corporation,
The Travelers Inc., were
held by Board members, except as set forth in the table below.
Name and Address
Amount and (Percentage)
of Shares Beneficially Owned
[TO BE PROVIDED]
In order that your Shares may be represented at the Special 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 1:30 p.m., [March 21,] 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 a new
sub-investment advisory contract for the Fund.
The Board recommends an affirmative vote on Proposal 1.
PROPOSAL 1
TO APPROVE OR DISAPPROVE A NEW SUB-INVESTMENT ADVISORY AGREEMENT BETWEEN
SMITH BARNEY GLOBAL CAPITAL MANAGEMENT, INC. AND THE TRUST ON BEHALF OF
FUND, CONTAINING SUBSTANTIALLY THE SAME TERMS AND CONDITIONS AS THE FUND'S
CURRENT SUB-INVESTMENT ADVISORY AGREEMENT.
SUMMARY OF PROPOSAL
For the reasons and based on an extensive analysis of factors described
below, a majority of the Trustees of the Trust have determined, subject to
approval by the shareholders of the Fund, to enter into a new
sub-investment advisory agreement (the "New Agreement") between the
Fund and SBGCM, a subsidiary of Smith Barney Shearson. Lehman Brothers
Global Asset Management, Ltd. ("LBGAM") is currently the Fund's
sub-investment adviser under an agreement (the "Current
Agreement") that will terminate on March 21, 1994, pursuant to notice
duly given by the Board of Trustees of the Trust. The New Agreement
contains substantially the same terms and conditions,
including the same sub-investment advisory fee, found in the Current
Agreement. If approved by shareholders of the Fund, the New Agreement
would commence on [March 21, 1994] and would
continue initially for a two year period and would continue automatically
for successive annual periods thereafter; 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 Investment Company Act of 1940, as amended (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.
THE PROPOSED ADVISER
As of April 29, 1988, SBGCM commenced managing portfolios of clients in
the international
securities markets, particularly in the fixed income area.
Prior to April 29, 1988, international bond portfolio management
services were conducted through Smith Barney, Harris Upham International,
Inc., a London based brokerage affiliate. In particular,
three broad types of international bond portfolio management:
global; non-base currency (e.g., non-dollar, non-Franc, etc.); and
international dollar (i.e., Eurodollar and "Yankee") bonds.
As of June 17, 1991, pursuant to a sub-investment advisory agreement
with Smith, Barney Advisers, Inc., SBGCM commenced managing a portfolio of
Smith Barney World Funds, Inc., an open-end management investment
company registered under the 1940 Act which had aggregate assets a
[March 30, 1993] in excess of [$426,790,000.] Under this sub-investment
advisory agreement, SBGCM provides portfolio advice and assistance
with respect to the selection, acquisition,
holding and disposal of securities. As sub-investment adviser,
SBGCM receives an annual fee of: .45% of the fund's net assets up to
$20 million; .40% of the next $10 million; 30% of the next
$20 million; and .20% of the fund's net assets in excess of $50 million.
An audited balance sheet of SBGCM as of [December 31, 1992] is set forth
as Exhibit A to this Proxy Statement. In addition, an unaudited balance
sheet of SBGCM as of [December 31, 1993], is set forth as Exhibit B to
this Proxy Statement. SBGCM has represented that since [December 31, 1993]
there has been no material adverse change in its financl.
The name, position with SBGCM and principal occupation of each executive of
director of SBGCM are set forth in the following table.
The business address of SBGCM and each
officer and director is 10 Piccadilly, London, United Kingdom.
Name Position with SBGCM Principal Occupation
Jill B. Jordan Director Director, SBGCM
Bruce D. Sargent President; Chairman and Director Director and
Executive Vice President, Smith Barney Shearson
J. Paul Horne Director Director, SBGCM; International
Economist, Smith Barney Shearson
Gabriel J. Irwin Director; Senior Vice President,
Director, Senior Vice President,
Compliance Director, SBGCM
Robert Druskin Director Director, Vice Chairman and Chief
Administrative Officer of Smith Barney Shearson
Jeffrey B. Lane Director Director and Vice President of
Smith Barney Shearson
A. George Saks Director; Secretary Executive Vice President,
Secretary and General Counsel
Smith Barney
J. Simon Wells Director; Senior Vice President Director and
Senior Vice President,
SBGCM
EVALUATION BY THE BOARD AND REASONS FOR THE PROPOSAL
On January 19, 1994, a majority of the Trustees of the Trust met in
person at a meeting called for the purpose of considering, among other
things, the New Agreement with SBGCM. It also considered, at that time,
continuation of the Fund's Current Agreement with LBGAM and
various other possible alternatives. In advance of the meeting, the Board
reviewed materials furnished by Smith Barney Shearson and SBGCM.
Additional materials were presented at the meeting and were described in
detail and reviewed carefully by the Board. The written ma
described each of SBGCM and LBGAM and their affiliates, senior personnel,
portfolio managers,
analysts, economists and others, their methods of operation,
investment philosophies, performance records and financial conditions.
Representatives of LBGAM and SBGCM met separately
with the Board to discuss in depth the written materials and to respond
to questions from the Board and its independent counsel. The Board
reviewed and considered LBGAM's investment performance on behalf of the
Fund and also considered the past investment performance of
in managing portfolios of global bonds with objectives and policies
similar to those of the Fund. The Board was informed that LBGAM
would waive 50% of its sub-investment advisory fee
under the Current Agreement for a period of two years and that
SBGCM would waive investment advisory fee provided in the New Agreement
(which is identical to the fee provided in
the Current Agreement). The Board was also advised that SBGCM would
continue this fee waiver
until such time as the Board and SBGCM mutually agree otherwise.
The Board of Trustees of the Trust determined to terminate the Fund's
agreement with LBGAM and to enter into the New Agreement with SBGCM,
subject to the approval of shareholders. In so doing, a variety or
factors were evaluated. It was asserted that management of the requires a
close relationship between the Fund's officers and its srealize its
investment objective, the Fund utilizes a complex asset allocati
highly dependent upon the coordination of the various portfolio components.
As economic factors fluctuate, the proportion of the Fund's portfolio
invested in each of these sectors changes and
frequently requires immediate adjustment. At the time of the Fund's
inception, LBGAM was an integrated part of Shearson Lehman Brothers Inc.'s
asset management structure and Mr. Heath B. McLendon, the Fund's Chief
Executive Officer, worked closely with LBGAM. However, Mr. McLendon is
no longer is associated with LBGAM. Rather, he now has a close associa
involved directly in the management of the Smith Barney
Shearson-distributed mutual funds. It was also noted that LBGAM and
its affiliates are currently advising and sponsoring a series of
mutual funds that are being offered, and will continue to be offered, to retail
and other investors through it own distribution network, and that the
availability of these LBGAM-advised funds could be confusing to investors
in the Fund and other mutual funds sponsored by Smith
Barney Shearson.
The Board reviewed the past performance records of LBGAM and SBGCM over
relevant periods of time as well as the background and experience of the
various officers and managers employed by those companies. The Board
compared their past performance and evaluated those records agvarious
indices and industry standards. The Board was satisfied that
provide high quality advisory and management services to the Fund.
The Board 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
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 its affiliate, LBGAM, 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 LBGAM.
Finally, the Board considered whether SBGCM, if serving as the
Fund's sub-investment adviser, could facilitate the Fund's
integration with other components of the Smith Barney
Shearson group of funds and would enhance the support and
services received by the Fund's
shareholders. The Board considered the ability of Smith Barney Shearson
to arrange opportunities for Smith Barney Shearson Financial Consultants
to meet SBGCM portfolio mangers in
person, by telephone and otherwise to become familiar with the management
style, philosophy and investment outlook of the Fund's
sub-investment adviser. After carefully evaluating the foregoing
materials and factors, and after meeting in
executive session with independent counsel, a majority of the
Trustees of the Trust who were not interested persons of the Trust approved,
subject to shareholder approval, the New Agreement
with SBGCM containing substantially identical terms and conditions to the
Current Agreement. The Board then reconvened and approved
the New Agreement and recommended its approval by the
Fund's shareholders.
THE PROPOSED AGREEMENT
A copy of the form of New Agreement is set forth as Appendix A to this
Proxy Statement.
Under its terms, SBGCM, subject to the supervision and approval of the
Fund's foreign investment adviser and Board, would manage the Fund's
foreign investments in accordance with the investment
objectives and policies stated in the Fund's Prospectus and Statement of
Additional Information. As sub-investment adviser, SBGCM would be
responsible for making investment decisions concerning
foreign assets, supplying investment research and portfolio
management services and placing orders to purchase and sell foreign
assets on behalf of the Fund. SBGCM would receive a fee
that is computed daily and paid monthly at the annual rate of .10%
of the value of the Fund's average daily net assets.
However, SBGCM has agreed to waive 50% of its sub-investment advisory
fee until such time as the Board and SBGCM mutually agree otherwise.
With the exception of the identity of the sub-investment adviser and
the commencement and termination dates, the
provisions of the New Agreement and the Current Agreement with
LBGAM are virtually identical.
Under the terms of the New Agreement, SBGCM would bear all expenses
in connection with its performance. Other expenses incurred in
the operation of the Fund would be borne by the Fund,
including: taxes, interest, brokerage fees and commission, 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 of the Trust of Board and
any extraordinary expenses.
If, in any fiscal year, the aggregate expenses of the Fund
(including fees pursuant to the New Agreement
(and the Fund's administration 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, SBGCM will reduce its fee to the Fund for
the excess expense to the extent required by state law in the same
proportion as its fee bears 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.
The New Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations
thereunder, SBGCM shall not be liable for
any act or omission in the course of or in connection with the
rendering of its services thereunder.
REQUIRED VOTE
Approval of the New Agreement requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund.
The term "majority of the outstanding voting
securities" of the Fund, as defined in the 1940 Act, means the
affirmative vote of the lesser of: (a) 67% of the voting securities
of the Fund present at the Special Meeting if more than
50% of the outstanding Shares are present in person or by proxy
at the Special Meeting; and (b)
more than 50% of the outstanding voting securities of the Fund.
If the New Agreement is not approved by the shareholders of the Fund,
SBGCM will serve as sub-investment adviser to the Fund for a period of
time pending approval of such agreement or a
different sub-investment advisory agreement or other definitive action by
the shareholders,
provided that the compensation received by SBGCM during that period is
not greater than the
amount that would have been received under the Fund's agreement with LBGAM.
Proxies solicited by the Board for the Special Meeting will not be
voted for approval of the New Agreement, or any other matter to be
voted on by the shareholders, unless: (a) (i) in
the judgment of the Board there has been no material adverse change in the
financial condition of SBGCM between the date of the uncertified
balance sheet and the most recently completed
quarter and (ii) the Fund shall have received a certificate of
the Chairman, President or a Senior Vice President of SBGCM,
dated the day on which such vote is to be taken, that, to the
knowledge of that officer, since the date of the most recently
completed quarter there has been
no material adverse change in the financial condition of SBGCM
unless such material adverse
change has been disclosed to shareholders in additional proxy
solicitation materials; or (b) the
Fund shall have mailed to all shareholders of record a
certified balance sheet of SBGCM and
given the shareholders an opportunity to revoke any proxies
previously furnished.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Fund is not generally required to hold annual or special meetings
of the shareholders. 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 Fund, c/o The
Boston Company Advisors, Inc., Exchange Place, Boston, MA 02109.
SHAREHOLDERS' REQUEST FOR SPECIAL MEETING
Shareholders holding at least 10% of the Fund's outstanding voting
securities (as defined in the 1940 Act) may require the calling of a
meeting of the Fund's shareholders for the purpose of voting on the
removal of any Board Member. Meetings of the Fund's sharehold
any other purpose will also be called by the Board when requested in
writing by shareholders holding at least 10% of the Shares then
outstanding or, if the Board Members shall fail to call
or give notice of any meeting of shareholders for a period of 30 days
after such application,
shareholders holding at least 10% of the Shares then outstanding may
call and give notice of
such meeting.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board does not intend to present any other business at the
Special Meeting other than
as described in this Proxy Statement, nor is the Board aware that
any shareholder intends to do
so. If, however, any other matters are properly brought before
the Special Meeting, the persons
named in the accompanying proxy card will vote thereon in accordance
with their judgment.
[March __, 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)
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
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 PROPOSAL.
Please refer to the Proxy Statement for a discussion of the Proposal.
1. To approve or disapprove a new investment advisory FOR * AGAINST *
ABSTAIN *
agreement between Smith Barney Shearson Income Funds, on behalf of
the Smith Barney
Shearson Diversified Strategic Income Fund, and Smith Barney Global
Capital Management, Inc.,
containing substantially the same terms and conditions as the Fund's
current investment advisory
agreement
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
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SMITH BARNEY SHEARSON DIVERSIFIED STRATEGIC INCOME FUND PROXY SOLICITED
BY THE BOARD OF
TRUSTEES
The undersigned holder of shares of Smith Barney Shearson
Diversified Strategic Income Fund
("the Fund"), a subtrust of Smith Barney Shearson Income Funds,
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
[March 21, 1994] at [1:30 p.m.] and any adjournment or
adjournments thereof. The undersigned
hereby acknowledges receipt for the Notice of Special Meeting
and Proxy Statement dated [March
__, 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
property 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 and 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)
shared\domestic\clients\shearson\boards\inc_eq\dsiproxy.doc
shared\domestic\clients\shearson\funds\slip\dsip\prxycrd1.doc
SUB-INVESTMENT ADVISORY AGREEMENT
SMITH BARNEY SHEARSON INCOME FUNDS
(Smith Barney Shearson Diversified Strategic Income Fund)
[March 21, 1994]
Smith Barney Global Capital Management, Inc.
388 Greenwich Street
New York, New York 10048
Dear Sirs:
Smith Barney Shearson Income Fund (the "Company"), a trust organized under
the laws of the Commonwealth of Massachusetts and the Greenwich Street Advisors
Division of Mutual Management Corp. (the "Adviser"),
each confirms its agreement
with Smith Barney Global Capital Management Inc.
(the "Sub-Adviser"), as follows:
1. Investment Description; Appointment
The Company desires to employ its capital relating to its Smith Barney
Shearson Diversified Strategic Income 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
dated, 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 Sub-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 holdings 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 concerning foreign assets for the Fund; (c) place purchase and sale
orders for portfolio transactions for foreign assets on behalf of 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 foreign 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 Company informed of developments materially
affecting the Fund, and will, on its own initiative, furnish the
Company from time
to time with whatever information the Sub-Adviser believes is
appropriate for this
purpose.
5. 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 .10 of 1.00% of the Fund's
average daily
net assets. The Sub-Adviser shall have no right to obtain
compensation directly
from the Company for services provided hereunder and agrees to look
solely to the
Adviser for payment of fees due. 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.
6. 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,
sub-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.
7. 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 7, if any, will be
estimated, reconciled and paid on a monthly basis.
8. 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 to 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.
9. Term of Agreement
This Agreement shall become effective as of March 21, 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).
10. 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.
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:__________________________________________
THE GREENWICH STREET ADVISORS
DIVISION OF MUTUAL MANAGEMENT CORP.
By:___________________________________________
Accepted:
SMITH BARNEY GLOBAL CAPITAL MANAGEMENT, INC.
By:______________________________
4
APPENDIX A
shared/domestic/clients/shearson/funds/slip/dsip/subadv2.doc
