SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[XXX] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
SMITH BARNEY INCOME FUNDS
(Name of Registrant as Specified In Its Charter)
GORDON E. SWARTZ
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] 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:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-
11:
4) Proposed maximum aggregate value of transaction:
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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
October 26, 1999
Dear Valued Convertible Fund Shareholder:
The Board of Trustees of the Smith Barney Income Funds has voted to
recommend to shareholders of the Smith Barney Convertible Fund ("Fund") the
appointment of Salomon Brothers Asset Management ("SaBAM") as sub-advisor to
the Fund.
A shareholder meeting regarding the proposed change in the Fund's sub-
advisor is scheduled to take place on November 22, 1999. Enclosed for your
review is a proxy statement that describes the proposal that will be submitted
to shareholders at the meeting. I ask that you review the proxy statement
carefully and, if you do not plan to
attend the shareholder meeting, please complete the proxy card and return it
as soon as possible in the postage-paid envelope.
PLEASE REMEMBER . . . YOUR VOTE IS EXTREMELY IMPORTANT!
We believe that the appointment of SaBAM as the Fund's sub-advisor will
benefit existing and future investors. With over $1.3 billion in convertible
assets (as of August 31, 1999) under management and a talented portfolio
management team led by Daniel J. Berkery and Ross S. Margolies, SaBAM offers
what has historically been a successful combination of both experience and
expertise.
The Fund will continue to be managed to achieve its stated objective of
current income and capital appreciation. Daniel Berkery, Ross Margolies and
their portfolio management team bring to the management of the Fund both
equity expertise as well as fixed income market knowledge. It is our view that
the characteristics of the convertible market have changed over time as
evidenced by the fact that many of the new issues coming into the market are
in two sectors, technology and telecommunications, with more than half of the
issues in the convertible bond market rated below investment grade. Additional
resources are required to analyze these types of securities. We believe that
SaBAM with specific expertise in these areas, exceptional resources and
analyst strength will provide those additional resources needed to analyze
investment opportunities in today's convertible bond market.
This means that you and your Salomon Smith Barney Financial Consultant
should have the confidence that risk and reward will be balanced to provide
you with an investment that may help you achieve your future financial goals.
And while no guarantees can be given, I think you will agree with me that
this proposed Fund change bodes well for its future. To give you an indication
of how the Fund has performed over the long-term; I have provided historical
performance information on the Convertible Fund.
Thank you in advance for your attention and vote with regard to this
important proposal.
Sincerely,
Heath B. McLendon
Chairman
<PAGE>
CONVERTIBLE FUND
Historical Performance
Average Annual Total Returns(1) (as of September 30, 1999)
(Excluding the effects of sales charges)
<TABLE>
<CAPTION>
Inception 1-Year 5-Years 10-Years Since Inception
--------- ------ ------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Class A 11/6/92 3.61% 7.61% N/A 7.63 %
Class B 9/9/86 3.01% 7.07% 6.96% 7.40 %
Class L 6/15/98 2.54% N/A N/A (5.88)%
Class O 11/7/94 2.97% N/A N/A 7.70 %
Class Y 2/7/96 4.04% N/A N/A 5.82 %
</TABLE>
- -----------
(1) Average annual total return assumes the reinvestment of income dividends
and capital gain distributions at net asset value and the deduction of all
fund expenses. Average annual total returns including the effects of
maximum sales charges also assume the deduction of the current applicable
maximum front-end sales charges for Class A and L shares and contingent
deferred sales charges (CDSC) for Class B and L shares. These charges may
be greater or less than the maximum sales charges that were in effect at
the beginning of each period shown and calculations using the maximum sales
charges in effect at such time would have resulted in lower or higher
average annual total returns, as the case may be. For Class A shares, the
maximum front-end sales charge is 5.0% for equity funds, 4.5% for taxable
fixed-income funds and 4.0% for municipal funds. One and five-year returns
for Class B shares reflect a maximum CDSC of up to 5.0% and 1.0%,
respectively. For Class L shares, the front-end sales charge is 1.0%. In
addition, one-year returns for Class L shares reflect a CDSC of 1.0%.
Average Annual Total Returns (as of September 30, 1999)
(Including the effects of maximum sales charges)
<TABLE>
<CAPTION>
Inception 1-Year 5-Years 10-Years Since Inception
--------- ------- ------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Class A 11/6/92 (1.56)% 6.51% N/A 6.83 %
Class B 9/9/86 (1.81)% 6.92% 6.96% 7.40 %
Class L 6/15/98 0.59 % N/A N/A (6.59)%
Class O 11/7/94 2.01 % N/A N/A 7.70 %
Class Y 2/7/96 4.04 % N/A N/A 5.82 %
</TABLE>
<PAGE>
SMITH BARNEY CONVERTIBLE FUND
388 Greenwich Street
New York, New York 10013
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Please take notice that a Special Meeting of shareholders ("Special
Meeting") of Smith Barney Convertible Fund (the "Fund") (a series of Smith
Barney Income Funds, the "Trust") will be held at the offices of SSB Citi Fund
Management LLC, ("SSB Citi"), 388 Greenwich Street, Conference Room 26J, New
York, New York 10013, on November 22, 1999, at 11 a.m., Eastern time, for the
following purpose:
(1) To approve or disapprove a sub-investment advisory agreement among
the Fund, SSB Citi and Salomon Brothers Asset Management Inc.
The appointed proxies, in their discretion, will vote on any other business
as may properly come before the Special Meeting or any adjournments thereof.
Holders of record of shares of the Fund at the close of business on
September 30, 1999 are entitled to notice of and to vote at the Special
Meeting and at any adjournments thereof.
In the event that the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the Special
Meeting, the persons named as proxies may propose one or more adjournments of
the Special Meeting in accordance with applicable law, to permit further
solicitation of proxies. Any such adjournment will require the affirmative
vote of the holders of a majority of the Fund's shares present in person or by
proxy at the Special Meeting. The persons named as proxies will vote in favor
of such adjournment those proxies which they are entitled to vote in favor and
will vote against any such adjournment those proxies to be voted against that
proposal.
By order of Board of Trustees,
Christina T. Sydor
Secretary
October 26, 1999
SHAREHOLDERS 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.
<PAGE>
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:
<TABLE>
<CAPTION>
Registration Valid Signature
------------ ---------------
<S> <C>
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
Custodial or Estate Accounts
(1)John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGMA...................................... John B. Smith
(2)Estate of John B. Smith....................... John B. Smith Jr., Executor
</TABLE>
<PAGE>
SMITH BARNEY CONVERTIBLE FUND
388 Greenwich Street
New York, New York 10013
----------------------
PROXY STATEMENT
----------------------
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 22, 1999
General
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Board") of Smith Barney Convertible
Fund (the "Fund") (a series of Smith Barney Income Funds, the "Trust") for use
at the Special Meeting of shareholders of the Fund, to be held at the offices
of SSB Citi Fund Management LLC (formerly known as SSBC Fund Management Inc.),
388 Greenwich Street, Conference Room 26J, New York, New York 10013, on
November 22, 1999 at 11:00 a.m., Eastern time, and at any and all adjournments
thereof (the "Special Meeting").
This Proxy Statement, the Notice of Special Meeting and proxy card are first
being mailed to shareholders on or about October 26, 1999 or as soon as
practicable thereafter. Any proxy may be revoked at any time prior to exercise
thereof by giving written notice to the Secretary of the Trust at the address
indicated above or by voting in person at the Special Meeting. All properly
executed proxies received in time for the Special Meeting will be voted as
specified in the proxy or, if no specification is made, in favor of the
proposal referred to in the 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; Salomon Smith Barney Inc. ("Salomon Smith
Barney") a dealer of shares of the Fund; SSB Citi Fund Management LLC, ("SSB
Citi" or the "Manager"), the investment adviser of the Fund, and/or First Data
Investor Services Group, Inc. ("First Data"), transfer agent of the Fund. Such
representatives and employees will not receive additional compensation for
solicitation activities. Salomon Smith Barney has retained the services of
First Data to assist in the solicitation of proxies. The aggregate cost of
solicitation of the shareholders of the Fund is expected to be approximately
$7,150. The costs of the proxy solicitation and expenses incurred in
connection with the preparation of this Proxy Statement and its enclosures
will be borne by the Fund. The Fund also will reimburse expenses of forwarding
solicitation materials to beneficial owners of shares of the Fund.
<PAGE>
If the Fund records votes by telephone, it will use procedures designed to
authenticate shareholders' identities, to allow shareholders to authorize the
voting of their shares in accordance with their instructions, and to confirm
that their instructions have been properly recorded. Proxies voted by
telephone may be revoked at any time before they are voted in the same manner
that proxies voted by mail may be revoked.
The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of the Fund entitled to vote shall be
necessary and sufficient to constitute a quorum for the transaction of
business at the Special Meeting. In the event that the necessary quorum to
transact business or the vote required to approve or reject any proposal is
not obtained at the Special Meeting, the persons named as proxies may propose
one or more adjournments of the Special Meeting in accordance with applicable
law to permit further solicitation of proxies.
In determining whether to adjourn the Special Meeting, the following factors
may be considered: the nature of the proposal that is the subject of the
Special 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 such adjournment will require the affirmative vote of a
majority of the Fund's shares present in person or by proxy at the Special
Meeting. The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of the proposal and
will vote against any such adjournment those proxies to be voted against the
proposal. For purposes of determining the presence of a quorum for transacting
business at the Special Meeting, abstentions and broker "non-votes" will be
treated as shares that are present but which have not been voted. Broker non-
votes are proxies received from brokers or nominees when the broker or nominee
has neither received instructions from the beneficial owner or other persons
entitled to vote nor has discretionary power to vote on a particular matter.
Accordingly, shareholders are urged to forward their voting instructions
promptly.
There is only one proposal in this Proxy Statement (the "Proposal"), and the
Fund does not anticipate that any other proposals will be presented. However,
should additional proposals be properly presented, a shareholder vote may be
taken on one or more proposals prior to any adjournment if sufficient votes
have been received for approval.
The Proposal requires the affirmative vote of a "majority of the outstanding
voting securities" of the Fund. The term "majority of the outstanding voting
securities" as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), and as used in this Proxy Statement, means: the affirmative vote
of the lesser of (1) 67% of the voting securities of the Fund present at the
meeting if
2
<PAGE>
more than 50% of the outstanding shares of the Fund are present in person or
by proxy or (2) more than 50% of the outstanding shares of the Fund.
Abstentions and broker non-votes will have the effect of a "no" vote for the
Proposal, which requires the approval of a specified percentage of the
outstanding shares of the Fund, if such vote is determined on the basis of
obtaining the affirmative vote of more than 50% of the outstanding shares of
the Fund. Abstentions and broker non-votes will not constitute "yes" or "no"
votes, and will be disregarded in determining the voting securities "present"
if such vote is determined on the basis of the affirmative vote of 67% of the
voting securities of the Fund present at the Special Meeting.
The Board of the Trust has fixed the close of business on September 30, 1999
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. Each
share is entitled to one vote and any fractional share is entitled to a
fractional vote at the Special Meeting.
As of the close of business on the Record Date, 9,390,817.313 shares of the
Fund were issued and outstanding. As of the Record Date, to the best knowledge
of the Board and the Fund, the following table shows the beneficial owners of
more than 5% of the outstanding shares for each respective class of the Fund.
<TABLE>
<CAPTION>
Title Name and Address of Amount and Nature of Percent
of Class Beneficial Owner Beneficial Ownership of Class
- -------- ------------------------------------------------- -------------------- --------
<S> <C> <C> <C>
Class L Joe Trautwein and Bonnie Trautwein 7,973.665 25.36%
Rt 1 Box 494
Fort Gay, WV 25514
Class L Harold Egon Gottschalk Jr. and Barbara Gottschalk 3,628.507 11.54%
Community Property
11603 Osage Trail
Lakeside, CA 92040
Class L Raymond J. Trudeau 3,092.741 9.84%
SSB IRA Custodian
112 Plummer Hill Road
Belmont, NH 03220
Class L Alfred L. Curry 2,247.369 7.15%
SSB IRA Rollover Custodian
6832 Trapper Way
Midland, GA 31828
Class L Harold A. Savage, Jr. 1,837.932 5.85%
SSB IRA Custodian
2100 Ludwick Drive
Maryville, In 37803
Class L Wilmer L. Keiser, Betty L. Keiser TTEEs 1,688.782 5.37%
The Keiser Family Trust UAD 4/1/97
13060 Metcalf, Apt. #303
Overland Park, KS 66213
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Title
of Name and Address of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership of Class
----- ------------------------------------------------- -------------------- --------
<S> <C> <C> <C>
Class O John J. Madden and Deborah A. Madden 3,685.609 10.43%
JTWROS
4107 Golden Grove Road
Greenwood, IN 46143
Class O John J. Zygowicz and Linda Lee Zygowicz 3,242.083 9.18%
Trustees FBO Zygowicz Family Trust UAD 6/17/97
841 Morning Sun Drive
Encinitas, CA 92024
Class O Kathryn Jeanne La Reau 2,598.703 7.36%
Smith Barney Inc. Spousal Cust. U/A/A 2/13/79
1813 S. Pebble Beach Rd.
Sun City Center, FL 33573
Class O Joseph H. Siemer 2,448.300 6.93%
Smith Barney Inc. IRA Custodian
8752 Carousel Park Circle B105
Cincinnati, OH 45251
Class O Edgar L. Makowski 1,981.929 5.61%
SSB IRA Rollover Custodian
1900 East Girard Pl. Unit 408
Englewood, CO 80110
Class O John R. Payzant & Carolyn R. Payzant 1,838.424 5.20%
Trustees FBO John R. Payzant & Carolyn R. Payzant
U/A/D 7/19/88
P.O.Box 277
Hampton, NH 03843
Class O Michigan Floral Assoc. 1,808.556 5.12%
Attn: Rodney Crittenden
5815 Executive Drive
Suite B P.O. Box 24065
Lansing, MI 48909
Class O Keith M. Lehrer 1,806.177 5.11%
SSB IRA Custodian
20801 Nordhoff Street
Chatsworth, CA 91311
Class Y Smith Barney Concert Series Inc. 3,513,757.694* 55.35%
Balanced Portfolio
PNC Bank, NA
Attn: Beverly Timson
200 Stevens Drive Suite 440
Lester, PA 19113
Class Y Smith Barney Concert Series Inc. 1,196,266.222* 18.84%
Select Balanced Portfolio
PNC Bank, NA
Attn: Beverly Timson
200 Stevens Drive Suite 440
Lester, PA 19113
</TABLE>
- -----------
* The Fund believes that these entities are not the beneficial owners of
shares held of record by them.
4
<PAGE>
<TABLE>
<CAPTION>
Title
of Name and Address of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership of Class
----- --------------------------------- -------------------- --------
<S> <C> <C> <C>
Class Y Smith Barney Concert Series Inc. 965,214.376* 15.20%
Conservative Portfolio
PNC Bank, NA
Attn: Beverly Timson
200 Stevens Drive Suite 440
Lester, PA 19113
Class Y Smith Barney Concert Series Inc. 361,383.500* 5.69%
Select Conservative Portfolio
PNC Bank, NA
Attn: Beverly Timson
200 Stevens Drive Suite 440
Lester, PA 19113
</TABLE>
- -----------
* The Fund believes that these entities are not the beneficial owners of
shares held of record by them.
As of the Record Date, the officers and Board members of the Trust
beneficially owned less than 1% of the shares of the Fund.
The Fund provides periodic reports to all of its shareholders which
highlight relevant information, including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent
annual report for the Fund and a copy of any more recent semiannual report,
without charge, by calling the Fund at (800) 451-2010 or by writing to the
Fund, 388 Greenwich Street, New York, New York 10013.
PROPOSAL:
APPROVAL OF A SUB-INVESTMENT ADVISORY AGREEMENT AMONG THE FUND, SSB Citi AND
SALOMON BROTHERS ASSET MANAGEMENT INC.
Introduction
The Board of Trustees of the Trust is proposing that shareholders approve a
Sub-Investment Advisory Agreement (the "Sub-Advisory Agreement") to be entered
into among the Trust (on behalf of the Fund), SSB Citi and Salomon Brothers
Asset Management Inc. ("SaBAM"), an affiliate of SSB Citi. SSB Citi, located
at 388 Greenwich Street, New York, New York 10013, serves as the current
investment adviser and administrator to the Fund. Both SSB Citi and SaBAM are
registered as investment advisers with the Securities and Exchange Commission
under the Investment Advisers Act of 1940, as amended, and are headquartered
in New York
SSB Citi (formerly known as SSBC Fund Management Inc. and prior thereto as
Mutual Management Corp) has served as the Fund's investment advisor since July
30, 1993, pursuant to an advisory agreement approved by shareholders on June
1, 1993, in connection with an assignment of the agreement to Mutual
Management Corp. Under the advisory agreement, SSB Citi furnishes investment
information and advice and makes recommendations with respect to the purchase
and sale of
5
<PAGE>
investments based on the Fund's investment policies. In addition. SSB Citi may
engage professional portfolio managers to assist in the investment management
of the Fund. As the advisor, SSB Citi will oversee the investment decisions of
SaBAM, as sub-advisor, with both subject to the supervision, direction and
approval of the Board of Trustees. The Board of Trustees approved the renewal
of the investment advisory agreement with SSB Citi on June 16, 1999.
SSB Citi is paid an advisory fee calculated at an annual rate of 0.50% of
the average daily net assets of the Fund. The aggregate advisory fee paid by
the Fund during the most recently completed fiscal year was $727,464. SSB Citi
also acts as the Trust's administrator and is paid an administrative fee of
0.20% of the average daily net assets of the Fund. The aggregate
administrative fee paid to SSB Citi for the most recently completed fiscal
year was $290,989.
At a meeting of the Board of Trustees of the Trust held on September 17,
1999, the Trustees approved the Sub-Advisory Agreement subject to shareholder
approval. A form of Sub-Advisory Agreement is attached as Exhibit A. The Sub-
Advisory Agreement provides that SaBAM's fee will be paid by SSB Citi in an
amount agreed to from time to time by the parties, but not to exceed the fee
paid to SSB Citi under its investment advisory agreement with the Fund.
Board Consideration and Recommendation
The Board of Trustees of the Trust has determined that it is advantageous to
have SaBAM as sub-advisor to the Fund. In reaching this conclusion, the Board
took into account both SSB Citi and SaBAM's view that the characteristics of
the convertible market have changed over time. Specifically, the Board was
advised that since the convertible market currently has more than 50% of its
issues rated below investment grade, additional resources are now required to
analyze these types of securities. In this regard, it was informed that SaBAM
had built a dedicated convertible bond team of five persons which manages
approximately $1.3 billion invested in convertible bonds and has access to a
twenty-two-person equity team. That convertible team also works closely with
SaBAM's Fixed Income team of ten investment grade and eight non-investment
grade professionals in order to assess the fixed income value of a convertible
security. The Board was further informed that a growing share of the
convertible market is now comprised of two sectors, technology and
telecommunications and that the Fund would benefit from SaBAM's specific
expertise in those sectors.
During the course of their deliberations, the Trustees (including the non-
interested Trustees) considered the following additional factors, among
others, in approving SaBAM as sub-advisor: (i) the nature, quality and extent
of services that SaBAM would provide to the Fund; (ii) the quality of
investment personnel of SaBAM; (iii) the financial resources and management
style of SaBAM; (iv) the investment record of SaBAM in managing similar
convertible assets; (v) the experience of SaBAM in the area of fixed-income
and equity investments and (vi)
6
<PAGE>
other information to assure that SaBAM could furnish high quality services to
the Fund. The non-interested Trustees also met separately to review the
information provided by SSB Citi and SaBAM representatives and were assisted
in this review by their independent legal counsel.
After the consideration of the foregoing factors, the Trustees (including
the non-interested Trustees) approved the Sub-Advisory Agreement for the Fund.
Description of Salomon Brothers Asset Management Inc.
SaBAM provides discretionary and non-discretionary portfolio management
services to a wide variety of individual and institutional accounts,
including, but not limited to, banks or thrift institutions, retirement plans,
pension and profit-sharing trusts, estates, charitable organizations,
corporations, and other business entities, registered investment companies and
unregistered domestic and offshore funds. As of June 30, 1999, SaBAM had $30.6
billion in assets under management including approximately $1.3 billion in
convertible securities.
SaBAM was organized as a Delaware corporation in 1987 and its principal
business address is 7 World Trade Center, New York, New York 10048. SaBAM is
an indirect wholly owned subsidiary of Salomon Smith Barney Holdings Inc.
("SSBH"), which is also located at 7 World Trade Center, New York, New York
10048. SSBH is a wholly owned subsidiary of Citigroup Inc., which is located
at 1 Citicorp Center, 153 East 53rd Street, New York, New York 10028.
The names, titles and principal occupations of the current directors and
executive officers of SaBAM are set forth below. Except as indicated, the
business address of each individual is 7 World Trade Center, New York, New
York 10048.
Ross S. Margolies--The principal occupation of Mr. Margolies is to serve as
a Managing Director and Chief Investment Officer of the Equity Group of SaBAM.
Peter J. Wilby--The principal occupation of Mr. Wilby is to serve as a
Managing Director and Chief Investment Officer of the Fixed Income Group of
SaBAM.
Heath B. McLendon--The principal occupation of Mr. McLendon is to serve as
Chairman or Co-Chairman of investment companies managed by affiliates of
Citigroup Inc.; Managing Director of SaBAM; Director and Chairman of SSB Citi;
and Director of The Travelers Investment Management Company.
Virgil H. Cumming--The principal occupation of Mr. Cumming is to serve as a
Managing Director of SSB Citi and Chief Investment Officer and Director of
SaBAM.
Wendy Murdock--The principal occupation of Ms. Murdock is to serve as
Executive Vice President of SSB Citi and Chief Operating Officer for Retail
Asset Management and Director of SaBAM.
7
<PAGE>
Marcus A. Peckman--The principal occupation of Mr. Peckman is to serve as a
Director and Chief Financial Officer of SaBAM.
Mark I. Kleinman--The principal occupation of Mr. Kleinman is to serve as
Treasurer of SaBAM.
Carol Epstein--The principal occupation of Ms. Epstein is to serve as
Secretary of SaBAM.
Jeffrey S. Scott--The principal occupation of Mr. Scott is to serve as Chief
Compliance Officer of SaBAM.
Michael F. Rosenbaum--The principal occupation of Mr. Rosenbaum is to serve
as Chief Legal Officer of SaBAM, Salomon Brothers Asset Management Limited and
Salomon Brothers Asset Management Asia Pacific Limited; Managing Director of
Salomon Smith Barney; Corporate Secretary of The Travelers Investment
Management Company;
With the exception of Heath B. McLendon, no other officers or Trustees of
the Trust are officers, directors or employees of SaBAM.
Description of Portfolio Management Team
SaBAM has designated Mr. Berkery and Mr. Margolies as co-portfolio managers
for managing the Fund. A team of investment professionals currently assists
them in the management of other accounts holding convertible securities. If
the shareholders approve the Sub-Advisory Agreement, Mr. Berkery,
Mr. Margolies and their team will manage the Fund in accordance with the
Fund's investment objective. The following provides a brief summary of the
business experience and educational background of the SaBAM investment
professionals.
Daniel J. Berkery, CFA (8 years of experience). Mr. Berkery is a Director of
SaBAM. He joined SaBAM in June 1991 and is portfolio manager for convertible
portfolios. He is also a former equity analyst covering the
telecommunications, utilities, and technology industries. Mr. Berkery is a
Chartered Financial Analyst and received a BA in History from Harvard
University
Ross S. Margolies (18 years of experience). Mr. Margolies is a Managing
Director and a member of SaBAM's Investment Policy Committee. He joined SaBAM
in June 1992 and is the senior portfolio manager for all SaBAM equity,
convertible and arbitrage portfolios. He is also portfolio manager of the
Salomon Brothers Capital Fund. Prior to 1992, Mr. Margolies was a high yield
bond analyst for non-cyclical consumer products at Lehman Brothers and a
senior credit analyst for an $8 billion high yield portfolio at Prudential
Capital Corp. Mr. Margolies received a BA in economics from Johns Hopkins
University and an MBA in Finance from New York University.
8
<PAGE>
Ajay Dravid (17 years of experience). Mr. Dravid is a Director of SaBAM. He
joined SaBAM in January 1996 and is portfolio manager of SaBAM's capital
structure and arbitrage portfolios and is a quantitative analyst for SaBAM's
convertible portfolios. Prior to 1996, Mr. Dravid performed asset allocation
research and developed models for trading, risk management and valuation for
Salomon Brothers Inc. He also was an Assistant Professor at The Wharton School
of the University of Pennsylvania teaching options and futures courses. Mr.
Dravid received an MA in Physics from the University of Stony Brook, an MBA in
Finance from the University of Rochester, and a Ph.D in Finance from Stanford
University.
Matthew Herenstein (7 years of experience). Mr.Herenstein is an analyst for
convertible portfolios. He joined SaBAM in February of 1998. Prior to 1998 he
was a corporate and restructuring attorney with O'Sullivan Graev & Karabell,
LLP. He received a BA in Economics from Columbia University and a JD from New
York University School of Law.
Ken Lee (4 years of experience) Mr. Lee is an equity analyst for capital
structure arbitrage portfolios and convertible portfolios. He joined SaBAM in
June of 1998. Prior to 1998, he worked as an equity research analyst at Brown
Brothers Harriman focusing on technology and financial services firms.
Mary Davis (3 years of experience). Ms. Davis is an analyst responsible for
covering convertible portfolios. She joined SaBAM in August of 1999. Prior to
1999, she worked as an equity analyst and trader for Brandywine Asset
Management. Ms. Davis received a BA in biology from LaSalle University.
The Sub-Advisory Agreement
The Sub-Advisory Agreement will be dated as of the date of its approval by
the shareholders. The Sub-Advisory Agreement will be in effect for an initial
two-year term ending on the second anniversary of its approval, and may
continue thereafter from year to year only if specifically approved at least
annually by the Board of Trustees or by the vote of "a majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Fund, and,
in either event, the vote of a majority of the non-interested Trustees, cast
in person at a meeting called for such purpose.
Investment Management Policies and Strategies to be utilized by SaBAM
Strategies
At the Board's Meeting on September 17, 1999, Dan Berkery and Ross Margolies
described in detail the strategies and techniques SaBAM would utilize to seek
to achieve the Fund's investment objective of current income and capital
appreciation by investing in convertible securities and in a combination of
nonconvertible fixed income securities and warrants or call options that
together
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represent convertible securities. In general, these strategies and techniques
would focus on purchasing convertibles in the following situations: (i) if the
common stock price is very attractive and an opportunity exists to gain
additional income from owning the convertible; (ii) the common stock price is
attractive and an opportunity exists to use the convertible to reduce downside
risk and (iii) the convertible bond is undervalued on a fixed income basis and
the equity upside potential is an inexpensive option. To accomplish these
goals, SaBAM intends to utilize a diversified group of strategies that seek to
take advantage of market inefficiencies in the convertible bond market. They
also advised the Board that they will maintain industry diversification by
staying within the investment restriction that limits total Fund assets in one
industry to 25%.
Changes in Certain Fund Policies
In connection with its decision to appoint SaBAM as the sub-investment
adviser to the Fund, and on SaBAM's recommendation, the Trustees approved
certain changes to non-fundamental investment policies of the Fund. While
these changes became effective immediately, they will be implemented if the
Sub-Advisory Agreement is approved by shareholders of the Fund (the
"Additional Changes").
These Additional Changes include the (i) elimination of credit restrictions
in the portfolio; (ii) increasing the limit of foreign securities to 25% of
the value of the Fund's portfolio from 10%; and (iii) increasing the limit of
warrants to 10% of the Fund for listed warrants and 5% for non-listed warrants
from, respectively, 5% and 2%.
The following generally describes investments in convertible securities and
the above-mentioned investment techniques to be utilized by SaBAM with related
risks.
Convertible Securities. Convertible securities are fixed-income securities
that may be converted at either a stated price or stated rate into underlying
shares of common stock. Convertible securities have general characteristics
similar to both fixed-income and equity securities. Although to a lesser
extent than with fixed-income securities generally, the market value of
convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because
of the conversion feature, the market value of convertible securities tends to
vary with fluctuations in the market value of the underlying common stocks
and, therefore, also will react to variations in the general market for equity
securities. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and thus may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the
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convertible securities tend to rise as a reflection of the value of the
underlying common stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Of course, like all fixed-income securities, there can be no assurance
of current income because the issuers of the convertible securities may
default on their obligations. A convertible security, in addition to providing
fixed income, offers the potential for capital appreciation through the
conversion feature, which enables the holder to benefit from increases in the
market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate.
Lower Rated Securities. Investments in lower rated and comparable unrated
securities involve greater risk than higher rated securities. Securities which
are rated BBB by Standard & Poor's Rating Service ("S&P") or Baa by Moody's
Investors Service, Inc. ("Moody's") are generally regarded as having adequate
capacity to pay interest and repay principal, but may have some speculative
characteristics. Securities rated below Baa by Moody's or BBB by S&P may have
speculative characteristics, including the possibility of default or
bankruptcy of the issuers of such securities, market price volatility based
upon interest rate sensitivity, questionable creditworthiness and relative
illiquidity of the secondary trading market. Because high yield bonds have
been found to be more sensitive to adverse economic changes or individual
corporate developments and less sensitive to interest rate changes than
higher-rated investments, an economic downturn could disrupt the market for
high yield bonds and adversely affect the value of those outstanding bonds and
the ability of issuers to repay principal and interest. In addition, in a
declining interest rate market, issuers of high yield bonds may exercise
redemption or call provisions, which may force the Fund, to the extent it owns
such securities, to replace those securities with lower yielding securities.
This could result in a decreased return.
Foreign Securities. As discussed, until such time as the shareholders of
the Fund approve a sub-advisory agreement with SaBAM, the fund will
voluntarily limit its investments in foreign securities, American Depository
Receipts ("ADRs"), American Depository Bonds ("ADBs") and American Depository
Notes ("ADNs") to 10% of its assets. ADRs, ADBs and ADNs are U.S. dollar-
denominated instruments issued generally by domestic banks and representing
the deposit with the bank of a security of a foreign issuer. They are publicly
traded on exchanges or over the counter in the United States. Investing in the
securities of foreign companies involves special risks and considerations not
typically associated with investing in U.S. companies. These risks include
differences in accounting, auditing and financial reporting standards,
generally higher commission rates on
11
<PAGE>
foreign portfolio transactions, the possibility of expropriation or
confiscatory taxation, adverse changes in investment or exchange control
regulations, political instability which could affect U.S. investments in
foreign countries and potential restrictions on the flow of international
capital. Additionally, dividends or interest payable on foreign securities,
and in some cases capital gains, may be subject to foreign withholding or
other foreign taxes. Foreign securities often trade with less frequency and
volume than domestic securities and therefore may exhibit greater price
volatility. Changes in foreign exchange rates will affect the value of those
securities which are denominated or quoted in currencies other than U.S.
dollars. Many of the foreign securities held by the Fund will not be
registered with, nor will the issuers thereof be subject to the reporting
requirements of, the SEC. Accordingly, there may be less publicly available
information about the securities and the foreign company or government issuing
them than is available about a domestic company or government entity.
Moreover, individual foreign economies may differ favourably or unfavourably
from the U.S. economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payment positions.
Warrants. The Fund is currently permitted to invest in warrants, which
entitles it to buy common stock at a specified date and price. Because a
warrant does not carry with it the right to dividends or voting rights with
respect to the securities the warrant holder is entitled to purchase, and
because a warrant does not represent any rights to the assets of the issuer, a
warrant may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying security and a warrant ceases to have value
if it is not exercised prior to its expiration date. Pending shareholder
approval of SaBAM as sub-advisor, the permissible amount of investment in
warrants, valued at the lower of cost or market, has been increased to 10% of
the value of the Fund's net assets for listed warrants and 5% of the Fund's
net asset value in non-listed warrants. Warrants acquired by the Fund in units
or attached to securities may be deemed to be without value.
Certain Tax Implications
In connection with the implementation of these strategies, SaBAM intends to
sell certain portfolio securities held by the Fund. Some of these securities
may have appreciated in value and therefore a sale may generate capital gains,
which would be distributed to shareholders. The majority of such gains,
however, are currently expected to be in the form of long-term capital gains.
Such distributions would be taxable to the shareholders who receive them.
Distributed net short-term capital gains are taxable to recipient shareholders
as ordinary income and long-term capital gains are taxable as capital gains.
Despite these potential tax consequences, however, SSB Citi and SaBAM believe
that the new investment strategies will be beneficial to the Fund and its
shareholders.
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<PAGE>
Other Information
CFBDS, Inc., located at 20 Milk Street, Boston, Massachusetts 02109-5408,
serves as the Fund's principal underwriter pursuant to a written agreement
dated October 8, 1998. Prior to the merger of Travelers Group Inc. and
Citicorp Inc. on October 8, 1998, Salomon Smith Barney served as principal
underwriter to the Fund. For the fiscal year ended July 31, 1999, the Fund did
not pay commissions to Salomon Smith Barney, an "affiliated broker" of the
Fund as defined in Schedule 14A of the Securities Exchange of 1934.
Required Vote
Approval of the Sub-Advisory Agreement requires the affirmative vote of a
"majority of the outstanding voting securities," as defined above, of the
Fund. The Trustees of the Trust, including the non-interested Trustees,
recommend that the shareholders of the Fund vote in favor of this Proposal.
ADDITIONAL INFORMATION
Proposals of Shareholders
The Fund does not hold regular shareholder meetings. Shareholders wishing to
submit proposals for inclusion in a proxy statement for a shareholder meeting
subsequent to the Special Meeting, if any, should send their written proposals
to the Secretary of the Trust at the address set forth on the cover of this
Proxy Statement. Proposals must be received within a reasonable time before
the solicitation of proxies for such meeting. The timely submission of a
proposal does not guarantee its inclusion.
Shareholders' Request For Special Meeting
Shareholders holding at least 10% of the Trust's outstanding voting
securities (as defined in the 1940 Act) may require the calling of a meeting
of shareholders for the purpose of voting on the removal of any Board member
of the Trust. Meetings of shareholders for any other purpose also shall be
called by the Board members when requested in writing by shareholders holding
at least 10% of such outstanding shares of the Trust or Fund, as applicable,
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 such outstanding shares may call and give notice
of such meeting.
Other Matters To Come Before The Special Meeting
The Fund does not intend to present any other business at the Special
Meeting, nor is it 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.
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IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE SPECIAL MEETING ARE THEREFORE URGED TO COMPLETE, SIGN,
DATE AND RETURN THE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-
PAID ENVELOPE.
By order of the Board of Trustees,
Christina T. Sydor
Secretary
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EXHIBIT A
FORM OF
SUB-INVESTMENT ADVISORY AGREEMENT
SMITH BARNEY INCOME FUNDS
(Smith Barney Convertible Fund)
, 1999
Dear Sirs:
Smith Barney Income Funds (the "Company"), a trust organized under the laws
of the Commonwealth of Massachusetts, on behalf of Smith Barney Convertible
Fund (the "Fund"), and SSB Citi Fund Management LLC (the "Adviser") each
confirms its agreement with Salomon Brothers Asset Management Inc. (the "Sub-
Adviser") as follows:
1.Investment Description; Appointment
The Company desires to employ its capital relating to 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 relating to the Fund (the "Prospectus") and the Statement of
Additional Information relating to the Fund (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
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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
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the previous month at an annual rate based on the Fund's average daily net
assets in an amount agreed to from time to time by the parties to this
Agreement, but not to exceed the fee paid to the Adviser under its investment
advisory agreement with the Fund. 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 any 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 fees payable to the Adviser 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 limitations 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
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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 , 1999 (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.
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<PAGE>
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 INCOME FUNDS
on behalf of its
Convertible Fund
By: _______________________________________________
Name:Heath B. McLendon
Title:Chairman of the Board
SSB CITI FUND MANAGEMENT LLC
By: _______________________________________________
Name:
Title:
Accepted:
SALOMON BROTHERS ASSET MANAGEMENT INC.
By: _______________________________________________
Name:
Title:
A-5
FORM OF PROXY CARD
SMITH BARNEY INCOME FUNDS - SMITH BARNEY CONVERTIBLE FUND
PROXY SOLICITED BY THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 22, 1999 AT
11:00 A.M.
The undersigned holder of shares of the Fund referenced above hereby
appoints Heath B. McLendon, Christina T. Sydor, and Gordon E. Swartz,
attorneys 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, 388
Greenwich Street, Conference Room 26J, New York, New York, 10013 at the
date and time indicated above and at any adjournments thereof. The
undersigned hereby acknowledges receipt of the enclosed Notice of Special
Meeting and Proxy Statement and hereby instructs said attorneys and
proxies to vote said shares as indicated herein. In their discretion, the
proxies are authorized to vote on 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 of the power
and authority of said proxies hereunder. The undersigned hereby revokes
any proxy previously given.
NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED BELOW.
Please vote by filling in the appropriate box below
1. To approve or disapprove a new sub-investment advisory agreement
among the Fund,
SSB Citi Fund Management LLC and Salomon Brothers Asset Management
Inc.
For Against Abstain
[ ] [ ] [ ]
2. To transact such other business as may properly come before the
meeting or any adjournment
thereof.
PLEASE SIGN, DATE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE
Date:____________________1999
Please sign in box below
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:
______________________________
Signature (s) Title (s), if applicable
